Co-Founder Michelle Zatlyn on Cloudflare’s Journey with Peak XV’s CMO Gayatri Yadav | Moonshot

Foreign.

Hello and welcome to Moonshot, a show by Peak15 that profiles innovative startups and inspiring founders and thought leaders who are dreaming big, making an impact and driving change across the region and beyond. We hope this podcast will give you fresh ideas on how to start and scale an enduring company.

Foreign.

Michelle Zatlin, Co founder, President and Chief Operating Officer at Cloudflare, chats with Peak15 CMO Guy Churyadov about building a company that stops 209 billion cyber threats a day. In this conversation, Michelle reflects on the initial struggle to garner support for Cloudflare's offerings and emphasizes the importance of perseverance, especially in the face of scaling skepticism from potential investors, customers and employees. She delves into why founders should listen to their own voice and not be deterred by doubters. Michelle also talks about Cloudflare's approach to customer acquisition as well as the evolution of the company's go to market strategy. While talking about the complexities of building and scaling a company, she also delves into the importance of hiring the right people as well as the leadership principles that guide her.

We have a room full of female founders and some other founders as well, and some folks from Peak 15 all eager to hear from you. We're super stoked to welcome Michelle Zatlin, co founder, president and CEO of Cloudflare, which is a public company at the forefront of technological security and reliability, which hold your breath as of last year had a market cap of north of 30, 30 billion and revenues of 1.2 billion. You know that's super impressive. You definitely represent aspiration to so many, including myself, of what you built and what we now know as Cloudflare actually began in 2009, which was just after the bubble when Michelle and her co founder Matthew Prince were MBA students at Harvard and they were later joined by Lee Holloway. And I think Michelle was very early on to not just recognizing Internet threats, but stopping them on their tracks. And fast forward to today, 13 years later after they incorporated, Cloudflare has an employee base of 3,600 employees, 190,000 paying customers, and boasts of 1/3 of Fortune,000 companies as Cloudflare customers, which is super impressive. And to give you Another dimension of Cloudflare's scale and impact, Cloudflare services 20% of Internet traffic in the world and stops 182 billion threats a day. So thank you Michelle for keeping us safe. Michelle has also been quoted as being on the Mount Rushmore of women in infrastructure. I would say all leaders in infrastructure and I would say on Mount Everest or on the Peak 15 of the Internet and infrastructure. So, really excited to welcome you today, Michelle. We have a lot of early stage founders, and we have some founders at the growth stage and at the scaling stage. I'm going to focus this conversation a little bit more on the early stage, but we'll keep toggling between, you know, the past somewhere in the middle and the present. Right. But I want to take you back to 2009. Markets were down. We had just been through a financial crisis. And that was the time you chose to fundraise. It was the best of times and it was the worst of times. We have a lot of founders here who are preparing for their seed round. And I want you to go back, you know, 14, 15 years and sort of talk through what were your reflections and learnings as you set out to fundraise. I know a lot of people said no. A lot of people you looked up to and admired said, you know, you're out of your mind. And how do you follow your internal voice versus listen to naysayers and walk us through that.

We're coming up on being 14 years old at Cloudflare. And so I was an early stage founder not that long ago. But it's interesting going back to the early days. You know, Matthew Lee and I, I had three co founders when we started Cloudflare. We were really in love with our idea, but some people we met were not in love with the idea. They. They kind of didn't get it or they asked a lot of questions that I found were annoying. Like, it was clearly they were just trying to find a reason to say, no, we're not going to give you money, or no, I'm not going to come work there, versus believing in what was possible. And, you know, early on, you're not sure whether your idea is a good idea. You're constantly evident and flowing for, this is something I believe in. And, oh, maybe we are crazy. Like, maybe they're right and we're wrong. Or that's how I was anyway, early on. And so I think that one of the things I learned really early is you can't just because other people don't see what you see, that's okay. Like, don't take it personally. And I think that's. That was really hard for me to learn because I was like, well, if it was so good, I could be able to do a good job explaining it. But some people just see things at different rates than you possibly could. And that goes for employees, it goes for customers, it goes for investors. And I think what I ended up eventually doing, which I think might be helpful to some of you, is we. I used to. I stopped taking it so personally. So when people would say no, whether it was an investor or a customer or an employee that wanted to come with someone I was trying to recruit, and they said, no, you know, I would never work for you, or I would never buy your service, you're like this. No. Or an investor said, like, this is never going to work. Instead of taking it personally, I kind of said, okay, no problem. I'm going to keep working on it. We'll come back to you. Almost, like, gave them an out so that I could go back to them, because it turns out a lot of people that I wanted to work for me early on eventually did work for us. It might be years later, once we kind of were further along. Wrong. And by making a joke of it, it gave them a way to come back. And same with investors. The ones that were like, a little bit, I would say I took the high road. The ones that were kind of very naysayers, we left the door open. We would go back to them and share the updates. And over time, some of those wanted to invest, and we didn't necessarily take money from them, but it's always good to have options when it comes to fundraising and then customers. I mean, this is a true story. There was a. I sell to a lot of CISOs, like chief security officers, and there was somebody who worked at one of the biggest tech companies, and I remember meeting him about five years in, and he looked at me and said, michelle, I will never buy your service. And thought, like, six years later, just last week, he was on a call with someone on our team saying, oh, my God, I love your service. I'm such a fanboy. I read all your blogs, and I was like, you know, six years is a long time, but it's not that long of a time. I'm never going to buy your service. And so I think as founders, we see things that other people don't see. And so don't take it personally when someone doesn't see it. You just kind of gotta, like, take the high road, let the water roll off your back and keep going because you might need them along the way.

