Mar 17, 2019 · 30m · top-founders
1331 How CloudFlare Broke $100m in ARR Securing The Internet, No $2.5B Amazon Acquisition
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In this episode of The Top Entrepreneurs Podcast, Cloudflare co-founder and CEO Matthew Prince outlines how the company scaled past $100 million in ARR using a capital-efficient, proprietary infrastructure model and an organic freemium-to-enterprise funnel. Prince shares core SaaS metrics, organizational management strategies, and his commitment to maintaining corporate independence while securing global internet traffic.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 27.4% of the talking time here. How this is scored →
Nathan as informed peer 5.0 Guest teaching 5.4 Guest disagreement 3.0 Nathan pushing back 3.2
speaking balance: gold is Nathan, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 9:33 Pushing Back on Dismissal of Corporate Governance
Matthew explicitly rejects Nathan's assertion that public company procedures are useless bureaucracy, arguing that companies claiming to remain Peter Pan forever represent dangerous governance risks.
Hardest push from Nathan ▶ 9:15 Calling Public Company Requirements BullshitNathan aggressively challenges the value of going public by framing compliance and auditing as administrative nonsense that wastes a creative founder's time.
Biggest teaching moment ▶ 11:08 Democratizing Wealth Creation in Public MarketsDrawing on his background as a former securities attorney, Matthew educates Nathan on why public markets are vital for regular retail investors rather than keeping all upside trapped in private venture capital.
Nathan holds their own ▶ 12:21 Drilling into Specific Growth and Pricing MetricsNathan demonstrates SaaS expertise by referencing industry frameworks and pushing Matthew to commit to exact annual revenue growth ranges and retention dynamics.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Nathan as informed peer | Guest teaching | Guest disagreement | Nathan pushing back | Why |
|---|---|---|---|---|---|---|
| Episode Preview and Cloudflare's Growth Highlights | 3 | 1 | 1 | 1 | Nathan introduces Matthew Prince with an overview of Cloudflare's metrics before breaking the ice with a lighthearted question about an NEA sandwich story. | |
| Cloudflare's Business Model and Tiered Pricing | 6 | 5 | 2 | 4 | Nathan presses for specific blended ARPU figures and probes whether Cloudflare leveraged physical hardware to secure non-dilutive bank debt. Matthew clarifies the divergence between self-serve and enterprise cohorts and explains the challenges of international equipment financing. | |
| Revenue Scale and Perspective on Valuations | 6 | 6 | 4 | 3 | When Nathan asks about run rate and valuation milestones, Matthew reframes bragging about fundraising as akin to bragging about a mortgage. Nathan effectively boxes Matthew into acknowledging a 50 to 99 percent annual revenue growth bracket. | |
| Corporate Governance and the Public Market Debate | 5 | 8 | 7 | 5 | Nathan dismisses public company compliance as bureaucratic nonsense that distracts creative founders. Matthew firmly pushes back, arguing that fiduciary responsibility and rigorous governance are essential duties once a company reaches scale. | |
| SaaS Metrics, Low CAC, and Expansion Strategy | 7 | 6 | 3 | 5 | Nathan cites SaaS benchmarks from industry leaders to question pricing axes and sales rep quota timelines. Matthew provides detailed unit economics on inside sales productivity and explains why Cloudflare avoids penalty pricing during security attacks. | |
| Evaluating Lifetime Value and Customer Graduation | 5 | 7 | 2 | 2 | Nathan asks whether lifetime value is tracked as an actionable metric or dismissed as a vanity stat. Matthew educates on how low customer acquisition costs and natural funnel graduation make traditional LTV modeling less relevant for Cloudflare. | |
| Organizational Hierarchy and Management Span of Control | 5 | 6 | 3 | 4 | Matthew breaks down Cloudflare's management philosophy of wider spans of control (9 to 10 direct reports) compared to standard HBS dogma. When Nathan suggests acquiring Malwarebytes, Matthew explains why client software is outside their architectural thesis. | |
| Capital Discipline, Independence, and Internet Impact | 4 | 5 | 2 | 3 | Nathan asks if Matthew would entertain a multi-billion dollar acquisition from Jeff Bezos. Matthew emphasizes his capital discipline and explains that Cloudflare's mission to influence internet policy and protocol privacy provides rare impact that money cannot buy. | |
| Decentralization, Crypto, and Industry Disruption | 4 | 5 | 3 | 2 | After Nathan retracts a crypto question, Matthew offers a thoughtful perspective on historical cycles of centralization and unbundling before completing the Famous Five rapid fire round. |
Statements from this episode (20)
Prince: Cloudflare powers over 10M web properties and APIs
“We have over ten million web properties, APIs, mobile applications that sit behind our network, and we run a network that literally spans the world everywhere from not very exotic places like San Jose to Djibouti and All across mainland China.”
