The security, performance, and dependability company Cloudflare, which went public three years ago, announced this morning that it will assist in establishing connections between startup businesses using its serverless computing platform and dozens of venture capital firms that have collectively offered to invest up to $1.25 billion in the businesses using their current funds.
The already five-year-old product, according to Cloudflare, enables developers to build or enhance apps without installing or maintaining infrastructure, so it’s a clever, eye-catching incentive to persuade more businesses to adopt it. In a companion press release, Cloudflare notes that businesses may grow so quickly utilising its platform that it just purchased Zaraz, a company that claims to accelerate website performance with just one line of code. (Cloudflare is not committing to acquiring further firms, although the possibility is floated.)
As far as we can tell, the primary purpose of this investment initiative is for Cloudflare to target highly profitable products like AWS, Azure, and Google Cloud. To that end, we questioned Cloudflare CEO Matthew Prince over the weekend about the company’s belief that it can compete with these much larger businesses for market share.
He asserted, “I wouldn’t characterise it as’stealing’ market share from anyone. It comes down to gaining market share, and the best way to do that is by offering a better product at a lower cost.
When asked how much more affordable it is, he only responded that because of the way it is constructed, it is “much less expensive than the legacy public clouds.” Modern browsers “encounter new, untrusted code with practically every website they access online today,” according to Prince. They require a method for swiftly and securely running that code, and they do it by using a technology known as isolates. The tool, called Cloudflare Workers, “takes the isolates technology inspired by the browser and makes it available as a developer platform.”
Programmers seem to be responding favourably to the proposal. Cloudflare doesn’t break its sales by product category; nonetheless, its shares have taken a beating in 2022 along with other tech stocks, while holding up well in comparison. However, it claims that 20% of Cloudflare’s paid clients make use of Cloudflare Workers. Additionally, it claims that by the end of this year, more than 1 million developers would be on the Cloudflare Workers platform.
This fresh strategy fits into the overall scheme.
The idea to link firms on its platform with venture capital investment, according to Prince, originated from the company’s interactions with VCs, who had started noting that more of their portfolio companies were utilising Cloudflare Workers as their developer platform. The VCs would “push [founders] on why Cloudflare and not a platform like AWS,” according to Prince, and startup after startup would respond that Cloudflare Workers scaled better, had better performance, and was less expensive to run.
If you’re a VC and you hear an answer like that from the most promising startups often, you start to pay attention, he continued.
Altimeter Capital, Altos Ventures, Amplify Partners, Bain Capital Ventures, Bessemer Venture Partners, boldstart ventures, Cowboy Ventures, Decibel, Emergence Capital, FirstMark, Greylock Partners, IVP, Lightspeed, Meritech, New Enterprise Associates (NEA), Norwest Venture Partners, Pear, Root Ventures, Scale Venture Partners, Signal Peak, Silverton Partner are just a few of the numerous companies that have agreed to support developers who use Cloudf
It is made clear that neither funding nor funding decisions are being made by Cloudflare. The participating firms will decide on all forms of finance.
Additionally, entrepreneurs applying for the fundraising programme will be eligible for a number of additional Cloudflare initiatives aimed at accelerating startups and access to “exclusive” events in addition to potential investment from these VCs.
