Fireside Chat: Michelle Zatlyn, Cloudflare - NOAH17 Berlin

Good morning, Berlin. Super excited to be here. I flew in from San Francisco and I haven't been in Berlin for about 15 years and it's been amazing to be back these last two days. And so Marco and I are going to have a little chat. But before I thought I'd give you a little bit of a sense of what Cloudflare is, because some of you have maybe never heard of us and others may have. And so Cloudflare's mission is to help build a better Internet. Well, what does that mean? We started about six and a half years ago. We actually launched at a tech conference just like Noah. It was called TechCrunch Disrupt in San Francisco. So I used to launch at a conference like this. And in those six and a half years, we've grown really quickly. We have over 6 million websites or Internet properties that are using Cloudflare as a service. And they use us because they want to be fast, safe, reliable online. So what does that mean? So performance, security, reliability and insights is what Cloudflare does as a service on behalf of all of our customers. And so who uses Cloudflare? Anybody with an Internet property. You could be a website, you could be an app, you can have an API, you could be a toaster connecting online. And all those sorts of Internet properties use Cloudflare, prefer performance, security, reliability and insights. Our customers range from small businesses to large organizations to governments. And so some of our European customers include Eurovision, which has been a longtime customer of Cloudflare. Great rail from the UK happen if any of you use their dating app. But we have many, many European based companies coming to Cloudflare because as they run their different businesses online, they need to make sure that their apps and their websites are loading very quickly. They need to make sure they have a layer of security in front, so they're always online and they need to make sure that they have good reliability. And so they come to Cloudflare for that. And so if you think about what's going on in the industry, people use the word cloud a lot. And to really understand what's going on, the infrastructure of the Internet has three tiers. There's store compute, there's applications, and then there's edge. And people use the word cloud to describe all three. But if you actually break it out, it makes to understand what's going on a little bit easier. And so on the store compute layer, there used to be a lot of hardware you would buy to get that service. So maybe you would buy it from Dell if you were a large organization. Or hp. If you were a smaller business, you would probably buy this service for someone like one on one Internet GoDaddy in the United States. Well, in the last eight years Amazon has shown that a lot of businesses are willing to use store compute of the cloud. And so AWS has built a very big business. Companies like Google and Microsoft have said there's no way AWS can own that tier and we have to compete heavily. I put DigitalOcean and others in that tier. That tier, the store compute scale really matters. And so this is why you're gonna see a few very big companies dominate that tier because it's very capital intensive and some of the most companies just don't have the balance sheet to compete there. And so scale really matters in store computer, Cloudflare does nothing on that tier. One level up is applications and you used to buy a lot of software, whether it was from SAP or Oracle or Microsoft. And because there's a relatively few store compute companies that made it super easy to spin up applications, there's been a huge unbundling on this tier. And all of a sudden there's been a lot of entrepreneurs and businesses who've created applications that solve best in breed problems. So now you know, you have a company like Workday which has done really, really well on the HR side or NetSuite on the financial services side, or you know, different sort of applications that are very, you can build pretty big businesses based on vertical and best of breed. Cloudflare doesn't do anything on that tier. One tier up. And this is the tier that often gets forgotten about before businesses have always wanted to be safe and reliable online and fast and they used to buy a lot of hardware to do that. So they would buy load balancing from companies like F5 or Netscaler, they'd buy WAN optimization boxes, they would buy firewall hardware boxes. But just like the store compute tier where things are going out to the cloud, the same thing is happening. People are saying, well I don't want to buy a hardware box, I want to adopt a service. And this is what Cloudflare does. We do everything. You used to buy hardware boxes for businesses used to buy hardware boxes for as a service out at the edge. And it's been pretty exciting the last six and a half years.

Thank you very much.

Yes, thank you.

So you are unicorn from the US right?

Apparently Eileen Lee, the woman who coined that term. That term is everywhere now. Unicorns.

You know why we like that term? Because we have the most unicorns on stage of any company ever over the world.

Well, I love the hustle, Marco. Congratulations.

We like to measure ourselves on something.

There we go. Excellent.

Now let's talk about measuring. What you do is crystal clear. And I think in the preparation I learned a certain percentage of the websites or the traffic which goes through your systems. Is that a number you can update us on?

Yeah. So we have 6 million Internet properties that use Cloudflare. Every day, 15,000 new sites sign up. And so if you're not a Cloudflare customer and you have an app or website, you could literally go and sign up. Right now it takes less than five minutes and we have over 15,000 a day that sign up. When you look at what that means is we touch about 10% of all Internet requests touches our network and that's we make the Internet faster and SAFER for about 10% of all Internet requests. And so it's been very quick growth in six and a half years.

So 10% of the Internet traffic goes through Cloudflare. And I think Amazon Web Services is probably a similar size or bigger size or how to say you.

