A short interview with Michelle Zatlyn discussing how founders should choose North Star metrics—whether to prioritize growth, engagement, monetization, or profitability—depending on their ambitions (e.g., ‘swinging for the fences’ vs. small, profitable business). Zatlyn uses Cloudflare as a case study: early emphasis on growth despite slow revenue, initial pricing tiers ($20/month, later $200/month), and selecting fast-moving leading metrics (five quick-changing metrics) rather than revenue early on.
Questions this video answers
A $20 per month plan initially, and years later a $200 per month plan.
How do you decide if you should just. If you should focus on growth at the expense of profitability? Or maybe the answer is you do both. But for the founders that are struggling with what their North Star metric should be, if it should be growth or engagement or monetization and profitability, how do you decide?
I think it kind of goes back to if you're swinging for the fences or not. So we were swinging for a fence. We were literally, we wanted to be a huge company. We wanted to be, you know, a, you know, $20 billion market cap company. And now, you know, now there's a new goal post that we're aiming for. And we knew this early, like, we knew this super, super early in that case you have to grow. I mean, profitability means nothing like it, like, it doesn't matter if you're swinging for the fences now, the risk, if you are growing, then, then, then you're in trouble. But growth matters a lot more. I would say if you're like my husband, who is not, is not taking outside funding and doesn't care about one day being a public company and wants to deliver good service with a small team, well, they are doing something. It's growth plus profitability. It's different. They don't have the same constraints and making different calculus. And you do make different decisions because of that. Early on, I will say this is something that's also not intuitive. We were focused on growth, really important, but our revenue was slow at first. Our first, the first way we made money early on in Cloudflare was we had a free service and a $20 a month service. And then years later, we added a $200 a month service. And now we have companies paying us over millions of dollars a year. I will tell you, it is so hard to grow revenue when you're charging $20 a month. It's just like you do a lot, create a spreadsheet and you're like, wow, I gotta set up a lot of customers and then 200amonth, you're like, wow, I grow faster. But you know, to get to that 100 million and now a billion revenue and whatnot, like, it grows slowly. And so anyhow, my, my point is early on, and again, this was very Cloudflare specific, we cared about growth, but revenue was a metric that was changing slowly for us because the types of customers that we originally went to market with, we started with small businesses and we knew long term we'd go to large organizations, but that took years. It always takes longer than you think. And so we picked five metrics that changed really quickly to measure our growth and revenue was not one of them. And I actually think that this is another thing that was unintuitive, where you as a founder get to choose what metrics you're going to measure, get measured on with your board or your investors, and you can pick them, pick ones that matter to your business based on your point of view. And so we picked other metrics that changed a lot quicker than revenue for Cloudflare because early on it just moved very slowly.
Can you give the examples of what those metrics were?
Yeah. So for us, early on, again, we started with small businesses or developers or again hobbyists, like many of these engineers putting their hobby sites on us because we had to build. So how does Cloudflare, what does Cloudflare do? We make the Internet faster, safer and more reliable. We literally build infrastructure for the Internet, which means we have to buy a lot of servers and routers and switches. And by the way, those are really expensive. And that's not something you just snap your fingers and do tomorrow. It's taken 11 years of a labor of love to build this global network. So Today we're in 200 cities with a lot of points of presence. And that's how. Because we're in 200 cities. And if you are, I don't know, trying to access your schoolwork from Paris, France, you get routed to Cloudflare's Paris, France data center. We make things every fast and do all this magic to make it fast and safe. If you're in Cape Town, South Africa, you hit our Johannesburg. And then versus if you're in San Francisco, you hit our San Jose. So we're cover the world so everyone else doesn't have to. And early on we measured by how much traffic is going through our network. So we said page views. So we said, and if you think about that, if Ravi's blog.com signs up for Cloudflare, early on Robbie's blog, I don't know how many blog posts, how many views did you get to your blog, Ravi? I don't know, a thousand. And so it'd be that plus somebody's, I don't know, somebody, some, some entrepreneur had a hot website and they put it on. So maybe they were doing a hundred thousand page views. And so actually, page views, how many page views we powered through Cloudflare's infrastructure was actually one of the metrics we used for the first four years. Five, I think it was four years. Every board meeting, first thing we showed on the board deck because page views changed faster than number of customers, because it was like one customer brought so many page views. And we had to process that. It made a lot of sense in our case, but it didn't represent necessarily revenue, but it just showed how much were we delivering on our process, on our promise to help make our customers traffic faster, safer, and more reliable. Another one that we cared a lot about was on our side. You're going to build a service like Cloudflare. We were really obsessed about cost and really obsessed about cost to deliver the service. And so we said, okay, how much does this cost to us to deliver? And we were constantly trying to bring that down. And so that was one of the metrics we used. And so these moved fast. They changed really quickly. And again back to early on, you have to make momentum as an entrepreneur. You gotta make progress. Like, things have to be changing and progressing forward. It's like, if you play basketball, the ball's gotta be going down the court. Like it's. You just want to be constantly making progress against what you're doing. That's how you get people to come work for you. It's how you get investors excited. That's how you get partners excited. If. If you talk to a person who you want to work for you on January and July, everything's the same at your company. They're going to be like, this makes no sense. You want a lot of new things and change and progress along the way. And so we picked metrics that changed a lot, that showed a lot of progress that were important to our business, and I think that served us really, really well. And revenue wasn't one of them.
