Cloudflare IPO Roadshow Video


The Internet wasn’t built
for what it’s become. Many of us tend to think that
the Internet just works, but behind the scenes, it’s another story: an unruly
mess of network equipment strung together through a
spider web of cabling. Tens of billions of dollars each
year are spent by businesses and organizations around the world on
these band-aid network hardware boxes: firewalls, load balancers, VPNs,
WAN optimizers, and the list goes on and on. You’re lucky if you’re able to afford them,
and then you need to spend millions more on the I.T. organization to support them. At Cloudflare, we believe there’s a better way. Cloudflare represents the next step of Internet infrastructure: a global cloud platform to manage
the security, performance, and reliability of any Internet property, along with any combination of
cloud services and on-premise hardware from a single dashboard that anyone can use. Today, over 2 million free and
paying customers globally use Cloudflare to power over 20 million Internet
properties, including many of the world’s leading companies. Approximately 10% of the Fortune 1,000
are already paying Cloudflare customers. We’re Cloudflare, and we’re helping
build a better Internet. Cloudflare has been fantastic. The way I like to describe it to people
is that it feels like an extension of our team. Cloudflare is our outer edge. It makes our application
faster, more reliable. I like the continued innovation
and push that Cloudflare brings. We’re looking at better agility, better
response time in terms of support. Better operational capabilities. Cloudflare actually understands
the Internet. Our team looked at the innovation over
the last couple of years and said, “Hey, this is definitely the horse
to bet on in the future.” Cloudflare is just bringing incredible
value to our business. I’m Matthew. And I’m Michelle, and we’re
the co-founders of Cloudflare. Cloudflare’s mission is to help
build a better Internet. We’ve built one of the
world’s largest global cloud platforms, providing Internet security, performance,
and reliability services to everyone from individual developers and
small businesses to large governments and Fortune 1,000
companies that require enterprise-grade solutions. Today, Cloudflare’s global network spans over
190 cities in more than 90 countries worldwide. With over 20 million Internet properties using Cloudflare, if you’ve used the Internet today,
it’s likely you’ve used our network. We see strong adoption from verticals like healthcare
with companies like Gilead and Lab Corp., the industrial and transportation verticals with companies
like United Technologies, Reliance Steel, and Norwegian Air, and among government, education,
and non-profit organizations like the FBI and
the U.S. Department of State. Cloudflare offers
an integrated global cloud platform which provides security,
performance, and reliability services for everything connected to the
Internet, replacing and improving the functionality delivered by
network hardware boxes. Our core security services help
protect customers from large and increasingly sophisticated online
cyber attacks. Informed by the millions of properties on our network,
our intelligent systems use data on cyber attacks against any one of our
customers to better protect every customer. For a long time, the
widely held view was that better security meant a
sacrifice in performance. At Cloudflare, we’ve never been
willing to make that compromise. We aim to develop products that
deliver security while also improving performance. And we’ve developed
technology that intelligently optimizes and routes data around
the world, bypassing network congestion. The next pillar of
our platform is reliability. There are so many things that can go wrong
on the Internet, even when you’re doing everything right. Our security and performance products are designed to make sure your
Internet property never goes down. In addition, we offer dedicated features
like load balancing that help you handle traffic spikes and
unforeseen events in real-time. Finally, we’re really excited to
have opened our own serverless platform to outside developers with
a product called Cloudflare Workers, which we believe stands to
make Cloudflare’s network the next frontier for modern
Internet applications. Security, performance, reliability, and
a bleeding-edge development platform. These are the pillars at
the heart of what Cloudflare does. I’m Thomas Seifert, Cloudflare’s
Chief Financial Officer. Before joining Cloudflare two years ago,
I had the opportunity to serve as CFO at other leading technology
companies, including Symantec and AMD. And I’m uniquely excited about
the opportunity ahead of us at Cloudflare. Cloudflare is disrupting a very large
and significant total addressable market that has allowed us
to grow revenue from a compound annual growth rate of 51%
over the last three fiscal years. But more importantly, we’ve been able
to deliver this revenue with a GAAP gross margin of 77%. At the core of Cloudflare is an efficiency
that is demonstrated across our entire business model It shows in the high gross margin
we generate from growing revenue, and in the low CapEx we need to deploy and build out the footprint
and capacity of our network. It shows in the efficiency of our