That's such a powerful line. As founders, we see things that others don't see. You know, moving. Fast forwarding a bit to early customer acquisition and pursuit of pmf. One of the most frequent questions we're asked by founders in the room is, how do we get to that elusive holy grail, pmf. And I was reading about how in the early days you didn't have servers. And this was pre aws. You actually asked the honeypot community for servers and drove around collecting servers from potential customers, which I thought was an incredible hustle and a great story. So can you walk us through the early days of customer acquisition and when did you know you had pmf?

You know, getting the first hundred customers was really hard for us. And the first thousand so. And, you know, then the next thousand. And so even in successful stories, it can be. It can be hard. And so really early on, like, when we were five of us working on this idea, getting people to try something new is hard. Or it was for us, anyway. We were selling to businesses, I think, consumers, a little bit easier. And we had a piece. We were very frugal. We did not have a lot of money back then. We had raised $2 million, and we were really trying to get that $2 million to stretch a long way. And so we also sat all in the same room. Very different time than today where people might be distributed. But we had a piece of cardboard that every day we would kind of fill in how many customers we had signed up. And we had told our team, when we get to 100 customers, we're going to take the team to Vegas. And it took us several months to get to a hundred customers. And when we got to a hundred customers, we took. There were six of us to Vegas. And it was really fun for a weekend. And at first, we reached out to a lot of friends and other folks to. To get them to use it to get feedback. And there was a lot of people who said, I will never use this. There's other people said that I love it, and other people who told me that they hated it. And so it was a little bit noisy. It was not. And the reason why I tell that story was it wasn't like a slam dunk. And so, you know, the people that loved it, of course we spent more time with them. We looked to find other customer profiles that looked like the love it. The ones that were indifferent were good too. And there were some that would hate it. And we're like, okay, that's good too. Tell me why you hated it. And so that we could fix those things. So that was kind of our approach. And what was interesting about us is we did not have a reputation. Like today, if I went to start another company, I would have a reputation. Like a reporter would cover it, and some people would follow me and like, Try it. Like I have a reputation today, but I didn't. When we started Cloudflare, we really kind of were nobodies or like just regular people with an idea. So we knew that we had to make a splash. And a lot has changed in how you would make a splash today. But then we, we decided to launch a kind of a tech conference to get our name out there. And what ended up happening was we really took that very seriously. Like, probably too seriously, but we took it very seriously. We launched one of these startup competitions on a stage. We ended up making it to the finals. We got to pitch again in front of a big audience and we, we sell to technical people. Anybody with anything online can use our service. We make things faster, safer and more reliable. And so people in the audience started to sign up and that ended up being this catalyst where people around the world start to use our service. And we went from a, like a thousand like users or customers kind of that we'd been running in pilot to, to, to like 15 or 20% week over week growth, which is really good. Like, that compounds that. That's a lot of growth over a very short period of time. And that was a really good place to be. And we've kind of just never stopped growing because of that. People started to talk about us, tell others, oh my God, this is great. And it kind of started to build a flywheel, but we, that was how we did it. So the first couple were really hard. And how did I know we had product market fit? I mean, on one side, early on, I remember that we got some emails from early customers that were so visceral, like so emotional. They're like, oh my God, for the first time in five years, I slept through the night. Thank you. And the reason why they said that is before, before Cloudflare, their servers kept going offline because they had to get all these crawlers, junk traffic and their server would go over online. They were, you know, use something like Bluehost or GoDaddy. This way before AWS. And then with Cloudflare, all of a sudden their pager didn't go off because we took off all this bad traffic. Silliest thing. But for them it made all the difference in the world. And you said, wow, like clearly we've really hit a nerve. And that was what I used to keep going on because, you know, early on there's 10 highs and lows every single day, you might believe, but gosh, there's good things and bad things happening ten times a day. So it's a roller coaster. And as you get bigger, like today, I still have a roller coaster, but it's much more spread out, so it's much more manageable. But in those early days it was like hot, cold, hot, cold. Every hour, within a day, by the end of the day you're like, oh my God, am I ending high or low? I don't know. But those, those, those kind of qualitative feedback from early customers is what we held onto in, in droves because we knew we had tapped into something. And sometimes I just think to myself, like, when would I, when have I last written into a service that I use to tell them how much I love them? Like that doesn't happen very often. And so the fact that like this technical person was doing it was I think I kind of at the gut level how we knew we had product market fit, even if it didn't hit some definition, we kind of used some of those north stars to keep going.

