<PAGE>

                                                                 Exhibit 10.7



             [Printed on Embarcadero Technologies, Inc. Letterhead]

                               September 27, 1999

Ms. Ellen Taylor
875 Dale Street
Andover, MA 01845

Dear Ellen:

          I am pleased to make this offer to you to join Embarcadero
Technologies (the "Company") as its President and Chief Executive Officer. If
you accept this offer, we are assuming that you will commence employment not
later than October 18, 1999.

The terms of your employment are as follows:

     1. SALARY. Your base salary will be $18,333.33 per month (equivalent to
$220,000 per year).

     2. BONUS. You will be eligible to receive a semi-annual bonus of up to
$65,000, or a total of $130,000 per annum, based upon objective performance
standards that are measurable on a semi-annual basis, which are to be set for
you and Embarcadero Technologies and to be mutually agreed between you and
the Board of Directors.

     3. STOCK OPTIONS. You will be granted seven-year standard-form options
to purchase (a) 220,000 shares of Common Stock at an exercise price of $0.50
per share, (b) 110,000 shares of Common Stock at an exercise price of $5.00
per share and (c) 110,000 shares of Common Stock at an exercise price of
$10.00 per share. Your options shall vest at a rate of 6.25% per quarter on
each three-month anniversary from your start date. Your options shall cease
vesting upon termination of your employment, except as set forth in paragraph
7 below. In the event of a "change in control," your options shall become
fully vested, except that if either (i) the change of control occurs within
six months of the commencement of your employment or (ii) within such
six-month period the Company enters into an agreement that would result in a
change of control and such change of control occurs within nine months of the
commencement of your employment, 50% of your options shall become vested.

          For purposes of the preceding paragraph, a change in control means
the occurrence of either of the following:



              (a)   any "person" (as used in Section 13(d) of the
                    Securities Exchange Act of 1934 and the rules
                    promulgated thereunder) becomes the "beneficial
                    owner" (as defined in Rule 13d-3) of securities

<PAGE>

Ms. Ellen Taylor
September 27, 1999
Page 2


                    representing a majority of the voting power of the
                    then outstanding securities of Embarcadero
                    Technologies; or

              (b)   a sale of assets involving all or substantially all
                    of the assets of Embarcadero Technologies, or a
                    merger or consolidation of Embarcadero Technologies
                    in which the holders of securities of Embarcadero
                    Technologies immediately prior to such event hold in
                    the aggregate less than a majority of the securities
                    of Embarcadero Technologies immediately after such
                    event.

     4. RELOCATION ASSISTANCE. Embarcadero Technologies will reimburse you
for the reasonable and customary out-of-pocket expenses associated with (i)
the sale of your existing residence and purchase of a new residence in the
Bay Area (within twelve months of your relocation) including real estate
commissions on the sale of your existing residence and reasonable and
customary closing expenses paid by you; (ii) the relocation of your family
and household goods to the Bay Area, including travel and temporary housing
expenses in the Bay Area for a period not to exceed three months; and (iii)
two additional round trips between Massachusetts and the Bay Area for you and
your family to prepare for your move. The reimbursement of expenses listed in
(i), (ii) and (iii) above shall not exceed $73,000.

     5. OTHER BENEFITS. In addition to the benefits specifically described in
this letter, you will be entitled to reimbursement for parking and
Embarcadero Technologies' standard executive benefits.

     6. PROPRIETARY INFORMATION. You will be required to sign Embarcadero
Technologies' standard employee confidential information and inventions
agreement (a copy of which has been provided to you).

     7. SEVERANCE. Your employment will be at will, which means that either
you or Embarcadero Technologies may terminate your employment at any time
with or without "cause" (as defined below). However, in the event you are
terminated without cause by the Company, you will be entitled to severance
pay in an amount equal to 12 months' base salary (which will be payable in
semi-monthly installments) and the Company will also continue to pay your
medical and dental benefits in accordance with the benefits you were
receiving at the time of your termination for six months. These payments will
terminate when you commence other full-time employment. In addition, if your
are terminated without cause by the Company during the first year of your
employment, 25% of your options shall become vested; or, if you are
terminated without cause after the first year of your employment, you shall
receive credit for an additional

<PAGE>

Ms. Ellen Taylor
September 27, 1999
Page 3

six-months of vesting beyond what you will have vested through your tenure
with the Company.

          In the event that you voluntarily leave the Company or you are
terminated by the Company with cause, no severance pay will be due to you.
"Cause" shall mean (a) fraud or illegal acts; (b) material violation with
consequential damages to the Company of Company agreements, including the
Company's confidential information and inventions agreement; (c) material
failure to perform your job function to a reasonable standard after notice of
such failure has been given to you by the Board and you have had a 15
business-day period to cure such failure or (d) any other reason deemed cause
under applicable California law.

     8. ARBITRATION. In the event of any dispute arising out of or relating
to your employment relationship or its termination (including without
limitation claims for breach of contract, wrongful termination, or age, race,
sex, disability or other discrimination) that it is not resolved by good
faith negotiations between the parties, you and Embarcadero Technologies
agree fully, finally and exclusively to arbitrate the dispute in binding
arbitration under the Employment Dispute Resolution Rules of the American
Arbitration Association in San Francisco County, California, rather than
litigate the dispute in court; provided that this arbitration provision shall
not apply to any dispute relating to or arising out of the alleged misuse or
misappropriation of Embarcadero Technologies' trade secrets or proprietary
information. In the event of arbitration, the arbitrator shall be allowed to
assess costs.

     9. TERM OF OFFER. This offer will remain in effect until 5:00 p.m.
(Pacific Standard Time) on Tuesday, September 28, 1999.

          I am enthusiastic about your joining Embarcadero Technologies and
look forward to working with you.

                                           Very truly yours,

                                           /s/ Stephen Wong

                                           Stephen Wong
                                           Chairman and Chief Executive Officer

ACCEPTED AND APPROVED:
Date:  September 27, 1999


<PAGE>

Ms. Ellen Taylor
September 27, 1999
Page 4



/s/ Ellen Taylor
-------------------------------------
Ellen Taylor