CloudFlare, Transform Thyself

CloudFlare has raised a total of $72M to date. They currently have 28 CDN POPs, 2M customers in total, of which 1.9M are non-paying, and about 100k paying customers that’ll generate $40M in revenue this year. According to Matthew Prince, CloudFlare has grown 450% over the last three years. Growing at the same rate in 2015 from $40M in annual revenue to $180M is going to be extremely difficult, and very unlikely. CloudFlare would have to defy gravity, in order to grow that fast.

Can CloudFlare grow its revenue from $40M to $100M+ in 2015? Absolutely, here’s the magic formula.

The first action CloudFlare must take is to go against its DNA, pivot big time, and transform itself by charging every single customer. The way it would work is easy; they would email their 1.9M customers, and say that in 60 days, CloudFlare will start charging a low monthly fee, and the best part, “there are three awesome plans to chose from”. Let’s say 1.4M customers go bye bye, and 500k customers sign up for the new plan (current clients not impacted). The plans are as follow: $10/month, $15/month, and $20/month. Based on one discounted cash flow model (summarized), here is what it looks like:

CloudFlare 2015 Revenue Forecast 
  • Currently 100,000 paying customers will generate $40M annually in  2015
  • 350,000 customers x $120/yr. ($10/mo.) = $42M
  • 100,000 customers x $180/yr. ($15/mo.) = $18M
  • 50,000 customers x $240/yr. ($20/mo.) = $12M
CloudFlare 2015 Revenue Forecast = $112M