CloudFlare Locks Down $110M From Fidelity, Microsoft, Google, Baidu And Qualcomm

22 Sep 2015 | Author: | No comments yet »

Cloud security start up Cloudflare gets $110 million in venture funding.

CloudFlare has secured a $110 million round of private financing, led by Fidelity, and participated in by a cadre of technology giants, including Baidu, Google, Microsoft and Qualcomm. Matthew Prince uses a lot of hand gestures—he holds his palms out to illustrate an overarching concept, or clenches his fists and grins to show excitement.In an interview with Fortune, CloudFlare CEO Matthew Prince said the startup didn’t need the funding, but needed the credibility that comes with being associated with big companies as it eyes a potential IPO.

The San Francisco-based performance and security provider has seen rapid growth over the past year: Its 4 million customers span 30 countries, and the company says that it processed 5 percent of all Internet requests globally in the past month. Wearing jeans and a plaid shirt, the cofounder and CEO of CloudFlare, an Internet edge service provider (more on what that means later), describes a grand vision of sweeping changes in the Internet infrastructure market, with much of it sliding over to Amazon.

From a spare conference room in cramped offices way south of Market Street in San Francisco, Prince talks about how CloudFlare can put a wrench in Amazon’s plan, thanks in part to $110 million in new funding that includes buy-in from some of technology’s biggest players: Google, Microsoft, mobile chipmaker Qualcomm, and Chinese search-engine company Baidu. (Fidelity Investments lead the round.) It isn’t the money Prince really wants to talk about. “I hate fundraising stories,” he says as an opener. The latest funding round actually closed in December 2014, but the company waited to announce it after it finalized a joint venture with Chinese Internet giant Baidu last week. Microsoft will help shape the CloudFlare’s enterprise strategy, Baidu will help steer the products into China, and Qualcomm is all about finding its way into the world of mobile. The partnership between CloudFlare and Baidu lets both U.S.-based companies and Chinese-based companies use CloudFlare’s website performance service while abiding by Chinese data laws.

Cloudflare claims enterprises can quickly set up cloud-based firewall, load balancing, WAN optimization, distributed denial of service (DDoS) mitigation, content delivery and domain name services services worldwide without needing any hardware. LAST CHANCE TO REGISTER: Don’t miss the GeekWire Summit on Oct. 1 and 2 in Seattle, featuring key execs from companies including Nike, Zillow, Concur, Xbox, Redfin, Uber and more. The changes Prince predicts would have huge implications for tech giants like Cisco, Dell, Google, HP, Microsoft, Oracle, and the new eight-million-pound gorilla, Amazon. “People prefer to rent services and use them as they need them, as opposed to having to make a big capital outlay that often doesn’t get used,” says Prince. Although CloudFlare maintains no physical operations in China, it has worked with Baidu to set up technology within Baidu’s facilities that mimic CloudFlare’s services elsewhere, Prince said.

Plus, 500 Startups founder Dave McClure, the return of “Inventions We Love,” New York Times reporter David Streitfeld moderating a panel of Amazon veterans, and much more. The company is refreshingly open about its finances, noting that it has been profitable since 2014, and currently puts up a gross margin of 75 percent. That explains the rise of Amazon Web Services (AWS) for what Prince calls the “store and compute” layer—one of three layers he sketches out on the conference-room whiteboard. Instead of buying and maintaining their own servers from companies like Dell and HP, businesses are contracting with providers like AWS that rent server capacity on an as-needed basis.

Next comes the applications layer, says Prince, dominated by Microsoft programs, Oracle databases, and SAP business management software, but transitioning to a huge number of specialty cloud providers such as Adobe and Dropbox, Salesforce for customer relations, and Workday for human resources. Here Amazon is offering its Amazon Relational Database Service and pushing its brand-new alternative to Oracle and Microsoft databases, called Aurora, as a “data lake,” says Prince, on which new services can sit. This is where CloudFlare competes by offering rented security and optimization services as alternatives to hardware such as Cisco and Juniper routers and various firewall boxes. Now that a company’s software has moved from its own servers to various cloud providers, says Prince, companies need cloud-based services, rather than hardware, to secure them all.

Doing business in China, a massive market for the Web and its larger requirements (the bread and butter of CloudFlare), entails more than entering other locales. With Baidu, Prince sees the logistical partnership as way more important than the monetary investment. “We figured out how to build infrastructure across mainland China,” he says. The Qualcomm partnership, meanwhile, gets CloudFlare a better toehold in the mobile Internet, which Qualcomm predicts will one day handle 1,000 times more traffic than it does today. CloudFlare became profitable in 2014 and is pouring revenue into expansion (currently opening about one data center location per week) and keeping costs down elsewhere. “You can see how much we spend on our beautiful office spaces,” says Prince, with a chuckle, pointing to the rough brick walls around him. (CloudFlare’s office is moving to a new location soon.) “What’s worked for us so far has been being extremely scrappy,” he says, “and making decisions not based on . . . how do we raise the most money or how do we get the best valuation.” However, this particular inevitability is more a market pitch than a business secured; CloudFlare has competition, and its success will only attract more.

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