From Disrupt Runner-Up To $22 Million In Funding, CloudFlare Tells All

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According to Matthew Prince, CEO of CloudFlare, the service that makes websites faster and more secure, he and co-founder Michelle Zatlyn, had their heart set on launching at TechCrunch Disrupt ever since it was called TechCrunch50. They eventually got their chance – though not at TC50. Instead, CloudFlare ended up as runner-up to Qwiki at TechCrunch Disrupt SF 2010. But their story is a good one to tell, because it demonstrates that you don’t have to take home the trophy to win.

The company has since gone on to raise $22 million in funding, help the U.S. formulate policy around how the Internet works, and grow CloudFlare’s base of websites to over half a million, ranging from small startups to the Fortune 500. The company now sees more traffic in a month than Instagram, eBay, Amazon, Aol, Apple, Twitter, Wikipedia, Bing, PayPal and Zynga…combined.

We recently caught up with Prince to talk about what it was like launching at TechCrunch Disrupt and what advice he might have for new Disrupt participants. Prince has stayed involved with Disrupt in the months since his near-win, serving as a judge at TechCrunch Disrupt Beijing, for example, and also helping new Disrupt startups prepare for the onslaught of traffic. CloudFlare has worked with previous finalists like Bitcasa, CakeHealth, (recent Salesforce acquisitionGoInstant and many others, which Prince says has allowed them to live the Disrupt experience time and again.

Using data accumulated from 15 to 20 companies during Disrupt SF 2011 and Disrupt NY 2012, he knows exactly what startups are up against:

  • Over the 3 days of TC Disrupt, startups’ sites see an average of a 3x to 10x surge in traffic.
  • Startups see 10,000-20,000 pageviews per day during the event, with 20% of the traffic hitting while they were on stage.
  • Traffic builds throughout the competition, but spikes when the TC post goes up.
  • For finalists, traffic can reach hundreds of requests per second while on stage and during the winners announcements.

TechCrunch: What were some of the highlights between Disrupt 2010 and now?

Prince: Internally, we’ve taken the approach of hiring incredibly smart people. Instead of throwing as many people as possible at the problem, we’re getting the best possible people. And so building our team up has been incredible – that’s sort of a cheesy thing to say – but that’s been the biggest highlight.

And it’s been pretty heady when we got a call from a senior official in the Turkish government who had put their official elections results page up on CloudFlare during their last election. They called us and said “thank you for helping us preserve Turkish democracy.” And you know, we’re just a bunch of dorky engineers sitting in a corner of San Francisco. Seeing you can have that wide of an affect…that’s been amazing.

Getting to sit and help formulate policy for how the Internet should work has been amazing, too. Michelle, one of my co-founders, was invited recently to be a representative to the Federal Communications Commission – the only representative from any Internet startup to advise on network neutrality – she’s one of fifteen setting network neutrality policies.

TechCrunch: What was it like right after Disrupt?

Prince: What was nerve-racking, leading up to Disrupt, was that we knew it would work at a small amount [of users], but we didn’t know how many people would sign up. And we didn’t want to say “oh, today, you can sign up to sign up.” We didn’t want to have a waiting list. We wanted to step on stage, flip the switch, and actually have the service on. I remember walking backstage, and there were still 34 critical bugs that needed to be solved before we could actually turn the service on. Michelle and I were actually sitting backstage watching the team chat, and all the engineers were saying “OK, I’ve got #12, I’ve got #13,” but there were still a handful when walked on stage.

It was remarkable to then watch as people started signing up. And what’s been remarkable is that a huge percentage of those users that signed up – a lot them that were in the audience at Disrupt watching – are still our biggest users today, and are our biggest advocates.

TechCrunch: What was it like to launch on the Disrupt stage?

Prince: We sort of had a demo problem. We could say “here’s how this works,” but it was a very difficult product to show. It was like, “we make sites faster,” but it was hard to show that you weren’t faking it.

The way that Mike Arrington described it was that there’s one company that’s incredibly boring, and they’re essentially doing muffler repair for the Internet. And that’s not very sexy. Then there’s this other company that’s essentially a Ferrari, but we’re not sure if it’s going to get out of the garage. It turned out that muffler repair wasn’t very sexy, but it turned out that a lot of people needed their muffler repaired.

TechCrunch: And how did it affect investor relations afterwards?

Prince: Well, it didn’t hurt us. We launched on September 27th, 2010, and the 29th was the finals. You know, you work for months to do this. Everyone was just exhausted afterwards. There’s kind of a weird letdown. Nothing broke, it was all kind of working. But the next couple of days, investors didn’t immediately call. That’s just kind of the cycle of how investors work. But it was about two weeks later, our phone started ringing like crazy from investors. In mid-October, we started talking to just about every firm you’ve ever heard of, and everyone was interested in participating with us. It was a very humbling thing to see. We never put together a presentation deck, we would just go and meet with people. Investors would come to us.

We whittled things down to our top five firms, and there was this one particular Monday that we had five final meetings with five different firms. Michelle and I were kind of sprinting from one firm to another. We ended up coming out of that with a number different options from some amazing, different people. It was hard to rank order the different offers we had. And the person that stood out from that was Scott Sandell at NEA.

[CloudFlare went on to raise $20 million, but held off on announcing it for some time.]

Prince: I think fundraising stories are boring. I think that raising money can often screw the culture of companies up, and it’s not necessarily something to be proud of. Every time you have to raise money, it’s a failure. It means you didn’t generate enough revenue from your customers, and that’s OK, but it’s not something to shout from the rooftops. So that’s why we kept our fundraising round secret for 8 months. And I would have kept it secret longer, but somebody started to get word of it.

TechCrunch: Do you have any advice for the incoming companies that will launch at Disrupt?

Prince: One thing is that they should definitely sign up for CloudFlare.

TechCrunch: I knew you’d say that.

Prince: It really is very sad. There are companies that will launch, and their site will crash. It adds to the stress enormously. All the companies that have launched at Disrupt with CloudFlare have had 100% uptime.

Also, tell a story, be real. And the thing that I think we did – the thing that has become slightly unfashionable – is actually launch. If you say, “now we’re going to launch this in six months, that’s very different than “…and we’re launching it today.” If you do that right, you can do what we’ve done – continue to grow like crazy, all off that initial momentum.