Cloudflare Files for IPO despite Growth in Losses

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Internet services company Cloudflare is going public joining the growing group of tech firms that have taken a decision to sell shares to the public this year.

Cybersecurity company Cloudflare, famous for the technology that enables other companies to share their content and keep it online, filed for their IPO. Yesterday the company’s filing became public as well.

In the first half of 2019, Cloudflare filed a $36.8 million net loss on $129.2 million in revenue. That revenue figure was up 48% from the first half of 2018, and the loss was up 13%.

The company will trade under the ticker symbol “NET” with underwriters such are Goldman Sachs, Morgan Stanley and JP Morgan.

By the end of the first six months ofthe current year, the firm had 74,873 paying customers with 408 of them contributing more than $100,000 in annualized billings. The company’s clients include such firms as DigitalOcean and IBM that provide cloud infrastructure providers as well as together a number of companies that offer software solutions like Marketo, Discord, and Zendesk.

One of their eminent clients is also a Chinese web company Baidu that showed up pretty important for giving Cloudflare significant network presence in China. Even though the terms of Cloudflare’s and Baidu’s contract are valid until the end of the next year, under certain circumstances – the contract could be terminated earlier. This is important because due to the Chinese and U.S. geopolitical and trade tensions – there is an increased risk of early termination.

Let’s also not forget that Cloudflare itself had been playing part in some pretty much controversial events including termination of providing services for message board 8Chan. In 2017 they stopped backing a neo-Nazi web site that is known under the name Daily Stormer. Even though this may seem like the right thing to do, such a situation caused a really strong negative feedback. As a result, the company lost a lot of clients.

In their filing the company underlines that “activities of our paying and free customers or the content of their websites or other Internet properties, as well as our response to those activities, could cause us to experience significant adverse political, business, and reputational consequences with customers, employees, suppliers, government entities, and others.”

Cloudflare co-founder and Chief Executive Officer Matthew Prince has been publicly struggling for some time now with all of the decisions including having freedom of speech on the internet and the need to limit hateful, racist online posts and potentially dangerous calls for violence, in a certain balance.

After they cut services to The Daily Stormer, Prince said the move could set a dangerous precedent.

“After today, make no mistake, it will be a little bit harder for us to argue against a government somewhere pressuring us into taking down a site they don’t like.”

Among other Cloudflare’s investors are also Fidelity, NEA and Pelion Ventures and Venrock. Cloudflare’s co-founder and CEO, Matthew Prince, has 20.2% of the company’s class B shares, and second co-founder and COO, Michelle Zatlyn, owns 6.8%.

In a letter to prospective shareholders, they said the IPO code name, Project Holloway, came as a dedication to Cloudflare’s third co-founder, Lee Holloway who had to resign back in 2015.

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