How Cloudflare CEO Matthew Prince grew Cloudflare to $1.3B revenue and 182K customers in 2024.

hello everyone my guest today is matthew prince he's the co-founder and ceo of cloudflare their mission is to help build a better internet today the company runs one of the most the world's largest networks powering more than 10 trillion requests per month nearly 10 of all internet requests and more than 2.5 billion people worldwide matthew are you ready to take us to the top absolutely thanks nathan for having me on so my research team put in bold at the top of the notes they said nathan we read this scott sandell rosewood nea sandwich story and you've got to clear the air quickly and ask the question everyone wants to know which is what is matthew's favorite sandwich since he didn't touch him that day gosh i don't i i uh i i don't know what my favorite sandwich is maybe uh maybe a good turkey sandwich um on some on some good bread that's everything sourdough bread there you go there you go all right let's jump into cloudflare what's the company do and how do you make money is it pure place ass yeah so we we we have a really simple model where people pay us to help make their whatever they're putting online faster more secure more reliable and more efficient um and we we have over 10 million uh web properties apis mobile applications that sit behind our network and we run a network that literally spans the world everywhere from not very exotic places like san jose to djibouti and uh all across mainland china and uh and and it's it's uh it's been really amazing to watch the company grow so walk me through kind of the average you know someone listening right now if they want to use you and they're not already right what would they pay per month on average so it really depends we have a free version of our service uh that people can get started with it's really designed for entrepreneurs that are just getting getting started trying to put something online up to we have companies that pay us over a million you know over a million dollars a year what's that minimum sorry a zero so free throw free there's a complete free version of the service uh which which we love our our free customers and they're great uh and then and then it graduates up so free 20 a month 200 a month and then and then hire from there if i just because matthew i know you have tons of products tons of different cohorts i i don't want to go down every single story i'm sure you're analyzing all of them but if i forced it kind of into some kind of average would you say generally 200 300 bucks a month something like that is fair i think that yeah our business really splits into two halves so we have what we think of as our self-service business which are people who come in give us a credit card and and pay for the service and that's going to be around 100 a month on on average and then we have what our mid-market and enterprise customers which we have a traditional uh enterprise sales team for and those will be you know it it really varies but sort of starting at five thousand dollars a month and and up from there that's great i want to put this on a timeline quickly uh when did you launch the company we launched a company in september of 2010 so we're coming up on our eighth birthday 2010 congratulations you've also raised you know chosen to go kind of the raised route versus bootstrapping how much have you raised to date a 183 million dollars and why did you decide to go down that path that's obviously a significant amount there was a point where you said you know what it's time to raise let's do it well caller it was clubhouse was either going to be kind of a one or a zero it was either going to be a company that didn't work or it was going to be a really big company and we knew that in order to build uh what we were doing out we had to build a global network so we own equipment in uh nearly 100 countries around the world 100 over 150 cities around the world you're talking about physical physical hardware physical hardware so we're not running on top of aws or or on top of azure or google we actually had to build the network out ourselves that takes a significant capital expenditure and so that was something that would have made this a very cost prohibitive business to to bootstrap that said i think we've been incredibly uh cash efficient we knew from the beginning that our business was about how can we process a bite of information cheaper than anyone else and so we've always respected that cash and you know i'm proud that we have still to this day um you know more than half that still in the bank have you leveraged those physical assets to raise non-dilutive capital from traditional banks that understand what physical assets look like yeah we haven't we haven't as much um we we experimented with that a little bit but the challenge with that is that because most of our equipment is deployed outside the united states it becomes a lot harder to get uh traditional like equipment financing uh or otherwise especially when you're at a smaller scale today where we're at a much larger scale and we can we can actually talk to more sophisticated global banks uh that's been that's been an option that we've explored but it's it's not something that we have that we prioritize today i'd like to dive more into kind of security and really what you guys are focused on from a technical perspective but first can you give me a general sense of scale in terms of what you guys are at now in terms of run rate um i mean i think the only thing that we've said publicly is north of 100 million dollars uh and and we're well north of that now that's great and what year did you break that number uh gosh a couple of years ago now um uh i don't i can't remember i think that we we got to then the metric i remember is that we went from zero to 50 million dollars in i think four and a half years which um puts us in some pretty pretty amazing company with companies like salesforce and workday and others yep so that was you know 50 million in arr by the end of 2015 kind of time frame right yep that's great um i think it was also public the last round of finance it well when was a was it public the valuation when you passed kind of the billion dollar mark and what round was that do you remember um so we uh again we you know i've always thought that that entrepreneurs who brag about how much they raised or or what their valuation are it's sort of like if you brag about how big your mortgage is um it's it it feels sort of distasteful but we you know we've said that we crossed over a billion dollars uh in valuation in uh the round that we did in december of 2014 but you know one of the things that i think that we've always done is um we don't we don't talk a lot about the money that we raise or or anything else so every round that we've done we've kept secret for at least nine months after we did it so the round that we that we raised in december of 2014 uh we actually announced finally in september of of 2015 so it's um you know i think that raising money is is is sort of a necessary part often of building a business like cloudflare but it's not necessarily something to be proud of it just means that you didn't actually generate enough revenue yourself to cover the cost that you had and so you know i i wish that more people would focus on you know how how quickly you've gotten to sort of break even how quickly have you actually ramped kind of your revenue rates um because that's that's what really matters for for a business let's focus on that so how if i started growing today so we're growing still high double digits um at the at the rate that that we're at which is uh which is really really really um you know amazing and so put a minute max on that and say between 50 and 99 percent you're over your growth is that fair that's right that's great which again very difficult at the levels you're at there was speculation you'd go public in 2017 right which you know ultimately i think you pulled the plans for why when you talk about using capital to drive your growth and your business in an efficient way uh whether you considered ipo or not walk me through the pros and cons of using that in terms of a capital form yeah we certainly weren't considering going public in in 2017 um and i think that what we're we're really proud of is that we've built a real business that can be a standalone uh sustained business and um you know we're we run the business at basically break even uh today and i i think that as you get to a certain size whether you're public or not public you have a responsibility to run your business as if it is a public company and so making sure that you have the controls in place that you're doing the right the right auditing the right other systems and so those are things that matthew there's a lot of though when you're in a public company stuff you have to do that is just like no entrepreneur who's creative thinking about how to solve security issues would ever want to spend a moment of his time thinking about so i'd push back on that i you know i think that there um there are reasons that you have rules and if you're taking people's money and if you're taking people's time especially and trading that for equity in the company then it's really important that you make sure that you're actually putting in place the systems and controls to to run that business responsibly and...