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Billion Dollar Unicorns: CloudFlare Offers Website Security over the Cloud

Posted on Wednesday, Jul 8th 2015

According to a recent RnRMarketResearch.com report, the Global Enterprise Cyber Security Market is projected to grow at 11.84% annually during the period 2014 to 2019. The growth in the market is said to be driven by the increasing demand for cloud security services. Billion Dollar Unicorn club member CloudFlare provides more than just cloud security and is growing at an exhilarating pace.

CloudFlare’s Offerings

San Francisco-based CloudFlare was founded in 2009 by Harvard students Michelle Zatlyn, Matthew Prince, and their friend Lee Holloway. The company sprung out of a five-day Silicon Valley Immersion trip that Michelle and Matthew had taken while at Harvard. Prior to setting up CloudFlare, Matthew was already running another company with his friend Lee and was looking to start a new venture. As classmates, Matthew and Michelle had already agreed that they wanted to set up something together. Matthew suggested quite a few business ideas before the two agreed on an idea that they both liked. They soon connected with their professor Tom Eisenmann, who acted as their mentor and guide and helped them get their act together.

CloudFlare is an online service that helps improve website performance while ensuring security. Web traffic for CloudFlare’s customers is routed through their intelligent global network that automatically optimizes the delivery of web pages so that visitors can get the fastest page load times and best performance. Their platform also detects and blocks threats and limits abusive bots and crawlers from wasting the website’s bandwidth and server resources. As a result, CloudFlare’s customers are able to see a significant improvement in their performance and see a reduction in spam and other attacks. As analysts put it, they are “essentially creating a cloud service that parallels the features of many of Cisco’s hardware products.”

Instead of following the traditional method of getting organizations to set up firewalls or intrusion-prevention hardware, CloudFlare offers less expensive solutions over the cloud. They have also expanded their router and server infrastructure extensively so that they are able to route their customers’ visitors to the closest CloudFlare server to enable fast site performance.

CloudFlare’s Financials

CloudFlare operates on a freemium subscription-based model. The basic package is available for free and comes with features such as a fast site performance, broad security protection and statistics about site visitors. For a professional, the service is available at $20 per month and offers additional features such as mobile optimization, real-time statistics and web application firewall. Organizations can opt for business packages which start at $200 per month and go up to $5,000 per month. The highest priced option comes with enhanced services such as an advanced denial of service attack mitigation, 100% uptime guarantee, dedicated solutions engineer, 24/7 phone support and multi-user access.

Their impressive product offering has helped them deliver a strong financial performance. Within three years of releasing their product, the company was seeing growth of 450% annually and adding over 5,000 new clients a day. They were trending at revenues of $40 million for the year ended December with nearly 5% of their 2 million websites as paying customers. Their customers include names like Goldman Sachs, Wells Fargo, and even Cisco Systems. They do not disclose their financials, but they are expected to have been profitable for a while. They turned cash flow positive in 2014 and most of their venture funds are still sitting safe in the bank. They have been venture funded so far with $72 million in funding from investors including Greenspring Associates, New Enterprise Associates, Pelion Venture Partners, Union Square Ventures, and Venrock. Their last round of funding was held in December 2013 when they raised $50 million at a valuation of $1.2 billion.

Despite its success, CloudFlare is not beyond criticism. Several pundits have criticized them for protecting controversial operators, such as LulzSecurity.com, which had signed up with CloudFlare just before publishing 3.5 million usernames and passwords stolen from Sony in 2011.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

This segment is a part in the series : Billion Dollar Unicorns


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