Cloudflare's CEO protected Nazis and prostitutes on principle - now the internet's most ethical exec will have to answer to Wall Street
- Cloudflare CEO Matthew Prince built his career on his strong beliefs about how the internet should run.
- Cloudflare, last valued at $3.2 billion, protected websites run by groups, from the Taliban to sex workers, from outside attacks. And it made no exceptions until 2017, when the neo-Nazi website the Daily Stormer pissed off Prince, and he stopped providing it services.
- Now Cloudflare is going public, and the SPAM-hating, ever-principled Prince is going to have to answer to Wall Street.
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It was late in the evening on a Sunday, in the hours after two separate mass shootings left dozens of people dead in El Paso, Texas and Dayton, Ohio, and Cloudflare CEO Matthew Prince decided to change the internet forever.
For only the second time in its 10 year history, Prince announced that Cloudflare would stop working with a customer, 8chan, an internet forum tied to three mass-shootings this year. Without Cloudflare as its protector, 8chan was left vulnerable to denial-of-service attacks, and the site quickly went offline.
Just two weeks later, Cloudflare filed its S-1 with an eye on going public in September.
Though a lawyer by training, Prince never wanted to be an arbitrator of content. The 45-year-old founder has made a name for himself in Silicon Valley with his vision of a better internet, and his strong politics on the role that network providers like Cloudflare should play in the technology ecosystem. That's meant an unwavering commitment to free speech as well as a willingness to defend websites run by groups like the Taliban and neo-Nazis from outside attacks.
This mentality has taken Cloudflare far on the private markets, where occasional cash infusions from committed investors - most recently $150 million led by Franklin Templeton - have allowed the company to grow unfettered by fears that its value would sink on the next news report about its connection to ISIS or a social network for sex workers.
The company is now valued at $3.2 billion. And however committed to his principles as he may be, Cloudflare's CEO is about to have a new boss - Wall Street.
'A good carnival barker'
Price started Cloudflare in 2009 alongside Chief Operating Officer Michelle Zatlyn, out of a business plan the pair wrote up for a Harvard Business School class contest. A third co-founder Lee Holloway joined on to run engineering at the company.
"Lee was sort of the technical genius. Michelle was sort of the operational genius. And I'm a good carnival barker," Prince told Nasdaq Vice Chairman Bruce Aust in 2016. "I think a lot of what we've done that's worked has worked because we set a pretty good solid foundation with the team from the beginning. "
Holloway knew Prince from their early days as anti-SPAM activists. Together they ran Project Honey Pot, which created millions of decoy email address for the purpose of gathering information on the spam bots filling up inboxes with unsolicited emails in the early aughts. Prince also cofounded a company called Unspam Technologies.
In addition to working as an adjunct professor of the John Marshall Law School from 2003 to around 2009, Prince wrote articles and consulted governments on anti-spam and child protection registry laws. Critics argued that these laws violated free speech rights.
From HBS to IPO
While working on the HBS project proposal, even before Cloudflare had actual employees or technology, Prince was focused on Cloudflare's branding, and he wanted the best.
Leader is well known for his work on the FedEx logo, which forms an arrow in the negative space between letters. He lived in Park City, Utah where Prince had grown up, so the two of them met at a bar to talk it over.
By the end of the evening Leader had agreed to make Cloudflare's logo for just $750. According to Leader, it was just enough to cover his expenses.
"He was very eager, very enthusiastic, very appreciative of my time and took nothing for granted in our relationship," Leader told Business Insider. Leader came up with the concept of a bright flash behind an orange cloud, which is still at the heart of Cloudflare's current logo, though the design has been updated.
"Between Matthew and Michelle, every year I get a Christmas card, every year they tell me how much they love the logo," Leader said. "So often you have clients who take the logo and run but they never forgot that I did this for them for peanuts, and that's for me always a sign of a good client. Beyond the money, what you like to get is a sense of appreciation."
With Leader's logo at the top of their business proposal, Prince and Zatlyn won the HBS class competition. They raised a $2.25 million Series A from Venrock, Pelion Venture Partners, and angel investor Ray Rothrock in 2009, then a $20 million Series B from New Enterprise Associates in 2011. In total, they have raised more than $400 million.
"I remember sending an email to Michelle that said, 'I ran the numbers and here's my prediction of what's going to happen: I predict that Google will buy Cloudflare for $500 million within 2 1/2 years,'" Prince told Business Insider in 2015. Zatlyn, usually the more conservative of the two, had a bigger idea.
"If my numbers are right, I think Cloudflare will go public in seven years at a valuation of around $4 billion," she said.
'He may be a genius'
In 2017, Prince kicked off the Daily Stormer from Cloudflare after the neo-Nazi website celebrated the murder of a protester during a white-supremacist demonstration in Charlottesville, Virginia.
It was a rare exception to the company's strident free speech policy.
"My rationale for making this decision was simple: the people behind the Daily Stormer are assholes and I'd had enough," Prince wrote in a blog post at the time. "I woke up this morning in a bad mood and decided to kick them off the Internet."
"They've always been very open about - we serve the good, the bad and the ugly and we're a law abiding company, but we're not in the business of censoring content," said one former executive, who saw it as a sign of maturity that Cloudflare kicked off the Daily Stormer. "It must have been a very difficult decision given how principled Matthew is, and how principled the company culture is."
People who have worked with Prince described him as both charismatic and frustrating, a CEO with a deep commitment to engineering and ethics, which occasionally has come at a cost to the business.
In its S-1 filing, Cloudflare addressed the negative press it received as a result of its former customers the Daily Stormer and 8chan. The company noted that the activities of its customers have alienated potential clients before: "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."
For employees inside of the company, Prince's steadfastness had always been a guiding light. Once Cloudflare hit around 60 employees, it started bringing new hires into the San Francisco office for a week long training to get everyone on the same page about the company's mission.
One investor in the space hesitated to describe Prince before settling on, "he may be a genius."
Sticking to its guns got Cloudflare pretty far, as it built its name as a digital protector from websites around the world. In its public filing, the company said that 10% of Fortune 1000 companies are paying users. Its revenue grew 43% to $192.7 million in 2018, though its losses were up considerably, from $10.7 million in 2017 to $87.2 million in 2018.
But it's also caused friction, sometimes arbitrarily, for the company.
Remember how Prince really hates unsolicited emails?
Cloudflare very briefly worked with Carta, a company that manages equity and vesting in startups. But Carta CEO Henry Ward abruptly broke the contract after a confrontation with Prince over the automated messages that Carta sent to update employees on their vesting status, according to one person familiar with the events.
Prince wanted complete control over what information was shared with his employees, and Ward was unhappy with how Prince handled the situation, the person said.
"We can't comment on a company's contract without their approval," a spokesperson for Carta said in a statement.
Cloudflare did not respond to a request for comment.
Over the past few months, Cloudflare's team has weighed its options ahead of the IPO, including whether Cisco would be a good buyer, according to one person briefed on the matter. Cisco did not respond to a request for comment.
But Prince isn't the type of CEO who can seamlessly merge into a larger organization.
"The nature of being neutral is that there's going to be someone that you upset all of the time," Prince told Bloomberg's Emily Chang during the Daily Stormer debacle.
"The worst case scenario is that you have a cabal of five to 10 tech executives who basically are choosing what content can and cannot be on the internet based on what are their own political and personal agendas," he said, "or even worse what their economic incentives and agendas are."