A Cloudflare executive explains why the company turned down a $1 million deal early on, fearing organizational whiplash. They waited 18 months and won the customer anyway, showing that saying no to premature growth can pay off.
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Um, so we really started with this, you know, free plan, $20 a month plan. And really quickly, this is what happened. Customers would contact us and we had an Enterprise Advisory Council contact us. That was, it was free, pro for $20 a month, or Enterprise Advisory Council contact us. That's what our website pricing page looked like, um, back in 2010. And so people would sign up for the free and $20 a month plan. And then also we had these customers running into the Enterprise Advisory Council saying, I love your service. I use it on my personal blog. I want to bring it to my office, but I have to pay you more than $20 a month or otherwise I will get fired. I cannot in good faith go to my boss and say, "Hey, we're going to pay this company $240 to run all of our performance and security and reliability infrastructure," which is a great problem to have. It took us 2 years, 2 years, and trust me, I wish it had been faster, to come out with what we called a business plan, which was $200 a month, so 10 times 10 times above what we were charging, and an enterprise plan, which was basically originally $3,000 a month, and now it's up to $5,000 a month, like a magnitude order. It took us 2 years to get there. I think the lesson I learned is to be patiently impatient. We always wanted to get there faster, but we weren't quite ready because the types, what your organization needs to do to service those larger customers are totally different than what we had to do for our freem $20 a month customers. Customers, like if we made a mistake and someone was on the free plan, we, they were very forgiving. If somebody was paying us, you know, $3,000, $5,000, when our customers who were paying us $60,000 a year, they are not as forgiving, nor should they be.
Yeah.
Because they're a real business and it's mission critical and it's totally unacceptable. And so we went through this whole transformation and then this happened. So we, we got onto these, these larger account types and you know, we, we have a sales team now. Fielding them, which is great. 'Cause when with, with our free plan, our $20 a month plan, we have no sales team. But to, again, to close a $60,000 deal, like they want to talk to somebody. They want someone to like ask technical questions to. You can't just point them to your documentation. Like they want to talk to somebody. Um, and then once they sign up, you need to service them. Um, and so we, we build that all out. Um, and I remember this is what happened. So we were really, we, we started to get like better at these $60,000, $100,000 contracts. Then it's like this oracle walked through the door where we had a customer, brand name customer, amazing internet property who were like, look, it was a $1 million contract. Our sales team was all over this contact. They wine and dined them and they were so excited and they were promising them the world. I remember—
What was their quota at the time? Do you remember?
Pardon me?
What was their quota at the time?
Oh, I don't remember.
You don't remember? I don't remember. It was like a 100x.
It was a big deal. Again, that was just a lot. It would've totally made our year, our revenue number for the year. It was a big deal. I remember Matthew and I literally having a panic attack, like a heart attack, and we said, "We are not going to take on this customer. We are not ready." It was this friction where the sales team was saying, "Oh my God, they're brand name. They want to pay us $1 million. Of course, we need to get there. We have to change and drop all our priorities and focus on winning this contract." and, and I remember thinking, no, no, we don't. No, we can't. We weren't ready yet. Um, and so what ended up happening, and it was not obvious, but what ended up happening, and this is really hard to do, is we, we told the customer, look, we admire what you guys are doing. We would love to be your vendor of choice, but truthfully, we're not ready to, to do this yet, but we'd love to keep in touch. And the next time this contract comes up for renewal, We want a bite at the apple then. And fast forward 18 months later, we won the contract.
Amazing.
But it was that, like, it was, and I tell you, our, the salesperson was not happy.
Yeah.
Our head of sales, not happy. 'Cause they wanted to use it as a reason to get better as a company.
Yeah.
And I totally get that. I totally get it. You lean in a little bit and that company makes you better because they have higher expectations and that's great and it's hard, but it's, It's a good hard, but there's also a thing about whiplash in the organization. I think as a founder or executive, if you're running a company, your job is to figure out, is this good for the company or is it going to be whiplash? We just thought at the time it was whiplash. Now, of course, you can't live life in parallel, so I don't know what would've happened, but I'm sure to this day we made the right choice.
Yeah. I really want to dig in here on some words you said because I think probably by the laughter, a lot of people can relate to this problem. So you have this big customer. What were the tangible things that made you know you're not ready? Because as a founder, you're always doing things that you're not ready to do. And so how did you know, like, no, honestly, we're not ready? How do you evaluate whiplash would be another way to ask the question. But I think that's one piece, and then we can talk about the sales.
When the words were uttered, we need to drop everything and change our product roadmap to meet these customers demand, I was like, no, we don't. No, no, we don't. We're not going to do that because we have all these other customers. I mean, today we have 7 million internet properties. Back in the day, I don't know, it was probably a million. But it's like, we have a million other customers we have to care about too. This revenue is super shiny and it's very attractive, and yes, I agree, we will get there, but it doesn't have to be right now. Again, I think that it would've broken the organization. Just change a lot of different sorts of things. And I really don't think the customer would've been happy in the end because we were going through, you know, scaling, scaling, growing pains, which is what every company does. And we didn't want them to have to bear the brunt of those.
Well, and how did you deal with the sales team?
Well, look, I mean, one thing I've learned, which I also did not know when I started Cloudflare, is no is a really powerful word. You just gotta say no sometimes. And the answer was like, no, understand we want this. Go back, tell 'em we wanna stay in touch and we'll try, you know, let's be a good partner here. Now I work with great people and so they understood that. They were disappointed as they should be. That's their job. They should be disappointed. But, you know, you play as a team, you win as a team.
Interesting. And that customer came to you, right? Yes.