go-to-market and our low customer acquisition cost It shows in the efficiency of how we
launch products and bring new products to market. And more importantly, it has allowed us to grow revenue with
multiple and independent growth drivers. We all know what a good experience
looks like, and one of the main reasons in choosing Cloudflare was because
of the experience that we would be getting. The team overwhelmingly said,
“We’ve gotta go this route. Look at how much
they have outpaced everyone.” We’re betting on the technology for
the future, not the technology for the past. So having a broad network,
having global companies now running at full enterprise scale,
gives us great comfort. It’s dead clear that no one is innovating
in this space as fast as Cloudflare is. The technology industry
is undergoing a massive transition from on-premise hardware and
software that customers buy to services in the cloud
that they rent. We first saw this transition at
the software stack as companies like Salesforce and Workday disrupted
legacy on-premise software with cloud-based software as
a service solutions. Storage and compute soon followed the
same trend as legacy hardware companies were disrupted by cloud
vendors like AWS, Microsoft Azure, and Google’s Cloud Platform. Today, the
same transition to the cloud is occurring with network hardware, as
enterprises continue to abandon the maze of band-aid boxes in favor
of network services built for the cloud. Cloudflare is at the forefront
of this transition, as we consolidate and improve on the
functionality historically provided by companies like Cisco,
Juniper, and F5. There are several trends
driving this change. In the past, if an organization wanted
Internet security, performance, and reliability, it had to buy rooms full
of expensive network appliances and hire I.T. teams just to manage them. While there were some companies
that could afford this, the cost was prohibitive for many. Businesses are at different stages in
this transition to the cloud. Most still have some equipment
running on-premise, some in SaaS vendors, and some in
the public cloud. Businesses want a single unified
control plane to manage their configuration across these hybrid environments,
and the band-aid boxes of the past simply aren’t built to
work in tandem with the cloud. This is where Cloudflare shines. We give our customers a single dashboard
they can use to manage their network configuration and have it apply
across all their cloud-based services, SaaS applications, and
on-premise hardware. We believe our platform disrupts
several large and well-established I.T. markets. We are disrupting a total addressable
market that, based on our analysis of IDC data, was nearly
$32 billion dollars in 2018, and that’s expected to grow to
$47 billion by 2022. This total addressable market
comprising security, performance, and reliability services doesn’t include opportunities
that we have in adjacent markets such
as serverless computing. And by virtue of the way we’ve
architected our network, as we grow, our efficiency and ability to serve
our customers with compelling new products grows with it. It’s really amazing to partner with a
vendor who’s not just providing a great enterprise service, but also helping
to move forward the security on the Internet. One of the things
we didn’t expect to happen is that the majority of traffic coming into
our infrastructure would get faster response times, which is incredible. Zendesk just got 50% faster
for all of these customers around the world because we
migrated to Cloudflare. I’m Jen Taylor and I’m
Head of Product at Cloudflare. We solve the problems that customers used
to need to buy boxes for, from companies like Cisco, F5, Juniper
and Check Point to address, But we deliver them as a service.
On Cloudflare, each of these is a separate SKU available from the
same intuitive dashboard, where turning one on is as simple
as a single click. Once you’ve adopted any Cloudflare
service, it’s incredibly easy to adopt others: 70% of our enterprise customers
use four or more Cloudflare services. I won’t attempt to introduce
all of Cloudflare products, but will instead highlight just
a few of them to illustrate the breadth of our product suite,
like our firewall, our zero trust security solution, our intelligent routing,
and our load balancing products. These products all work
together seamlessly and are managed from the same integrated dashboard. They join the complete solution
of other security, performance, and reliability products we’ve built to
solve our customers’ needs. Let’s start with
our firewall product. The job of a firewall is
simple: keep the bad guys out. But historically, firewalls have been
complicated to deploy and manage, and they lack the scale and
shared intelligence you need in today’s threat landscape. We went for
simple, smart, and powerful. If you can create a filter for your
email inbox, you can author a firewall rule. As with all our
products, our firewall is informed by our massive global network,
which behaves like an immune system, always learning how to
identify and neutralize novel threats. Now let’s look at Cloudflare Access,
our zero trust security solution. Security is as much about keeping the bad
guys out as it is about only letting the good guys in. It used to
