 So we meet again Matthew is great to be with you as always we've I was just thinking backstage all the different cities We've been in and I think this is the furthest north in the world We've ever been together, but but it's been an amazing journey with with you Scott and and any a well Thank you Matthew and welcome to Helsinki. I've been here before at slush great to be back You know since I was here Cloudflare has become one of the most famous companies in the world But for the founders out there, I'd just love for you to tell them the origin story How how the company got started? Why you started the company what you set out to do and and how it's different today than what you thought it might be back then yeah, so Cloudflare launched in September of 2010 and actually launched an event. It's a lot like slush. It was the tech crunch disrupt event in San Francisco And so when I see things like the slush 100 and the startup competition here, you know It's it's amazing to think that not that long ago just 12 years ago. We were one of those startups standing on stage scared to death Pitching to a bunch of investors and so it's it's incredible to see what's here And and I think that there's a real chance that people here might might create, you know The next cloudflare which is exciting we started because we saw that the world was shifting from You know software and hardware that you bought to services in the cloud that you consumed And we saw what was happening with traditional box software, which really in the past was made by three major companies Oracle SAP and Microsoft that was turning into all the SaaS companies that are out there We saw what was happening to the storage and compute space with You know once upon a time you would buy a box from a Dell or an HP or a Sun or an IBM And that obviously has turned into the major cloud hosting providers and we said that same trend is Going to shift What how people consume network gear things that someone like a Cisco would sell Into a service as well And could we take advantage of that opportunity? And so the three of us that started the company me my co-founder Michelle and Lee Holloway We sort of started out Thinking we're going to take on that challenge and you know cloudflare's mission today is to help build a better internet when we started Cloudflare's mission was to build a big business and hopefully make a bunch of money But I think what changed along the way is that in order for us to get customers We knew that we needed to have the data to build the security sets and things that the big customers that rely on Cloudflare today have but in order to get that data We had to have customers and that created this chicken and egg problem where We're trying to figure out how to solve it and the way we ended up solving it is we created a free version of our service And we thought you know small businesses and startups would sign up for that But what really ended up being the things that signed up were a lot of the civil society organizations non-profits human rights groups around the world and They would get attacked all the time for the important work that they were doing and that was first of all a great source of data That we could then turn around and and use to help protect big companies, but even more important than that I think it put us on the front lines of What were some of the most important work that was being done? online and on the internet and I think that our mission emerged from that because we saw You know journalists in Africa reporting on government corruption. We saw Human rights workers in Asia Reporting on you know the lack of hospital care. We saw you know on the front lines today You know we're helping protect a lot of Ukraine against the attacks that are coming and I think because we did that It really changed the business where yes, obviously we want to build a successful business But our mission is much bigger than that and it's about how do we actually help? The internet and some of the most vulnerable people on the internet make sure that they're fast Reliable and secure and so I think our mission actually grew out of our business model And I think that's part of why it's been so sustainable Hmm and and tell us a little bit more about this idea of giving it away for free and back in the day that that wasn't such a universally adopted idea and of course today a lot of founders are doing that So I think it'd be helpful to just reflect on Not just why you did it But how that has transformed the business and what advice you would have for entrepreneurs that are thinking about that today you know for us for a lot of businesses and and I don't mean to Denigrate them in any way, but you know if you're a drop box The reason you give the service away for free is because you hope that people will use it a bunch and then eventually pay you if You're slack you hope that people use it a bunch and eventually pay you that's just never been the way We've thought about the business as much What we really that the problem that we were trying to solve was that again in order for Cloudflare to be able to sell to the Huge companies that rely on us today and 18 of the 20 largest companies in the world rely on us 32% of the Fortune 500 relies on us or something like between 20 and 25% of the entire web Sits behind Cloudflare's network today but in order to be able to get there we knew that we needed to have the Understanding of what cyber threats were out there and we'll be able to stop them and so How we Catalyze that was we we actually gave the service away for free in order to learn About those those cyber attacks so that we could eventually sell to the you know Visas and apples and Goldman Sachs and you know big companies that that provide most of our revenue today But it had these additional benefits as well Well, it is very rare that if Bob's blog Signs up for Cloudflare that someday Bob will you know decide to spend you know a million dollars to protect his blog That blog is probably