That's amazing. So you had a core set who was in love with your product. And that's often this debate that we sometimes have about how do you build and scale, you know, GTM. So now fast forwarding from starting up to PMF to GTM scaling, one of the biggest challenges for both B2B and B2C founders here is how do you scale efficiently? And what I've heard about Cloudflare is you sort of follow an inverted marketing pyramid where you get the customers and then you expand versus expand and then get the customers and you build on core. So can you share some of those insights for both B2B and B2C founders in the, in the room.

And we were really about the tech and all about the engineers and the cool tech we were building. And that's amazing. Solving real problem that differentiated is really cool. But you know what's even cooler is revenue. Revenue is really cool. And I think it took me and Matthew a while to appreciate that. We kind of said we had a little bit of the Silicon Valley attitude of meh, the tech is cooler. Turns out revenue is much more easy to measure between companies and so turns out it matters a lot. And so if you can build cool tech with a great mission and tie it to revenue growth, that is, that is actually what's actually really cool. The reason why I bring this up when you asked me about the go to market is I remember we were 70 people, we had about 5 million in ARR. So we were really early and we hired kind of our first executive on the go to market side. But we're tiny. We are so geeky. As a founder, you have to understand the basics of that, even if you don't own it. Ultimately there's a lot of parts of Cloudflare in our go to market that also is about serving large, large audience, which is more consumer like. And so I've learned a lot about kind of how do you, what are the levers on that? And I, I think what I've just wish, I wish someone had told me when I was 10 people in is caring about the go to market and caring about the tech, differentiated tech. You need to do both. Like one's not better than the other. And I would say as a tech vendor, that's hard because I remember early on a lot of people would say, oh, are you a product company or you're a sales company? They were like, they made me pick. And I was like, well, I think I'm both. And then I remember someone else saying, okay, you're gonna start to hire salespeople, put them in a different building than your engineers, don't let them talk to each other. And that was like some of the advice I got because it's like, oh, they speak different languages, gonna ruin everything. Keep them apart. And I was like, why aren't we. And so I again, you're gonna figure out what works for you. There's lots of successful companies out there, there's lots of ways to be successful. But I do think leaning into understanding the mechanics of how do you get customers, why are they coming? Are there more customers that look like that? Is it repeatable? And even if you're uncomfortable and feel like I don't know how to do sales, show up to those conversations and learn about it. Because that is really important to being successful long term. And I think that you can't really outsource. That doesn't mean you always have to like own it. Over time you're going to hire other people to help, like systematize it. But I think just understanding why do customers come to you and why do they buy from you or why don't they buy from you is actually really helpful and makes you a better founder and a better leader. And I think that's something that was something that I again, I had to learn along the way. So hopefully me sharing that story helps you get there faster than I did.

Yeah, it makes so much sense and it's so fundamental when you think about it. So fast forwarding now to leadership and you talked about how this one revenue hire helped you scale to a billion dollars and how getting the right people is so critical. And I know we've had a ton of discussions about both at the early stage, how difficult it is to attract and hire talent and build culture, and then how do you scale? So I want you to talk about, you know, scaling organizations right from building it. And I know at the early days you took a lot of contrarian moves, like your first 25 hires, none of them were from infrastructure tech. And, you know, you didn't have any titles for your early hires. And, you know, now you've scaled a 3,600 employee organization. So walk us through building teams and scaling organizations both for the early stage and the growth stage. Founders in the room.

