Cloudflare (NYSE:NET)

Cloudflare’s mission is to create a better internet. They are responsible for managing the networks that many businesses operations are run on, this includes content delivery (storing data in their cloud and then distributing it where it needs to go), cloud computing, edge computing, security, and performance optimization of systems, among other services they offer. Cloudflare was founded by Matthew Prince, Michelle Zatlyn, and Lee Holloway in 2010, Prince and Holloway were school friends who previously started a group called project Honeypot which tracks online fraud and online abuse. Cloudflare built on their experience in the field and is now one of the largest internet services companies in the world boasting a $40B+ market cap and a sprawling network that spans the globe.

positives

-Cloudflare already processes around 17% of the world's websites, accelerating performance and protecting sites from disruption.
-Because of cloudflare’s very large scale it makes them very capable of fighting DDOS attacks (distributed denial of service), these attacks are where an attacker would run loads of fake traffic through a website, overloading it and causing it to crash, Cloudflare has lots and lots of computer servers across the world at its disposal which allow it to spread that traffic out and make it harder for attackers to reach a critical mass when attacking
-cloudflare is in a complementary position to work with some of the leading cloud storage providers (AWS, Azure, GC) rather than in direct conflict as they can provide the computing power to make the existing storage platforms more efficient for end customers
-The company still has the feel of a young upstart despite being very large
-constantly rolling out new ideas and releasing much for free for the open source net to build out
-Having many new applications being built by independent coders on Cloudflare’s Workers platform also makes for the attractive option of acquiring some of these and having them already be compatible with Cloudflare's coding structure
-Cloudflare is sitting on almost $2B in cash and is only amassing more
-its dollar based net retention is 125%
-large customers with annual contracts over $100k is increasing rapidly.
-cloudflare’s scale offers it other interesting opportunities like its partnership with Crowdstrike for XDR (extended detection and response) where their ability to see into all corners of the internet makes them a natural partner to many other firms
-my first introduction to the company, sad but gives some interesting history to the founders: https://www.wired.com/story/lee-holloway-devastating-decline-brilliant-young-coder/
-Matt Prince owns 74% of B class stock which represents 46% of voting interest in the company: https://d18rn0p25nwr6d.cloudfront.net/CIK-0001477333/6c411ada-9c5f-49f7-99de-e88609ccb122.pdf
-Cloudflare is partnering with large office buildings (traditional on prem users) to launch more Cloudflare data centers
-growing at a very strong rate on almost any metric
-Matt Prince has an mba, law degree, and computer science degree, giving an interesting mix of perspectives
-Prince quoted bill and ted in an earnings call
-positive operating cashflow of $64m
-getting close to break even mark, cashflow positive
-R&D increasing roughly in line with scale
-Cloudflare received more than 200,000 job applications in 2021. They extended 1,455 offers and had a 92% offer acceptance rate. (2021)
-The two characteristics Cloudflare looks for most in job candidates are curiosity and empathy. They value these more than education, experience, GPA, and IQ.

negatives

-lots of competition in space
-disruptions or hacks may cause customers to look elsewhere, cloudflare outages are very noticeable across the web
-cloudflare has been put in tricky spot in the past stuck between being a neutral party that the internet runs on, and a content moderator, their position is that they will not moderate content unless it is found that the content is unlawful, still this could be a recurring rough spot for them
-internet technology changes quickly so like any company operating in this space cloudflare will have to keep innovating and spending on R&D to keep up
-still richly valued, could continue to be volatile