Prince: Some customers pay Cloudflare over $1M per year
“We have companies that pay us over a million, you know, over a million dollars a year.”
Prince: Cloudflare self-service customers average $100 per month
“We have what we think of as our self-service business, which are people who come in, give us a credit card, and pay for the service, and that's going to be around a hundred dollars a month on, on average.”
Prince: Cloudflare enterprise tier starts at $5K per month
“We have what our mid-market and enterprise Customers, which we have a traditional enterprise sales team for, and those will be, you know, it really varies, but sort of starting at 5000 dollars a month and up from there.”
Prince: Cloudflare owns equipment in nearly 100 countries and 150+ cities
“So we own equipment in nearly a hundred countries around the world, a hundred and over a 150 cities around the world.”
Prince: Cloudflare does not run on AWS, Azure, or Google Cloud
“So we're not running on top of AWS or on top of Azure or Google. We actually had to build the network out ourselves.”
Prince: Cloudflare retains more than half of $183M raised in bank
“And, you know, I'm proud that we have still to this day you know, more than half of that still in the bank.”
Prince: Cloudflare reached $50M in revenue within four and a half years
“The metric I remember is that we went from zero to fifty million dollars in, I think, four and a half years, which puts us in some pretty, pretty amazing company with companies like Salesforce and Workday and others.”
Bragging about company valuation is like bragging about mortgage size
“I've always thought that, that entrepreneurs who brag about how much they raised or what their valuation are, it's sort of like if you brag about how big your mortgage is it's, it feels sort of distasteful”
Cloudflare kept every funding round secret for nine months
“Every round that we've done, we've kept secret for at least nine months after we did it.”
Prince: Raising capital just means you failed to generate enough revenue
“It's not necessarily something to be proud of. It just means that you didn't actually generate enough revenue yourself to cover the costs that you had.”
Cloudflare is growing at high double digits past $100M ARR
“We're growing still high double digits at the rate that we're at, which is which is really, really, really you know, amazing.”
Prince: Cloudflare is operating at basically break-even
“We run the business that basically break even today.”
Prince: Tech's allergy to going public harms public markets
“I think this sort of allergy to being a public company is a disservice to public markets generally.”
Cloudflare signs up 15,000 new sites daily mostly at zero CAC
“Every day, you know, 15,000 new sites sign up for our service, most of whom heard about us with, there were zero customer acquisition costs.”
Cloudflare inside sales reps generate $1.3M new ARR annually
“No, over 12 months, 1.3 million in new AR per year, which is about twice what you would get from a high performing other SAS company where that's usually around 700,000 dollars per fully ramped rep.”
Prince: 25% of Cloudflare enterprise business converts from self-service
“About 25% of our mid-market enterprise business actually graduates from the self-service business.”
Prince: Cloudflare's acquisitions are small acqui-hires under ten people, not revenue plays
“Most of the acquisitions that we've done have been aqua hire types of acquisitions. I think we've done two that have had A little bit of a technology component to them, but again, still very, very small teams, 10 or fewer people as part of that nothing so far …”
Prince: Tight infrastructure coupling makes external tech integration difficult for cloud companies
“I think the challenge with most cloud companies is we're so tightly coupled That it's really difficult to take an outside product and have it naturally fit into our ecosystem.”
Prince: Decentralization is likely to disrupt major tech leaders including Cloudflare
“I don't know whether it's going to be crypto in any of the forms that it is today, but I do think that something decentralized is, is is important. And I think that that, that is likely to be disruptive to a number of companies that are very successful today, …”