It all comes down to people. And there's such a big difference between a great hire and a good hire. There's a difference between a great investor and a good investor. A lot of it comes down to people. A good test we used to employ was when something goes wrong, because something will go wrong. Startup things go wrong all the time is, would I be worried to call this person? And that was like, for executives, that was a good test. Like, do you feel like you would trust them or not? And we use the same thing for investors over the years, whether it's investors and board members. There's some that we call all the time when there's an issue and you feel, you know, that they're not going to scold you or you don't feel like your job is at risk. The people matter a lot. And I, in my experience, and this might resonate with some of you, is there's inflection points to a business. It's like getting to 10 million in revenue if you're a B2B company. And then 100 million is a totally different inflection point. And then when we hit a billion in revenue, like run rate, a forward run rate, which is about a year and a half ago, is a whole new inflection point. And you need different people at different of those stages. Like our CISO has a, was a. He was a CISO of hsbc, you know, and again, he would never have joined us when we were 25 million in revenue. But at a billion, he's like, oh, this is interesting. I can come to you now. And being human to those folks, I think, and being good to them is if you can get that, if you can do that, it makes the culture of your company a lot healthier and you just feel better as a leader. So that's one thing. The second thing I'LL just say that I don't think it's spoken about enough at all. Whether you're a growth company or building something from scratch, there's like, a lot to do. And so it's all about, like, what are we doing and are we getting it done? And for a long time, we used to have one spreadsheet you could go to, and we did this to about 2000 people where. One spreadsheet where we planned every quarter. And you could see exactly what we were doing this quarter, what, why was that important and who owned it. And each week that person updated whether it was yellow, sorry, red, yellow or green. And then Don was blue. And we used to report back to the company. And it was amazing because I'd go try and hire people and they'd be talking to other startups and it's like, those people, it was a mess. And I'm like, well, I can tell you exactly 200 most important things at Cloudflare. They're like, you can. I'm like, yeah. And I'd pull up the spreadsheet and they could see what was green, what was yellow, what was red, who owned it? And it. All of a sudden, in these conversations again with investors or, or people that I was trying to recruit to work at Cloud Flare, they just realized, wow, you guys are serious. It gave you more of a legitimacy. It's like, you're really trying to build your business. This is not just some party time. And I think that this idea of, are we rowing in the same direction? Do people know what they're supposed to be working on? Are they doing it? Are we hitting goals? Instilling that when you're early. When we were five people, we used to do it every two weeks in a room at. Every Friday, we'd get up and people would say, I was supposed to do these three things this week. One by one person would stand it up and say, either did it or didn't. Like, it was really binary. And we did that till about 30 people. So whether you're one of the early stage founders or the growth companies, I think it was really, really effective. And again, having people feel like what they're doing matters and they're shipping things really makes people feel productive. And it feels really good to be on a team that's making progress, progress against a goal.

Wow, that was, that was so rich with insights from the philosophical to the tactical. Thank you. So, one last question from me. Your leadership style is, you know, we've, you know, this really amazing blend of, you know, functional Competence and, and warmth and humility and you know, just amazing personal qualities. And I've heard Matthew, Matthew quote about you that you have an ego but zero vanity and you fly fairly below the radar. And you've talked about how a founder is often over glamorized, whereas it's an entire team that delivers. So walk us through some of your leadership principles or mantras. And we have, you know, people often talk about the challenges of being a female founder. What are some of the opportunities of being a female founder? And let. Three takeaways on leadership.

