Fast-growing tech unicorn Cloudflare eyes a September IPO

Author: Lindsey Boycott

Estimated read time: 3 minutes

Publication date: 19th Aug 2019 21:54 GMT+1

San Francisco-based Cloudflare is striking while the markets are still hot with their plans to go public this September. The company will soon join the ranks of tech-unicorns who have IPO’d this year, including Uber (NYSE: UBER) and WeWork who debuted on the stock market earlier this year.

Cloudflare is well-known within the internet security and content delivery market and is used by 2 million customers that run over 19 million websites. They act as the intermediary between websites and their web host and offer a selection of services that both protect and enhance sites – including performance accelerators and advanced security options that integrate well with everything from IBM Cloud to WP Engine.

Co-founded by Matthew Prince, Michelle Zatlyn and Lee Holloway, CloudFlare’s origin story may not involve operating out of someone’s garage but did involve a school project. Zatlyn shared how it all began for the business back at Harvard.

“CloudFlare started as a school project at Harvard Business School in January 2009. My classmate there, co-founder Matthew Prince, had already started working on the idea and he asked me to join in,” said Michelle Zatlyn, co-founder of CloudFlare, in an interview with SFGate. “When our project won the Business Plan Competition at Harvard, we knew the idea had huge potential. That summer, we moved to California and started collecting venture capital. One year later we launched.”

Their S-1 filing tells the tale of a growing company with promising upward trend in revenue – moving up from $87.1 million in the first half of 2018 to $129.2 million in the first half of 2019. The number of paying customers have also increased along a similar track but like many tech startups that are still finding their feet, expanding can be an expensive venture.

With their focus on growth, Cloudflare expects to make significant investments into their operations, sales, marketing efforts and to expand their product offerings. The Silicon Valley startup shared their rationale for operating at a net loss – stating that their long-term prospects will improve with this shorter-term sacrifice.

While CloudFlare is the major player in the web performance niche, the company does have serious competition in the vertical markets they serve. Google, Cloudfront and Akamai Technologies offer similar content delivery products that will challenge them to keep their market share. On the cybersecurity front, they can expect that Palo Alto Networks, Juniper Networks and Cisco will be fierce rivals in the upcoming months.

According to Crunchbase, the company has raised a known $332 million over six funding rounds, the last being series E funding round for $150 million led by Frank Templeton Investments a mere six months ago. While there are no numbers available for what CloudFlare’s IPO hopes for market valuation, it was estimated to be worth approximately $3.2 billion in 2016.

“All factors considered, it appears as though both retail and institutional investors are very interested in Cloudflare’s IPO, as demand in the private market has consistently exceeded supply, with more investors aiming to buy than to sell shares ahead of the IPO,” said Javier Avalos at Forge, an alternative marketplace for private tech companies, in an interview with TheStreet.

Sources:

https://news.crunchbase.com/news/cloudflare-files-s-1-with-healthy-mix-of-accelerating-revenue-growth-slimming-cash-burn/

https://www.crunchbase.com/organization/cloudflare#section-overview

https://www.businessinsider.com/cloudflare-plans-to-ipo-in-september-2019-7

https://www.thestreet.com/investing/stocks/what-to-know-about-cloudflare-s-upcoming-ipo-15059940

https://en.wikipedia.org/wiki/Cloudflare

https://www.sfgate.com/business/article/Q-A-with-Michelle-Zatlyn-co-founder-of-CloudFlare-2373155.php

https://www.cloudflare.com/en-ca/#what-is-cloudflare


Disclaimer: Lindsey Boycott is an experienced financial consultant who writes for Finscreener.com. The observations she makes are her own and are not intended as investment or trading advice.