still free But what we realized was that often times while Bob's blog might not be a big company Bob is is actually working as the CTO at somewhere like Salesforce and that literally is how Salesforce became what is a customer now that spends, you know north of ten million dollars a year with us Their CTO used us on his personal blog He got to know us there when he went to work He saw a problem with what was going on at work at Salesforce He knew how we worked and so he advocated he became our internal champion and then pulled us into Salesforce Salesforce started out as a $60,000 a year customer and they've just grown and grown and grown and grown and grown But that original seed of trust came from the fact that But you know Bob the metaphorical Bob was using us for his personal site And that then gave him the trust to bring us to work So I think there are a lot of different paths that people can take with sort of the freemium Business I think ours is a little bit different than everyone else's and what I think is key is you've got to understand that your business you've got to understand The the go-to-market dynamics of your business and you've got to understand the cost of your business to make sure that if you're Going to go down that path it makes sense over the long term But it's been something which is key to who we are and something that we we will always have and was that something that was easy to Sell to investors in 2009 and 2010, you know, it's I mean I think right now We are living through very difficult economic times And probably the hardest economic times since the sort of 2008 2009 Time frame and I remember, you know, we launched in 2010, but we were first pitching investors back in 2009 and You know, we got a lot of sort of scratching our head looks when we were when we were first pitching it what I think we did really well though is We didn't pitch blindly we didn't just go run to a bunch of investors and say anyone who who would listen to us Like what we're gonna try and try and get money from you We were very very very strategic and this this is Michelle my co-founders Sort of the genius is she made a list of our target top 20 investors not by firm But by individual partner at those firms and we would meet with anyone But it was it would always be never be in their office. It would never be in our office So I'll be out always be out over coffee. We tell them what we were working on We'd learn a ton from those meetings and at some point we were at one of those coffees with a woman named Daphina and Daphina was an associate at a Venture capital firm called Venroc and one of the partners there was a guy named Ray Rothrock who is one of the top Security investors and he was actually number two on our list and Daphina said, you know After we'd had coffee and we talked about the business and she's like I need you to meet Ray And what was interesting was that was the first time that we went what somebody was like I can give you a clear path to one of the people on your list. We went in we met Ray and 15 minutes in the conversation Ray said I have the authority to write you a half million dollar check right now Will you take it and I said no and and Michelle kicked me under the table like what are you doing? I said well, we're targeting raising two million dollars And so we need we need more than that He said well, I then I guess we have to have you meet with the rest of the partnership But that obviously and that was really the only firm that we pitched at the time and we were the only technology investment that NEA did in Excuse me, excuse me. The Venroc did in 2009 and we and we were then have been the most successful investment in Venroc's entire history, which is pretty amazing given they were the original funding behind Intel they were the original funding behind Apple and And so, you know, it's it's I think even in really tough times You can actually build great companies and it becomes a little bit harder to raise money But sometimes that actually makes the company better Well Ray of course is the one that introduced me to you Yes, that's how we got involved But I guess the part of what I remember also is that free wasn't so obvious back then and while Ray and I Believed in free when we went out to raise future rounds Even it was still not that easy to find people who did believe in free it ultimately found usv and off we went but I yeah I just think that's important to think about in times like today where investors are increasingly focused on revenue generation Yep, I certainly see that in our founders if we encourage them to do something, you know pursue this free strategy They're first, you know responses Well, but we're gonna have to generate revenue in order to get the next round of investment Which is I think what you guys told us when we encourage you to go free for longer and longer and yeah, I know and I think that What you what if you're going to go down that path again what I think you have to be incredibly disciplined about is cost And so we have you know, we believe that even today as a public company every dollar that an investor entrusts with us is We have a sacred duty to make sure that we are being Very very very responsible with every single one of those dollars And so we have from the earliest days Obsessed about how can we drive every cost down as far as we possibly can and I think that that Discipline that was actually born out of what were the tough times when cloudflare started has made us a much better Company today and I think the companies that launch if you look at when do the Googles and and Facebooks and I mean and all of these companies that turn into massive massive massive successes Oftentimes they actually come out of very difficult times And so while right now it definitely has become a lot harder than it was a year ago to raise money I would I would bet on the companies that are that are successfully raising money today that are thinking about costs in a very Disciplined way and and