Transcript of a conversation (Cloudflare Shortbite) about Cloudflare's pricing evolution and handling large customers. Speakers describe starting with free and $20/month plans, later adding a $200/month business plan and an enterprise tier (initially $3,000/month, later $5,000). They recount declining a major $1M prospective contract because the company wasn’t operationally ready—opting to avoid organizational ‘whiplash’—and winning that contract 18 months later. Themes: product-market fit, scaling operational capabilities, sales vs. product priorities, and the strategic use of ‘no’.
Chapters
So we really started with this free plan, $20 a month plan. And really quickly this is what happened. Customers would contact us and we had a 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 back in 2010. And so people would sign up for the free and $20 a month plan. And then also we had these customers writing 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. Right. Like, it's just like 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. So it took us two years. Two years. And trust me, I wish it had been faster. It's of kind come out with what we called a business plan, which was $200 a month, so 10 times above what we were charging and kind of 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. So it took us two years to get there. And so I think the lesson I learned is to be patiently impatient. Like 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 free and $20 a month customers. Like if we made a mistake and someone was on the free plan, they were very forgiving. If somebody was paying us 3,005, our customers who are paying us $60,000 a year, they are not as forgiving, nor should they be, 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 got into these, these larger account types and we have a sales team now fielding them, which is great because with our free plan, our $20 month plan, we have no sales team. But again, to close a $60,000 deal, they want to talk to somebody. They want someone to ask technical questions to. You can't just point them to your documentation. They want to talk to somebody and then once they sign up, you need to service them. So we build that all out. And I remember this is what happened. So we were really, we started to get like, better at these $60,000, $100,000 contracts. And then, like, it's like this oracle walk through the door where we had a customer, brand name customer, amazing Internet property, who were like, look, it was a $1 million contract. And our sales team was like all over this contact. They wine and dine them and they were so excited and they were promising them the world.
What was their quota at the time? Do you remember?
Pardon me?
What was their, their quota at the time?
Oh, I don't know.
You don't remember? But it was like a.
It was a big deal. Again, like, that's just a lot. That.
That was a big.
It would have totally made our year, our revenue number for the year. Like, it was a big deal. And 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 can. We are not ready. And it was this, it was this. It was this friction where the sales team was saying, oh, my God, their brand name. They want to pay us a million dollars. Of course we need to get there. We have to change, drop all our priorities and focus on winning this contract. And I remember thinking, no, no, we don't. No, we can't. We weren't ready yet. 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 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 do this yet. But we'd love to keep in touch. And the next time this contract comes up for renewal, we want to 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, the salesperson was not happy. Our head of sales, not happy. Because they wanted to use it as an. As a reason to get better as a company. 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 a good hard. But there's also a thing about whiplash in the organization. And I think as a founder 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? And we just thought at the time was whiplash. Now, of course, there's no, you can't live life in parallel. So I don't know what would have happened? But I really, I still, 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, like, how did. What were the tangible things that made you know you're not, you know, you're not ready. Right. Because as a founder, you're always doing things that you're not ready to do. Right. And so how did you know? Like, no, honestly, like, how do you evaluate. Whiplash would be another way to ask the question. But I think that's one piece. And then we have to 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. And 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. And again, I think that that's the. It would have broken the organization. It would have just changed a lot of different sorts of things. And I really don't think the customer would have been happy in the end, because we were going through scaling, scaling, growing pains, which is what every company does, and we didn't want them to have to bear the brunt of those.
And how did you deal with the sales team?
Well, look, 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 them we want to stay in touch and we'll try. 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 play as a team, you win as a team.
Interesting. And that customer came to you, right?