be that to create a secure system, people would secure the perimeter of
their systems with a VPN. But in today’s threat
landscape, that’s not enough. Cloudflare Access verifies anything and
everything trying to connect to the Internet. Access also makes life so
much better for the end user because they don’t have to deal
with a clunky client and configurations. Fast, easy, and secure. Shifting gears to performance: at Cloudflare,
we leverage the scale and the scope of our network to act as
a vast sensor network to monitor all of the transit routes across the
Internet. This helps us identify not just the most logical route,
but the fastest route. Argo Smart Routing works like Waze
for the Internet, using that shared intelligence to route data
around Internet traffic jams. Typically, when our customers enable
Argo Smart Routing, they see a performance boost just by
clicking one button. Finally, let’s talk about
our load balancing product. Cloudflare’s load balancing helps
customers load balance between single, hybrid cloud, and
multi-cloud environments. This means our customers can be
truly multi-cloud, which simply isn’t feasible in the world
of hardware boxes. We think about load balancing the same
way we’re thinking about all of our functionality, built on the same platform,
and you turn it on the same way: simply clicking a
button in the dashboard. These are just a few of
the many products available with Cloudflare’s integrated global cloud platform. And the key thing to remember is
that each of these products runs on every server across the
same global network infrastructure. My name is John Graham-Cumming,
and I’m Cloudflare’s Chief Technology Officer here at Cloudflare’s London office
— one of our eleven offices worldwide. You just heard about the
broad suite of products that we deliver to our millions of
customers spanning security, performance, and reliability. At the heart of
these products, and our ability to continuously innovate and improve on them,
is our network and the wholly proprietary software stack
that runs across it. Rather than deploy different hardware and
software for each product we sell, we built our network to allow
for every server, in every city, to run every Cloudflare service. We refer to this architecture as
serverless because it means we can deploy standard commodity hardware and
our product developers and customers do not need to
worry about the underlying servers. Our entire software stack is
proprietary and built in-house. This integrated stack has made
scaling, debugging, optimizing, and operating our platform easier and
cheaper than competing services. It also allows us to deploy
changes across our entire worldwide network in a matter of seconds. Our software automatically manages
the deployment, prioritization, and execution of our own code and
our customers’ code across our network. Whenever we add additional services to
our network, the entire network becomes more efficient. The efficiency of our network has allowed
us to offer basic versions of our core products for free. We estimate that we operate within
100 milliseconds of 99% of the developed world’s Internet
connected population. For context, the blink of an
eye is 300 to 400 milliseconds. We intend to continue expanding our
network to better serve our customers globally and enable new
types of applications, while relentlessly seeking to drive
down our unit costs. This is one reason why we’ve been
able to grow our global network while achieving a GAAP gross margin
of 77% in 2018. Our serverless architecture and the software
stack that runs across it is at the heart of everything we do. It is the foundation from which
we deliver world class security, performance, and reliability products for
over 20 million Internet properties. What’s more, we’ve been
able to productize the network itself. Cloudflare Workers is our
bleeding edge development platform built to fully leverage the breadth
and power of Cloudflare’s network. Workers provides customers the opportunity
to customize and configure our performance, security,
and reliability solutions. It also provides a fast, secure,
and scalable platform where companies deploy whole applications, including for use
cases that simply were not feasible before Cloudflare Workers. It’s amazing to see what developers
are already doing as they leverage our platform to invent the future. A great example is our customer Optimizely,
which use Cloudflare Workers to reinvent its core website
experimentation product to make it faster and more scalable than ever. We needed a way to push this
type of decision making and computation out to the edge, and Workers ultimately
surfaced as the no-brainer tool of choice there. Once we started using
Workers, it was really fast to get up to speed. It was like, oh,
I can just go into this playground and write JavaScript, which I
totally know how to do. And then it just works. Our customers will be able to run
10x, 100x, the number of experiments. And from our perspective, that ultimately
means they’ll get more value out of it. And the business impact for
our bottom line and our top line will also start to
mirror that as well. You may look at Cloudflare’s network
spanning over 190 cities in more than 90 countries and
think, “that looks expensive.” But the reality is far different.