that are building businesses that yeah, we'll scale to you know today Cloudflare, you know generates a billion dollars in revenue But that they also are doing it in a way that they can have you know Very high margins that they can be that they can succeed at scale And I think when money is really easy to come by sometimes There's less discipline around that and I think that the tough times that we started in actually gave us that discipline Which continues to pay off today? Well, I actually think this is one of the most important things for founders to understand about the environment We're in you know We know that great companies are founded and funded in really difficult times and in you know In any ace history more than half of our best investments where companies founded in tough times, but it's precisely what you said It's not it's not just that the money is hard to come by but there's sort of this crucible of learning and Discipline that comes out of that which which builds fundamentally better businesses and I would have to say of all the companies I've been involved in you're you're right up there with Christian Chabot in terms of discipline on spending money. He's the founder of Tableau Built his business on 1.8 million dollars. That's pretty much impossible to do But anyway, you guys are right there with him and one of the things I remember about that is that whenever You would encounter a problem you would always challenge the team to solve that problem by you know Basically writing software that would solve that problem rather than going out and buying somebody's box at one point We had some other NEA portfolio company I remember Recommending to you which had some next-generation switch or something and you guys were nice enough to look at it But you said no no no we got a we got to create the solution ourselves. Yeah, you know, I think we You know Clutha was either gonna be a one or a zero it was either gonna work or it was gonna be a complete failure and In order for it to work it need to have scale and or if it was going to get scale we we really did need to drive the fundamental costs as far down as possible and And so I think that we're we we invent a lot of our own solutions And and I think you can make a mistake as a company if you know if we were inventing our own I don't know CRM system or we were venting our own, you know tax and accounting system Those aren't things that are core to our business and we go out and buy those and we negotiate really hard on all of those things But anything which is core to our business We always needed to figure out how to do it as efficiently as possible And so what what I always would say to our team was, you know, let's Drive anything which is a commodity that we're buying It has to we have to be able to buy it as cheaply as anyone else like Cheaper than Google cheaper than Amazon cheaper than Microsoft cheaper than than Facebook How do we drive those costs down? But those things that are truly differentiated which ultimately are the people How do you make sure that you're you're not being cheap in those areas and that you're really rewarding people and Making sure that it is that they are successful and and I'll say that You know, we've we've done very very well I've you know from a financial perspective done really well But when I think about what are the things that have been the most rewarding at Cloudflare It's when you know an employee who was early with us calls me up and says, you know I was just able to buy my first house because I you know, I joined Cloudflare I was just you know able to you know, send my kids to school without having to think about You know what the cost would be I was just able to do those things and and so I think we've always been And I think you've really helped us Think through how to reward the employees in your team as much as possible. They're not commodities That's not the place to be cheap But yeah driving down the cost of a switch It's a switch like we should we should make sure that we're never dependent on any one company so that we can continue to Drive those costs down as far as possible That's the commodity that you need to be cheap around but people you really want to reward And you want to make sure that those people who bet on you early are are you know In in our cases many of them created generational wealth for them, which is which I'm really proud of It's wonderful to see you know coming back to the cost discipline. I think One of the things that impressed me was the creativity that went into the standardization of the hardware You know off-the-shelf hardware standardized offering standardized software which could be deployed without a human ever leaving You know San Francisco to deploy it in Bombay or whatever it was Could you just talk about that a little bit because I'm not sure people have realized that's even possible So one of the earliest fights that we had in our engineering team at Cloudflare Was did we need to have specialized hardware to do all the different things we did? So did you need a storage server to store files? And then did you need a you know specific DDoS mitigation server to stop DDoS attacks and a DNS server and That was one approach I think Lee who was really the technical genius behind Cloudflare and then to a lesser extent I Really saw what Google had done In terms of saying we're gonna buy just commodity Equipment and then we'll spend our time running clever software that makes it act as if it is one giant mainframe Our question was could we do the same thing? But instead of being one giant mainframe could we make it one giant you know? Router or switch or load balance or one giant network effectively That was out there and so it was not popular at the time and it was harder But we from the beginning said we are only buying one type of server and it has to do everything and today We will set up and we're on our 12th generation of servers. We buy them. We actually have multiple What are called odm's that build them