Yes. Yeah. Thank you. You know, it's. I feel like the world needs a new definition of leaders or what they think of leaders. So I feel like for all the women on the call, like time is now, like people are looking for other types of leadership. There's some wonderful leaders out there, but there's also a lot of research and data that shows that people like confidence. Kind of all time low for different types of leaders. Whether it's public office or business leaders. I kind of get it. There's a lot of people who are scripted, not relatable, not believable, don't look like you, which again, it's fine, like nothing against them, but there's probably room for more types out there. And I, I think that that is something that I appreciate more today than I did 10 years ago of where it's like, yeah, we need more voices and more types of leaders, more archetypes, I guess, where we can keep the ones we have, but we should add more because they're the, the lineup is not complete yet. So I guess that's my first point. I was at an event once recently and it's interesting. We, we. We. The first part of Cloudflare was, was hard, but we, we've lived a pretty charmed existence if I'm honest with ourselves. I mean we've been again, lots of low points, but at the end of the day we've been a very successful company. And I remember we were raising, I told you about this conference we launched at. So we'd raise $2 million, which was a lot back then. Today a lot of you would laugh at that, but that was like a lot of money that we raised back then. It was a, it was a priced round and, and no one knew who we were. And we launched at this conference and it was interesting. This conference, if you like at like at Peak 15 or any VC firm, their job is to know the good companies. Like that is an associate's job at a VC firm. But they need to know anything that's at all interesting. So we launched at stage of this tech conference and all these VCs had no. All these VCs started to reach out to us being like, we've never, like, we need to know more about you because you weren't on our radar, but now you are. And it was interesting, let's put it like analogy like that, where we had a lot of venture capitalists reaching out to us. And again, Matthew and I and Lee were not. We were living in San Francisco, but we really didn't know anyone. There are all the brand name firms were reaching out. Kleiner Perkins, Sequoia, all the brand name firms wanted to know us. It's. It goes to your head like it's really easy to kind of get wrapped up into this. And anyhow, I have a point to my story about leadership and I'll tell you right now. So fast forward. We ended up running a process. We ended up raising money. We thought we're going to raise $8 million. We ended up raising $20 million. So it was like way more than we thought it was. Way over subscribed all this stuff. And we kind of, you know, Monday's the day you go pitch to partnerships as a founder. And we had like four term sheets at the end of that day. And we were feeling really high on the world, like really high. And I remember and I'm so thankful for this person. He said to us, don't be jerks. And we're like, what do you mean? Look, someone's sticking your neck out, giving you a term sheet on a Monday. Next Monday, the partnership's going to find out. Want to be asking that person internally what's going on with that. So if you have a fast no, say no or try and get it done by next Monday. And it kind of like brought us back down to earth of like, okay, yeah, this is, this is a relationship thing. Let's get back. And we ended up raising money from NEA and negotiated the terms. We politely said no to the other people. We'll go back to you in our next round. And I think we ended up handling it well. But if that person hadn't said something, I think we probably would have been jerks. And so I think that as leaders in good times, and that was a good time, we had all these options. We were higher in the world. We were feeling really good. You got to kind of like bring yourself back down to gravity of like a pilot. You know, if you fly too high as a pilot, you can. You can stall and crash. And so it kind of tempered us of, like, things are good, but let's bring ourselves back to reality and, like, stay grounded and vice versa. When things were bad, there are times where there's been bad. Okay? It's our job to bring the nose of the plane up so we don't crash it down and. And provide the, like, the steady hand that you need to say, we can weather this. Like, I believe I'm not going anywhere. Like, sometimes saying that is enough to get through a bad moment. And years later, I was at a. It was. I was in Davos, this World Economic Forum. It's actually. There's a great program called the Tech Pioneers Program. You should all look into it. You should all apply to it. It's great if you run, do something that's excess, like trying to better the world. We always say that helping the Internet is bettering the world. We've been part of that. And you find yourself in interesting circles. Anyway, so I was at Davos. I was at the Harvard Business School, the Harvard reception, and the dean of the Business School of Harvard was speaking, and he was talking about how the true test of leadership is not in bad times. Most leaders do the right thing. It's in good times that you see the true character of a leader. And there's so many moments where you see the character of leaders in good times who go off and party or stop showing up to work or start doing irresponsible things. And so I think that, you know, Matthew and I, we're still running the business. We keep each other balanced. I have my husband who keeps me balanced, my kids who keep me balanced, my family. And it's kind of like, it's good to stay balanced and, you know, not let the success get to your head and take yourself too seriously and more. But, like, at the end of the day, like, I'm just a person like anyone else who happens to build something that I'm really proud of, and it's a privilege to get to part of it. And so that doesn't work for everyone. Some other people are like, I don't know. I want to be the person that's fine. But not every leader needs to be the person. They can just be, hey, it's about everyone and gratitude. I'm grateful to be in this role. And so I think that new archetype of leadership and one that works for me, and I'm lucky that I get to kind of be true to who I want to be as a leader. And so I share that, because all of you, you don't have to decide today. But if there's something you see you like, try it. And there's something you see you don't like, maybe, you know, just say, hey, that's not for me, and I'm going to try it a different way. And again, I think there's many more types of leadership that we need to be seen in archetypes that there's still room for more.

Amen. That was very, very profound. Thank you so much, Michelle.

You've been listening to Michelle Zalin, co founder, chief operating officer, and president of Cloudflare, in conversation with Peak 15 CMO Guy Triadov. I'm Chelsea Ng, and for more interesting startup stories, visit peak15.com or follow us on your favorite podcast platform.