Cloudflare IPO: A real tech giant in the making -- with a female co-founder

Cloudflare IPO puts the "tech" back into tech IPOs -- protecting the core of the Internet.

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Cloudflare founders Matthew Prince (right), Lee Holloway and Michelle Zatlyn at the Crunchies Awards 2014  in San Francisco.

Tom Foremski

Cloudflare, the San Francisco based Internet infrastructure and security services startup, has filed an S-1 for an initial public offering on the New York Stock Exchange (NYSE) with the ticker symbol NET that could value it at more than $5 billion.

Cloudflare is rare for a tech company in that it has a female co-founder in a senior leadership position: Michelle Zatlyn, Chief Operating Officer, along with Matthew Prince, CEO and Lee Holloway founded the company in June 2009.

It has raised more than $320 million in six private rounds; the most recent was $150m in March 2019.

Cloudflare said it is not yet profitable but that its revenues have jumped substantially to nearly $193 million in 2018 from around $135 million in 2017. First half 2019 revenues were $129 million compared with $87 million in the first half of 2018. Cloudflare is on track for nearly $300 million in revenues this year.

Its losses have slowed as revenues have risen. Cloudflare had a net loss of nearly $37 million in the first half of 2019 compared with a loss of about $33 million in the same period a year ago.

Cloudflare handles traffic for more than 20 million web sites filtering out malware and speeding up access through 193 data centers around the world.

The company has attracted some negative publicity for having some client web sites that have been labeled extremist by critics. In some cases, Cloudflare has removed those controversial sites from its network.

Foremski's Take

Cloudflare's successful IPO would create one of San Francisco's fastest-growing tech companies and bring back "tech" to tech IPOs which have been dominated by ride-hailing services Uber and Lyft, and office space renting such as WeWork -- tech users rather than tech companies.

Cloudflare is a real tech company dealing with core technology infrastructure issues. Its workaround DNS, for example, is critical to every Internet user because it protects the hyperlink from abuse and malware.

It does a lot to support non-profits, media organizations, and small businesses through free or very low-cost services that protect against denial of service attacks and improve web site performance. 

It has also launched a free VPN service alongside free DNS services, and it recently became a domain name registrar, providing registration services at cost. 

It's been hugely innovative in many other areas of essential Internet infrastructure. And it works for its users -- it is not selling them out at every opportunity as Google and other large platforms with tracking software.

Cloudflare sincerely wants to make the Internet a better place, and its leadership is a keen promoter of women in tech and the value of diversity. The IPO will propel co-founder and COO Michelle Zatlyn into a prominent position on subjects of diversity and a prime example of female success in a male-dominated industry.

There aren't many startups like Cloudflare that have the opportunity to stay independent. We are unlikely to see many or any large tech companies created by Silicon Valley over the coming years because startups don't have the scale to compete with the large tech companies. They are acquired if they are lucky. 

Cloudflare has a chance to become one of the most important tech companies in the next decade.