Cloudflare IPO Roadshow Video

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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.
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Channel: Cloudflare
Views: 41,668
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Keywords: Cloudflare
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Length: 26min 39sec (1599 seconds)
Published: Tue Oct 01 2019
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