Shares ofCloudflare [http://www.cloudflare.com/]rose 20% today in its first day
of trading on the public market, opening trading at $18 after it priced its IPO
at $15 a share yesterday and holding steady through the day.
Put another way, the performance of the nine-year-old company ? which provides
cloud-based network services to enterprises ? was relatively undramatic as these
things go. That?s a good thing, given that first-day ?pops? often signal that a
company has left money on the table. Indeed,Cloudflare
[https://crunchbase.com/organization/cloudflare]had initially indicated that its
shares would be priced between $10 and $12, before adjusting the price upward,
which suggests its underwriters, led by Goldman Sachs, fairly accurately gauged
demand for the offering.
Of course, it was still a very big day for Cloudlfare?s 1,069 employees and
especially for Cloudflare?s founders Matthew Prince, its CEO, andMichelle
Zatlyn, [https://crunchbase.com/person/michelle-zatlyn]its COO. We talked with
Zatlyn today in the hours after the duo rang the opening bell to ask about the
experience, and how the IPO impacts the company going forward. Our chat has been
edited lightly for length and clarity.
TC: Thanks for making time for us on a busy day.
MZ: Of course! [TechCrunch?s] Battlefield [competition, in which Cloudflare
competed in 2011] is such an integral part of our funding story. Thank you for
giving us the stage
[https://techcrunch.com/video/cloudflare-startup-battlefield-finalist-presentation/] to launch our company.
TC: Did you get any sleep last night?
MZ: I was so exhausted that I got a great night?s sleep. This whole process has
been so incredible, so special. I didn?t know what to expect, and it?s been way
better than I could have imagined. There are 150 of our teammates, early
employees, family members, board members, champions and other friends here with
us [in New York at the NYSE]. We also live-streamed [our debut] to our offices
around the world so they could share this moment with us.
TC: How are you feeling about today? The stock is up 20%. There?s always banter
afterward about whether a listing was priced right, whether any money was left
on the table.
MZ: At this point, we?ve raised almost a billion dollars between today and all
of the money we?ve raised from venture investors. We have a great team. We?re
really happy. The markets are going to react how they react, but it?s part of
our DNA to provide more value than we capture. We think that?s the way to build
an enduring company.
TC: You have a liquid currency now. Do you imagine Cloudflare might become more
acquisitive as a public company?
MZ: We?ve done some acquisitions on the smaller side and of course, we have a
team that?s always looking at different opportunities. But we?re really
engineering-driven, and we think we have many products and services left to
build, so we?ll continue to invest in our products and in R&D development, as
well as in our customer relationships.
TC: Retaining employees is a challenge that some newly public companies worry
about. How will you address this in the coming days and months as lock-up
MZ: I?m so proud of where we are today and of our whole team, and we?re just
getting started. [Matthew and I will] show up Monday morning and get back to
work and so will our employees, because they want to make the company [an even
TC: The company went public with a dual-class structure that gives not just
management but all employees 10 times the voting rights of the shares sold to
the public. Why was this structure important to Cloudflare, and did it give
MZ: There are more than 1,000 people around the world who are building the
product and working with customers, and we think it?s important for them to have
that 10:1 structure, so it?s something we put in place a few years ago with the
encouragement of some of our earlier investors.
TC: Were you modeling this after another company? Is there a precedent for it?
MZ: I don?t know of another one ? there may be ? but we weren?t inspired by
another company. We just felt passionately about this being the right corporate
structure and [I don?t think it was harder for us to tell the story of
Cloudflare because of it]. Over the last two weeks, in talking with investors
across the world, it wasn?t in the top 10 topics that came up, so I think we did
a good job of describing it in our S-1.
TC: What was the roadshow like? What surprised you most?
MZ: Don?t get me wrong, there?s a ton of work involved from all kinds of people,
in finance, our legal teams ? But roadshows have a bad rap in that people think
they?re grueling and that, by the end, you?ll be exhausted. That was my
expectation. But it was really fun. It was a huge privilege to represent
Cloudflare to all these investors who were incredibly smart and well-prepared.
We traveled all over and people told us ?You look better than most teams.?
TC: Wheredoesone go for these roadshows?
MZ: You have the usual suspects; there?s a travel roadshow circuit, with some
variations based on people?s vacation schedules, but New York, San Francisco,
Boston, Chicago, Baltimore is common, Kansas City, Indianapolis, Toronto. You go
in person to some places and in others, people dial in. But the whole thing gave
me new insight into these pools of capital after venture capital. It was really
TC: Cloudflare said in a recent amendment to its S-1 that it was in touch with
the U.S. Treasury?s Office of Foreign Assets Control back in May after
determining that its products were used by individuals and entities that have
been blacklisted by the U.S. Did this new revelation slow anything down?
MZ: There was no impact. Your group of advisors expands when you go through a
public offering, and lawyers dot every ?i? and cross every ?t,? and you become a
better company for it.
We deliver cybersecurity solutions that are made broadly available to
businesses, entrepreneurs and nonprofits, and that?s incredible, but there are
also some unsavory actors online, and we?ve always been a transparent
organization [about having to grapple with this].
TC: How will Cloudflare handle requests for service by embargoed and restricted
entities going forward? As a public company, does that process change in any
MZ: We have a really good process today. I think people think that we let anyone
use Cloudflare and that?s it. But if customers are breaking the law, we remove
them from our network and that?s not new and we publish transparency reports on
Sometimes, [you?re confronting] things that aren?t illegal but they?re gross,
and the question is whose job is it to take it offline. But I work with some of
the smartest minds on this and we try to be very transparent about how we figure
this out. The conversation is so much better than it was a few years ago, too,
with policy makers and academics and the business community engaging on this.
People around the world are talking about where the lines can be drawn, but
these are tricky, heady conversations.
TC: They certainly put Cloudflare in a precarious spot sometimes, as when the
internet forum 8chan earlier this year after it was learned that the site was
used by a gunman to post an anti-immigration rant. Can we expect that Cloudflare
will continue to make decisions like this on a case-by-case basis?
MZ: Freedom of speech is such a fundamental part of this nation. Citizens should
want the lawmakers to decide what the law should be, and if lawmakers could do
this, it would be much better. On the other side, these are new issues that are
arising so we shouldn?t rush. Lots of opinions need to be weighed and
conversations are much further along than they once were, but there?s still work
to be done, and Cloudflare is one [participant] in a much broader conversation.
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