Firing a customer isn't uncommon. But few can say they've done it under such an intense media spotlight--and personal internal struggle--as Cloudflare co-founder and CEO Matthew Prince.
This past August, the man accused of a mass shooting at a Walmart store in El Paso, Texas, posted his manifesto on the online message-board 8Chan. Cloudflare, a web infrastructure and security firm, counted 8Chan among its thousands of customers. Weeks before taking his company public, Prince suddenly found himself in the middle of a national debate about free speech, wrestling with the decision to pull Cloudflare's services, which would practically assure 8Chan's removal from the internet.
Prince didn't think his company should decide who can and can't publish on the web. Still, after debating the issue for 24 hours with his team, he ultimately decided 8Chan wasn't following the rule of law. Cloudflare would no longer offer the site its support services. "What we saw [in 8Chan] was an organization that appeared to have been designed, in large part, to hide from those responsibilities, not take them," Prince says. His staff worried that if 8Chan was allowed to continue to operate with Cloudflare's protection, there'd someday be another manifesto. (Since then 8Chan has struggled to find a service provider and it has bounced on and offline under different names.)
If its founder's transparency and thoughtful decisionmaking under fire hadn't been enough reason to consider Cloudflare a contender for Inc.'s Company of the Year--a recognition conferred on a single startup that has not just succeeded in the marketplace but also stood out from its peers--consider its other accolades. [Ultimately, Inc. named Impossible Foods its Company of the Year.] Within San Francisco's new guard of unicorn companies, Cloudflare is an understated colossus. In the past decade, it has risen from a software-as-a-service startup that maintains and secures other companies' websites to a business with a $5.3 billion market cap, more than $192 million in 2018 revenue, and close to 1,200 employees globally. And despite its lack of profitability, the company's September initial public offering, which netted Cloudflare $525 million, was a rare success amid a year of lackluster openings.
"We're just a boring infrastructure company," Prince says.
Hardly. Cloudflare has mastered the art of smooth flying--while also working with two million customers, securing more than 20 million internet properties, and finding itself at the center of one of the biggest debates in technology.
The Birth of Project Honeypot
Prince met his co-founder, Michelle Zatlyn, at Harvard Business School. It was during a 2009 class trip to Silicon Valley where he described something he'd been working on: Project Honeypot. It was a web-database and site-caching system with the eventual goal of stopping bad actors from executing attacks online. Even in the earliest days, there was a "someday" vision of making the internet a safer place--and that resonated with Zatlyn. Right there, Zatlyn and Prince sketched out a business plan for Project Honeypot. Within hours, they'd pitch it to their professor.
"Before we knew it we'd won a business-plan competition and were packing our stuff into a U-Haul and driving across the country," Zatlyn says. They enlisted Prince's programmer friend Lee Holloway as a co-founder and, later, as their lead developer. Zatlyn became co-founder and head of user experience. Prince took the chief executive job. Their little company launched in beta in June 2010. By its more public launch in September, it had taken on the name Cloudflare, and was serving 1,000 websites across 10 countries.
A Tough (but Necessary) Call
Within five years, Cloudflare--which by that point had persuaded some of the world's top companies to pay up to $1 million annually for top-tier coverage and 24/7 support--had more than $70 million in funding, which it used to grow internationally. In 2014 alone, it launched centers in Lima, Johannesburg, Madrid, Milan, Medellin, Sao Paulo, and Valparaiso, Chile. The following year, it passed 200 employees and announced it had brought in another $100 million in investment from a few unlikely investors: Baidu, the Beijing-based internet giant, would help the company expand in China; another, Fidelity, would help Cloudflare learn the kind of Wall Street-style oversight to which public companies are accustomed.
With the massive growth, so too came more ethical dilemmas. In 2017, an analyst at the Southern Poverty Law Center accused Cloudflare of "optimizing the content of" 48 hate websites--one of which, the Daily Stormer, became a centerpiece of a crescendoing debate over the limits of free speech online. In August, a counterprotester was killed in the demonstrations surrounding the white supremacist rally in Charlottesville, Virginia, and the Daily Stormer's founder used his site to insult the victim. GoDaddy, which maintained the Daily Stormer's domain, canceled its service. Google denied it the same. It appeared Cloudflare was the remaining holdout willing to do business with the neo-Nazi site.
The ire of the internet came at Cloudflare. Prince, who'd majored in computer science and English and also studied law before heading to Harvard, confronted the situation as a staunch free-speech defender. Some of his company's first clients were a slew of Turkish brothels; he'd reasoned this out before. He was steadfast in his belief that the infrastructure layer of the internet was not the place to be making piecemeal decisions about what content should be permissible.
Still, that week, the pressure got to him. Three days later, he typed out a post explaining his decision to cut service to the Daily Stormer. The tipping point in cutting off the white nationalist site wasn't the content it published, but rather false accusations lobbed at Cloudflare that supporting the site's existence meant the company secretly supported its ideology. Prince decided he would not let himself or his staff be bullied by or associated with Nazis. Still, in a memo to staff, he made clear his inner conflict with the decision to rule on content: "Literally, I woke up in a bad mood and decided someone shouldn't be allowed on the internet. No one should have that power."
Despite making what Prince himself calls "dangerous" moves to cut a select few bad actors--and perhaps set a regrettable precedent--his thoughtful decision making has been met with respect by others in the industry. Evelyn Douek, an affiliate at Harvard's Berkman Klein Center for Internet and Society, commended Prince for "embracing the storm," and noted "he is committed to the hard task of defining a policy that Cloudflare can enforce transparently and consistently going forward." And while Prince still seems uncomfortable taking on a content-arbitration role, his company now monitors potential hate sites on its network to, as he wrote, "continue to work within the legal process to share information when we can to hopefully prevent horrific acts of violence."
Reckoning With Success
Today, the company is thriving. Just a month after the 8Chan incident, Prince and Zatlyn flew to New York City to ring the opening bell at the New York Stock Exchange.
After setting its initial stock price of $15 a share, Cloudflare's shares rose to $18 on opening day. By its third-quarter earnings call, it reported gaining 10,000 new paying customers since the end of 2018. Yet it's still in growth mode, with roughly 50 percent of its revenue going toward sales and marketing expenses. Half of its clients are international--and those ranks are growing, as the company plans to open another major European office in Portugal. Cloudflare operates out of Munich and London, as well. But competitors are also strong, and plentiful: Rackspace, Fastly, Amazon CloudFront, and Akamai (Facebook's content delivery network) are all popular. And surely, Prince hasn't seen the last of more thorny ethical questions.
Does Prince think Cloudflare can maintain its early-company values--its transparency, its embrace of challenges--even as a public company? "I think so," he says. "We don't always get it 100 percent right, but I hope that we at least keep catalyzing the conversation so that as a society we can be headed in the right direction over time."