Well, they do different, right? They're on the store compute and AWS has built a very big business and they're doing very well. And same with Google Cloud and Microsoft Azure again. Or maybe you're using one on one Internet or GoDaddy people. Lots of businesses or individuals are choosing different store compute companies to get their content online. And what's nice about Cloudflare is we work with all of them. We sit on top, we work at the network layer. So whether you're using part AWS and part Google Cloud or part you have an on premise data centers that you just don't want to invest them anymore. And so for the new things, you want to spin up some of these cloud services, but you still have on premise data centers. Cloudflare just sits on top. And you'll get performance, security and reliability across both regardless. And so I think that's a better way to think about it.

Sounds like you are the Switzerland of the Internet.

Yes, yes, we are. We have, you know, the Internet is an amazing place and there's over 350 million Internet properties online. And you know, when we say we're Switzerland, we work with anything you choose to use, anything our customers choose to use, we have to work with it. That's just the nature of what we're doing. And that's hard because there are some really strange corner cases that come up. But actually that's why a lot of engineers want to come work at Cloudflare because they love to have to deal with these corner cases and see how would we solve that. So it's pretty interesting. And then on the content side, we have 6 million customers, 15,000 every day signing up. And we aren't choosing what content should and shouldn't be online. So we're also Switzerland in that sense of we have a free service. So even if you have no resources, you can still sign up for cloudflare. We also have paid services, so if you have more financial resources and want more functionality, there's a way to pay us. But we want to make it so that anybody with an idea where anybody with an Internet property can get the same resources that were previously reserved for really only big companies that had a lot of money and technical resources. And so we've tried to democratize this for everybody, and we think that's a really good thing for the free and open Internet.

Interesting. And we raised almost $200 million. And with great interest, I found out you have both, you have Google and Microsoft as shareholders. Are they having board representation? You have board meetings with both of them.

So we are the first investment that both Google and Microsoft invested in, which was kind of interesting. So we've raised $182 million, four rounds. In our last round, we raised $100 million of which Google and Microsoft both participated in. And Fidelity, the big mutual fund company, led the round. And I think that why would a company like Microsoft and Google be interested in cloudflare? And you know, again, if you think back to this, that chart I showed of the three tiers of the Internet, again, Google, Microsoft really compete with AWS on Store Compute and on the application tier. And yes, they're gonna build parts of the edge services as well. But there are gonna be lots of choice on store. There are gonna be some choices on Store compute. People are gonna keep their on premise, they're gonna strategies. And the only way as a business to deal with that is if you have a independent party like Cloudflare that allows you to manage across all of that. Because again, you don't want to have to pick one CDN for part of your infrastructure and another CDN for a different part. You can't have two load balancers. And so all of a sudden, independence is really important as you think about the future of the Internet. And Cloudflare is very well positioned to be the leader of that. And so I think that's been interesting to.

They help you to get customers. Are they going into the market with a bundled package?

Yeah. So we Partner really closely with both Microsoft Azure and Google Cloud. And so if you are a Google Cloud customer and you sign up for Cloudflare, we will save you money on your Google Cloud bill. There's a 75% reduction. We interconnect, we have a big network around the world and Google and Cloudflare have partnered to interconnected all those and we pass 100% of those cost savings onto the end customer. And so a partnership is only good as both partners in it. And in this case Google and Microsoft have been great partners to us.

And it didn't block your strategic exit options because you have both of them. So you have two heavyweights in there. So it's a little bit probably more of a Switzerland than when you're just having one of them, right?

Yeah. You know, we never thought about it that way when we did the deal. And the deal the last time we raised money was two and a half years ago.

Oh really?

So that's a long time. December of 2014. And I think that, that you know, we do well over 100 million in revenue. It's all recurring and so we're kind of on this path from over 100 million in revenue to a billion right now in revenue and again in six and a half years. We're a SaaS based B2B business where people, customers are paying us. That's very fast growth and something we're really proud of. And so when we put the deal together back in 2014 again and we were a lot today more people don't know we exist than do. But back in 2014 that was even more the case. We were quite a small and we just felt like we were onto something very big and that we had to partner with the future of the Internet. And however you describe it, Google and Microsoft are part of the future of the Internet.

Yeah, definitely part of it. So how, I mean, you went to Harvard Business School. How did you get to start such an amazing revolutionary tech company? What's the beginning of your company?