We built our network and business with efficiency at its core. As a consequence, over the last
three years, our revenue has increased at a rate faster than
our cost of revenue. This is the secret sauce that
makes Cloudflare’s business so compelling. And we believe this
efficiency can scale alongside Cloudflare’s continued growth. There are two interconnected flywheels
that drive this efficiency and they stem from Cloudflare’s
commitment to serving everyone. In order to serve millions of customers
in a cost-effective way, we had to invent a new type of network architecture,
which we refer to as serverless. Rather than deploying different
hardware and software for each product we sell, we designed our
network to allow every server in every city to run
every Cloudflare service. Our servers are built with
commodity hardware, and our proprietary software allows us to intelligently
optimize our network and utilize idle capacity to create a free tier
of service which introduces us to millions of customers and
generates substantial global scale. This scale makes us an
attractive partner to ISPs globally. Deploying our equipment directly inside
their networks helps drive down their bandwidth costs and increase
their performance, allowing us to negotiate better colocation and bandwidth
costs. So the increased efficiency enabled by our intelligent
serverless architecture helps us better serve everyone and we
drive the flywheel forward. A flywheel also drives
how we develop products. Because we wanted to serve everyone, we
had to design our platform to be easy to use. This makes it
easy for our customers to adopt our platform, which has contributed
to our global scale. Our diverse global customer base
generates data on everything from traffic patterns to cyber attack
signatures, creating a global sensor network, which we automatically leverage
with machine learning to improve our products. In addition, many
of our free customers volunteer to test new features, which helps
us quickly develop and validate new products. The symbiotic relationship
we have with ISPs, and the efficiency of our serverless network
architecture, allows us to introduce these new products on our
platform at low marginal costs. In other words, because we serve
everyone, we are able to serve everyone better. We see our competition
falling into three distinct buckets. We continue to see on-premise
hardware boxes being phased out in the enterprise because of their
complexity and price, along with their incompatibility with cloud
and SaaS solutions. There are some point-cloud providers
that offer a single solution like VPN as a service, CDN, or DNS,
but they lack the breadth of products managed from a
consistent, integrated dashboard. Furthermore, each service that gets
layered on adds additional latency, cost, and overhead. We believe that customers don’t want
to manage a portfolio of point-cloud providers, but instead want
an integrated solution that also works well with
other cloud services. We expect public cloud providers
will attempt to vertically integrate and push customers to adopt
their own products exclusively. While we work with these providers
today, we’ve heard from CTOs that one of their rising concerns is
public cloud vendor lock-in. As a result, many enterprises are
pursuing a multi-cloud strategy. We believe Cloudflare’s neutrality and the
ability to sit in front of any on-premise, hybrid or cloud
service makes our platform uniquely positioned to serve customers. We’ve always believed strongly in
the power of serving everyone. Our products are designed from the ground
up to be easy to use, which has enabled millions of customers around
the world to leverage our platform. And we’re incredibly fortunate
that many of these customers have become our greatest advocates. In the fourth quarter of 2018, we
achieved an average Net Promoter Score of 68 across our paying customers,
rivaling some of the best consumer brands in the world. We believe that we have been able
to invert the go-to-market approach used by most companies, yielding
considerable savings and efficiency gains. Instead of investing in marketing,
and then a sales team, and only then getting customers — we
do it the other way around. We start by investing in regions
where we already see organic demand from customers. After we’ve seen
a significant number of customers adopt our services within a given region,
we start to invest in local sales teams, followed by
supporting marketing investments. Instead of committing upfront sales
and marketing resources to expand into new markets and geographies, we’re
pulled up market and into new regions by organic demand. Cloudflare’s global cloud platform provides
a horizontal solution that serves many diverse customers. While we usually think of our customers
as one continuum, it can be helpful to think of them
as three distinct segments. First, we serve developers
and small businesses. These customers are coming to our
website and independently signing up for self-serve subscriptions, paying
us month to month. We have tens of thousands
of these paying customers. Next, we serve the mid-market.
