Cloudflare's Journey and Business Model

Introduction

• Discussion between Matthew (Cloudflare founder) and Scott
• Reflecting on their journey and collaboration
• Event location: Helsinki, Slush

Cloudflare's Origin Story

• Launched in September 2010 at TechCrunch Disrupt, San Francisco
• Initial fears and excitement in the startup journey
• Vision: Shift from software and hardware to cloud services

Initial Mission

• Early mission: Build a big business and make money
• Adapted mission: Help build a better internet
• Understanding the evolving market: storage, compute, and network gear

Evolution and Business Strategy

• Chicken-and-egg problem: needed data and customers
• Solution: free version to gather data and attract early adopters (NGOs, nonprofits)
• Impact: Protecting vulnerable groups provided valuable data
• High-level products today: Serve 18 of the 20 largest companies in the world, 32% of Fortune 500

Freemium Model Insights

• Difference from other companies (e.g., Dropbox, Slack): Focus not just on converting free users to paid but getting essential data on cyber threats
• Example: Personal blog of Salesforce CTO leading to Salesforce becoming a major customer
• Importance of understanding business specifics and go-to-market dynamics

Fundraising Challenges and Strategy

• Fundraising difficulties in 2009 and 2010
• Strategic targeting of investors, personal relationships, and coffee meetings
• Early investors: Venrock (Ray Rothrock)
• Insights: Tough times can lead to disciplined business practices and future success

Economic Perspective for Founders

• Difficult times are fertile grounds for founding great companies
• Cost discipline and efficiency from early struggles contribute to the long-term success
• Cloudflare's long-term cost discipline: “Every dollar is a sacred duty”
• Importance for founders: Cost management, disciplined spending

Hiring and Team Culture

• Importance of attracting and retaining extraordinary talent
• Balancing fair pay with mission-driven work
• Equal compensation policies: Important for fairness and stability
• Mission alignment: Big mission attracts motivated individuals (example: internet access in Iran and Russia)

Innovation and Infrastructure

• Standardization of hardware: Using commodity equipment with clever software
• Purchasing strategy: Buy at scale for cost efficiency
• Example: Repurposing excess storage to create a new product (R2 Object Store)

People and Mission

• Mission-driven culture: Encourages people with multiple offers to choose Cloudflare
• Importance of meaningful work: Attracts individuals
• Advice to founders: Set sights on large missions, be serious and empathetic

Conclusion

• Key takeaways: Focus on mission, disciplined spending, strategic fundraising, and attracting the right talent