for us mostly in Asia? We bid them all off each other. They have a certain spec. We're specking it down to the individual chips that are on the motherboard There are times where someone can't get a chip for us and we'll go source the chips individually To be able to to again drive those costs down as far as we can But when we buy equipment instead of us buying you know a little bit of one thing a little bit of another thing a little bit of that we're buying a ton of One type of equipment and that has two meaningful impacts the first is because we can then buy at scale We can get that equipment very inexpensively. The second is that it really simplifies our Deployment so that whenever we need equipment somewhere we can actually depot it around the world and then deliver it Right to those places. What's been powerful though is what that means is We're always at somewhere on our network. We have a little bit too little capacity for something Maybe we have we're running hot on CPU But maybe we have then an excess of something else maybe we have more storage than we might need and every single quarter our Infrastructure team meets with our product team and they look at okay not where things running hot We know what to do when things are running hot We deploy more equipment and we sell that but where do we have excess capacity and so for example? Recently about a year and a half ago our team looked out at our network and said we've deployed all these servers everywhere They have a certain amount of storage in all of them. We have excess storage today so what can we do with that and and our Infrastructure team challenged our product team to go out and build something around it and they said well Let's go compete with a AWS right they have s3 as a storage system. We've got a whole bunch of extra storage We can go sell that extra storage which is already deployed as a as an object store So we launched something called R2 which is a s3 compatible object store but with no egress fees no no data transfer fees and That's gonna use up all of that extra storage and then we'll have to buy more boxes and then though You know to supply that and then we'll wake up I would predict in 18 months and now we'll have a whole bunch of extras at CPU and we'll be like Well, what can we do with that and so I think we're always trying to think about Where is their slack in the system and how can we take that up with new products or features? Which can then surprise and delight our customers or you know I have always really admired Amazon's ability to take things that are costs and turn them into revenue centers And I think that we've been very inspired by that And I think that's a big piece of how we think about products as we build them awesome Matthew in the time We have left. Let's switch to people. Yeah, you know I've been amazed over the last, you know decade I've been involved in the company that Cloudflare always seems to get the people that you want to get and they're often quite extraordinary and I contrast that with You know, not that my other portfolio companies are necessarily doing a bad job of this But it's it's been a very difficult hiring environment for for the last decade in Silicon Valley What's the secret sauce at Cloudflare for you know attracting and retaining these extraordinary people? Everyone who comes and works at Cloudflare can work somewhere else Everyone has multiple job offers that they could work somewhere else and we I think we're generous around pay and and those things But but we don't chase that when especially Late last year beginning this year it seemed like, you know salaries were going through the roof I think we're very disciplined around that But as a result, I think we've tried to be very fair Across that and and people want to work for organizations that are fair That's I think really important and and so being disciplined around how you think about compensation Actually, maybe you don't get someone In the short term, but it actually means that you're gonna be more fair and that's more stable over the long term Which which is important. I think the second thing is mission really matters And people who can have multiple different opportunities are thinking about what is the thing they want to do in their life Because they realized especially I think during COVID people realized Like time is finite and I and I should be working on the things that really matter and so I think that Because we have a big mission Because we live that mission every day of helping build a better internet Because we are out there, you know right now We're helping make sure the internet stays on in Iran. We're helping You know, Russian citizens 10% of Russian households are using Cloudflare technology to bypass Russian censorship. I was personally sanctioned by Iran I had to check on the flight path to make sure on the way in we weren't getting too cool not by Iran by Russia to make sure we weren't getting too close to Russia because we're pretty close right now and and I think that people want to work for places that are doing work that matters and So I mean my advice to founders that are out there often times Founders want to do something that's within sort of the four corners that they understand and feel like they can control We had no idea how Cloudflare was gonna work when we started we saw a big problem We're like, yeah, that seems like it's an opportunity But we weren't the obvious people to figure that out But we knew that if we got different people with different backgrounds together and that they were smart And curious and empathetic that we'd be able to figure out a big problem And so my advice to founders is always set your sight on something that's so much bigger Then you think it is be serious about getting there and that's gonna help you actually attract better better founders That's gonna make it more likely that you succeed Love that Matthew. Thank you. Let's leave it there and thanks to everybody in the audience for being with us today