Many of these mid-market customers are looking for more enterprise-grade
security, performance, and reliability services. They enter into longer-term
contracts with us to access these features. We have an inside sales team
focused on serving these customers. And finally, we
serve the large enterprise market, which includes approximately 10%
of the Fortune 1,000. We have a dedicated field sales
team focused on these larger customers. And whether you’re a developer or
one of these Fortune 1,000 enterprises everybody wants to be more
secure online, more performant online, and more reliable — and that’s
something that isn’t going to change going forward. I’m Chris Merritt and I’m
the Chief Revenue Officer at Cloudflare. Our sales cycles typically
last less than a quarter, and our sales reps have
maintained high productivity levels as we’ve expanded into
larger enterprise customers. We’ve hired veteran sales leaders
from Cisco, Seagate, Dell, VMware, Splunk, and other enterprise companies
known for building great sales teams. Our customers span nearly every
industry in every geography, but many of them do follow a similar
path as they adopt our services. They often come to Cloudflare to
address an immediate need, whether it’s replacing hardware, stopping
an acute security threat, accelerating global network performance,
or deploying a custom application at the network edge. Our
subscription plans are designed to make it easy for a customer to
adopt our platform and quickly see ROI before going on to
expand their adoption. We follow a land and expand model. Today, over 70% of our
enterprise customers already leverage four or more products of ours. Often we’ll see our larger customers
begin using our self-service plans before adopting our
contractual plans. That’s what happened when this
well-known global consumer packaged goods customer, which signed up on
a self-service plan in 2016. Our systems surfaced that they would
be better suited by adopting our enterprise plan. So we reached out
and they quickly became an enterprise customer on
an annual contract. During 2017 and 2018, they continued
to expand their usage, adding many more Internet properties from their
large portfolio of brands, and adopting our VPN alternative
product Cloudflare Access. Now this customer has over a
thousand Internet properties on our network and has increased overall
usage of our platform. Next, let’s look at an example
of a large multimillion dollar account. They chose Cloudflare because of
a security and performance need. During 2017 and 2018, this customer
continued to add significantly more Internet properties and
expand their usage. This customer’s aggregate lifetime
contracted spend is $15.3 million. We are truly fortunate that our
customers are often our greatest advocates. Cloudflare helped us to
improve the customer satisfaction. It removed the friction
with our customer engagement. It’s very low maintenance, and very
cost effective, and very easy to deploy. And it improves the
customer experiences big time. We ended up building our own fleet
of HAProxy servers such that we could easily lose one and then it wouldn’t
have a massive effect, but it was very hard to manage because we kept
adding more and more machines as we grew. With Cloudflare we were able to
just scrap all of that because Cloudflare now sits in front and does
all the work for us, and that saves a lot of money. The other
thing that’s been phenomenal for us is the latest release of Cloudflare Workers,
which we’ve been able to offload more work from our boxes we
were running, to run code directly on Cloudflare’s edge. I’m Janet Van Huysse,
Head of People at Cloudflare. At Cloudflare, we have three
guiding tenets for everything we do: we are curious, we
are transparent, and we are principled. Through our initiative Project Galileo, we
work to protect hundreds of artistic, political, and humanitarian
organizations at risk of being silenced. Many of these groups are
lifelines for the most vulnerable voices on the Internet, for whom
downtime can feel like extinguishing their connection to the only
people who understand them. Meanwhile, through the Athenian Project,
we provide state and local governments the highest level of
protection and reliability for free, helping protect voter data and
election integrity and ensuring these sites stay up during the
critical moments of an election. All of these factors have contributed
to a company culture that holds itself to a higher standard, and we will
not waver in that regard as we open this next chapter of
helping build a better Internet. I’m Scott Tomtania,
Head of Recruiting. Helping build a better Internet goes
beyond building products and services. We pursue the latest research,
are deeply engaged in helping define the next generation of Internet
standards, and we hold regular public conversations with luminaries within
the tech industry and beyond. Everything we do stems from
our mission, which helps us to attract the best and brightest talent
who want to solve the Internet’s biggest problems. In fact, in the three months ended
March 31, 2019 we made offers to less than 1% of applicants and we
had an offer acceptance rate of 90%. Our retention rate
is similarly exceptional. Our employees are
our greatest asset. We are fortunate that the best
and brightest want to work here. Cloudflare launched nearly
nine years ago. Many great startups pivot over
time — we have not. We had a plan and have been
purposeful in executing it since our earliest days. While we are still
in its early innings, that plan remains clear: we’re helping
build a better Internet. Our business model is aligned with
our customers and their customers. We don’t sell ads or user data. We strive to be a neutral party,
building our technology to work in tandem with anything connected
to the Internet. And we are incentivized to keep
making the Internet more secure, faster, and more reliable to the benefit
of everyone who uses it. Not just because it’s good for our business —
but it’s also the right thing to do. We are the beneficiaries
of broad industry trends that position our global cloud platform to grow
in lockstep with the Internet itself. We believe there are vast
opportunities ahead in helping organizations better secure their networks,
improve their performance and reliability, and to empower them with
a platform to unlock the next generation of online innovation. We’re Cloudflare. We’re helping build a
better Internet. And we’re just getting started.

, , ,

Post navigation

Leave a Reply

Your email address will not be published. Required fields are marked *