Yeah, thank you for the kind words. So my business partner and I, Matthew, we were students, we went to do our MBAs and we met as students and Matthew and Lee, our third co founder, had started something called Project Honeypot, which if you know Project Honeypot, it's a way for websites to install honeypots on their site to track web spammers online. So he knew a lot about Internet security. They just had, they'd been doing this project for a long time and they knew a lot about behaviors online and the conversation Went something like this. Matthew, you're always talking about Project Honeypot. Tell me more about it. And he's like, yeah, well, 80,000 websites have signed up and they help track web spammers online. I was like, what do you mean by track? He's like, well, you know, they install honey pots, and the honey pots catch the bad guys as they're doing bad things, and then they send all the data back to a central source at Project Honeypot. And I was like, and what do you guys do with the data? He's like, we work with law enforcement agencies and we go after the web spammers to take them offline. And I was like, doesn't that take a long time? He's like, yeah, years. And I was like, and how do people hear about you? Because they literally have no money. You can go to projecthoneypot.org now. It is not a nice looking website. It's not easy to use. They had no money, no marketing dollars. And he's like. We went back and forth. I was like, I just don't understand why anyone signs up for this. It takes so long to find a result, you don't really get anything. And finally he threw his hands up in the air and he said, michelle, one day customers want us to use the data to create a service that actually stops the bad guys. And that's how Cloudflare was born. We said, let's go see whether we can build a real business around this. And you know, this business only works at scale. We have 115 points of presence around the world. That means we're really close to where customers are connecting online. So we have over 30 points of presence in Europe. So whether you're based in Dusseldorf or Berlin or Paris, Cloudler has a point of presence. And we're serving content very close to the end user. And that's how we make things fast and safe all across mainland China, Australia. I mean, we're everywhere. Sri Lanka, Columbus, Sri Lanka. And you only can do that if you have scale. And so I think that, you know, some people say, should you go do your MBA or not? I mean, I'm so biased. It changed my life. I met my business partner, we've started a great business. I've met amazing people along the way and I get to come to amazing conferences like this to speak with awesome entrepreneurs like you.

How global is your business today? Is Europe and Germany a big focus?

Definitely, definitely. So we have over 100 people working out of our London office. Europe represents well over 25% of our revenue and growing very, very quickly. You know, Eurovision is a customer. Great rail happen. I mean, we have many, many European based companies using Cloudflare. And I think what's interesting about Cloudflare and from a point of presence, we have over 30, so over 32% of all of our points of presence are based here in Europe. And we'll continue to invest in that. And so it's a very big market for us. We're very bullish. We think we've just gotten started and so we continue to hire locally. And so if this is Cloudflare somewhere interesting that you'd like to learn more about working, come email me after because we're definitely hiring.

Last question. Hiring and culture. When I prepared, I saw some interviews from you. Can you define your corporate culture and why it's for some very techie person more interesting to work for you than for others?

This is always a hard question, but one that I always get. And so when people say, what's your culture like? And my answer is adult like. And then adult like we're adult like professional. And then people laugh and I say, well, we're definitely not a frat. Like, we're not that. I think that the people who do great at Cloudflare are folks who are very, who are absolutely passionate about helping to build a better Internet. We have 6 million Internet properties using Cloudflare, so when we build something, a lot of people use it. And so there's a lot of new standards coming on online. Internet's 25 years old. And so some of the new standards like HTTP 2, which makes HTTP traffic faster, or SSL investments, advancements like over encryption, we basically can roll that out. And you just see the market adoption of these change overnight because Cloudflare is making it accessible to everybody and we're democratizing these sorts of things. And so people who come to Cloudflare really believe in helping to build a better Internet. And they might not know what that means on day one, but they absolutely fall in love with it as they spend more time interviewing with the company. And people choose to come because they want to help push the Internet forward. And they feel like we're doing that.

They're people with a purpose.

Purpose. Then people are very smart, which I love. They get things done because if you're not getting things done at a high growth company, you're going to die, literally die, because it's really hard to build a company. And then finally we have a no jerks policy.

And you know what Noah stands for?

What is it?

No no assholes here.

There we go.

See how many tech people you have a percentage of your workforce, roughly.

Yeah, over 65% are technical folks. So we're. I mean, when you're building infrastructure for the Internet, you are. People who work on our people team are technical or people who work in marketing have to be technical. It's, you know, we're building infrastructure for the Internet. And again, it's, It's. If you're not an expert on that in day one, as long as you're curious and can learn, our team will help you learn. Which is. Which is very cool. Which comes back to. That's why I describe us as adult, like, because that really speaks people who are curious and want to learn and do something where they feel like they're making a difference in the world with good people. Those are the types of people that I get to work with every day.

There was one question we ask after every interview. Also going to ask you, do you own any bitcoins?

I do. Oh, you're the number one. I do, I do, I do. I do own some bitcoin. My husband and I do. You know, I think that. And it's, I mean, been very good to us. I mean, the price is way up, so that's great. So we'll see. But yes, it's good to stay involved in all these new technology. You know, when I've been. I've been doing Cloudflare for six and a half years, almost seven, and, you know, things have come and gone so much in that time frame. The tech industry changes so quickly, and then some things stay the same. And so I try and stay current of what's going on, even if they become fads. Again, I don't think bitcoin is a fad, but we try and stay involved because otherwise it's really easy to stop being curious. And if you stop learning, then what do you have?

Sometimes we have to try things to find out how they are.

Exactly.

Michelle, thank you so much for coming.

Thank you for having me. Thank you.

A little trophy behind stage.

Oh, wow. Okay, great. Thank you so much.

Thank you, Marco. Thank you very, very much.

It.