Cloudflare Inc. filed with the SEC on Thursday for an initial public offering.
The San Francisco-based provider of cloud-based networking and cybersecurity services works with 2 million free and paying customers, who together operate 20 million individual internet properties. Cloudflare says it counts 10% of the Fortune 1,000 companies as paying customers.
“Cloudflare’s mission is to help build a better internet,” the company said in its preliminary prospectus. “We have built a global cloud platform that delivers a broad range of network services to businesses of all sizes and in all geographies, making them more secure, enhancing the performance of their business-critical applications, and eliminating the cost and complexity of managing individual network hardware.”
Cloudflare says in the filing that its platform includes “security products like firewall and access management, performance products like intelligent routing, and reliability products like vendor-neutral load balancing.”
The company posted revenue for the first 6 months of 2019 of $129.2 million, up 48% year over year, with a net loss of $36.8 million, compared with a loss of $32.5 million a year earlier. For calendar 2018, Cloudflare posted revenue of $192.7 million, up 43% from the previous year, with a loss of $87.2 million, compared with a loss of $10.7 million a year earlier.
The filing didn’t specify the number of shares to be sold in the offering. The underwriting group is led by Goldman Sachs, Morgan Stanley and JPMorgan.
Founded in 2010, Cloudflare recently cropped up in the news when it decided to remove the controversial internet bulletin board site 8Chan from its service. The company took note in the filing of the risks that customers could host controversial content.
“Even if we comply with legal obligations to remove or disable customer content, we may maintain relationships with customers that others find hostile, offensive, or inappropriate,” the company wrote. “For example, we experienced significant negative publicity in connection with the use of our network by The Daily Stormer, a neo-Nazi, white supremacist website, around the time of the 2017 protests in Charlottesville, Virginia. We also received negative publicity in connection with the use of our network by 8chan, a forum website that served as inspiration for the recent attacks in El Paso, Texas and Christchurch, New Zealand. We are aware of some potential customers that have indicated their decision to not subscribe to our products was impacted, at least in part, by the actions of certain of our paying and free customers.”
Cloudflare has raised $332.1 million in venture capital. The company’s largest investors include the venture firm NEA, with 20.4%; Pelion Ventures, with 18.8%; Venrock, with 16.2%; and Cloudflare CEO and co-founder Matthew Prince with 16.6%.
In a letter to prospective shareholders from Prince and co-founder and COO Michelle Zatlyn, they wrote that “one of the characteristics of the world’s greatest SaaS [software as a service] companies is that they typically enter a market in some small way and then use that toehold to expand their relationship and move up market. We learned from the great SaaS companies that came before us. This strategy has resulted in consistent, long-term—rather than explosive—growth. Contrast this with companies that only build a better mousetrap. They initially experience heady growth shifting defined spend from one product to another, but the challenge they then face is existential: what’s their second, third, and fourth act? Cloudflare doesn’t have this problem.”
They add that Cloudflare will “continue to invest in R&D so long as it demonstrates a significant return.” The co-founders said their investment philosophy is oriented on making many small, inexpensive bets, “quickly killing the ones that don’t work, and increasing investment in the ones that do.” They said they would consider merger and acquisition when opportunities arise, but that their “bias is toward internal development tightly integrated into our efficient platform. We aim to build a massive business—slowly and consistently.”
Write to Eric J. Savitz at firstname.lastname@example.org