Fastly Files for IPO, Breaking 12 Year CDN IPO Dry Spell

Last Friday, Fastly announced it had filed an IPO with the U.S. Securities and Exchange Commission. The number of shares that will be offered and the price range for the proposed offering have not yet been set. Fastly is expected to file amended IPO documents with the pricing range set, and it looks likely to go public in May. Fastly will be listed on the NYSE under the ticker FSLY.

Fastly’s filing marks the first CDN IPO in twelve years. The last was Limelight Networks back in 2007, which set a proposed maximum aggregate offering price of $201 million. It ultimately outperformed this, raising $240 million at IPO, selling 16 million shares at $15 each.

Fastly has seen an astonishing growth rate since it was founded by Artur Bergman eight years ago. Its focus on caching dynamic content at the edge with instantaneous global purging has differentiated it from its CDN competitors from the start. Fastly has become one of the world’s biggest edge cloud compute platforms with a valuation of almost $880 million, according to PrimeUnicornIndex last July (no doubt, the valuation has grown since). Fastly’s employee headcount grew to 449 at the end of 2018, a growth of 18.5%. Its revenue also grew over 2018, hitting $144 million, a rise of 37.8% from the previous year. It shrank its net losses from $32.5 million to $30.9 million across the same time period.

Fastly’s customers include several members of the Fortune 500, including Alaskan Airlines, Audi of America, Gannett and Ticketmaster.

The edge compute platform said it intends to use the proceeds from its IPO for general corporate purposes, working capital and repaying around $47.5 million in credit facilities, which is due in late 2021. It also said it would continue to spend on its outreach to developers and further expanding its marketing and sales programs, which would lead to the necessity of further developing its offerings in order to differentiate itself from its rivals.

“We plan to dedicate significant resources to sales and marketing programs, including various online marketing activities as well as targeted account-based advertising,” Fastly stated in its IPO filing. “This will require us to dedicate significant resources to further develop the market for our platform and differentiate our platform from competitive products and services.”

Joining a Wave of Tech IPOs

There has been a recent wave of IPO activity among tech companies in the Bay Area. Lyft (NASDAQ: LYFT) filed for an IPO last month, kicking things off by setting share prices higher than expected at $72 a share (its shares began to decline a day later, something which doesn’t bode well for its direct rival, Uber, also thinking of filing an IPO soon). Lyft has since been followed by enterprise software company PagerDuty (NYSE: PD), Pinterest(NYSE: PINS) and enterprise video conferencing company Zoom Video Communications (NASDAQ: ZM).

Cloudflare is rumored to be planning an IPO of its own sometime later this year; a move that looks more likely since it announced it had raised $150M recently. By moving first, Fastly has put itself ahead of its CDN rival to the IPO gate, meaning it won’t have to deal with any ugly hangover if Cloudflare’s own IPO goes less well than planned.

Fastly’s Rapid Ascension to Success

Fastly describes itself as an edge cloud platform, designed to help developers “deliver the best online experiences possible”. By moving “data and applications closer to your user”, Fastly says it will “help your websites and apps perform faster, safer and at global scale”.  Fastly servers over 10% of all Internet requests worldwide (around 400 billion on a daily basis), powering some of the web’s busiest sites, including media companies like The New York Times and Spotify, and eCommerce companies like Stripe and Ticketmaster. It is also popular with many open source and software developers, including GitHub, PyPi and RubyGems.

In 2017, Deloitte named Fastly as one of the Technology Fast 500 for its innovative disruption of business practices in the tech arena and dubbed it one of the fastest growing companies in the U.S.

Fastly’s edge cloud computing platform processes information at the device level and then relays information across the networks into the cloud to be stored. Fastly operates edge data centers around the world, which hold customers’ data, so that visitors to its clients’ websites can experience faster load times and receive information faster. Fastly server’s are typically geographically closer to the user than its customers’ own data centers.

Fastly has also always marked itself apart from its competitors by its approach to inclusivity and diversity. Women comprise 42% of the executive team, and 65% of its engineering leads are women, people of color or LGBTQ – or the intersection of those categories. It has also been committed from the outset to operating in a strict legal and ethical fashion. In a recent blog post, Fastly described the value of this approach: “Fastly’s values – transparency, honesty, and authenticity – have guided our growth. Our team, customers, and partners trust that we are evolving authentically. Unlike other Silicon Valley companies, we’ve maintained a concentration on the privacy and security of our customers, and do not exploit their end-user data.”

Key Features

The Fastly edge cloud platform includes its content delivery network, video & streaming, image optimization, load balancing services and cloud security.

Fastly’s cloud security services include DDoS protection, bot mitigation, and a web application firewall. The Fastly WAF uses the OWASPModSecurity Core Rule Set (CRS) along with its own ruleset.

Fastly is built on top of Varnish, an open source HTTP accelerator, which allowed the then CDN to reverse proxy, and fork from it to make it scale to the size it needed. Fastly supports open source (by giving away free Fastly services, including CDN, DDoS mitigation and Image Optimization)  and non-profit projects — including Drupal, HashiCorp, Terraform, Haskell, Python and Ruby — by providing free delivery services. The company also sponsors meetups, conferences and projects that center around open source, and subsidize the maintainer’s work on Varnish on a monthly basis.

Fastly Labs

Last year, Fastly announced the launch of Fastly Labs, a hub of “in-progress projects and experimental ideas” it wanted to share with the larger developer community in the spirit of fostering collaboration, receiving feedback, giving people the chance to leverage them themselves, and providing a window into the company’s research and development process.

Fastly Labs also enables its own internal teams “the space to let creative ideas flourish, and for our developers to experiment freely and securely”. This is done independently of the Fastly network it and its users depend on, allowing the Fastly Labs projects “to develop safely, but also more rapidly in response to our community”.

With the Fastly Labs announcement came the launch of three projects:

Terrarium – a multi-language, browser-based editor and deployment platform, which allows developers to write their own code to create applications and functions, or try a Fastly template and deploy either quickly over HTTPS (Rust is a particularly effective programming language to use);

Fiddle – a service for debugging issues or testing custom code through Fastly’s edge compute language and instantly see the outcome without having to do a server setup or impacting production service;

Insights – an optional service for Fastly customers to enable Fastly to collect metrics and monitor network performance in order to improve its services.

Staying Up to Speed

Focus on the Edge

Edge compute technology was a critical part of Fastly’s approach to content delivery from its founding. Its focus on caching and enabling its clients to push instant purges, reloading content from cache and delivering up-to-date information quickly to its users was enabled via the writing of application logic at the edge.

Edge computing at Fastly has enabled various features, such as:

  • A/B testing at the edge – enabling the speeding up of different iterations and minimizing costs by saving traffic to origin;
  • Content targeting via geolocation – allowing customers to rapidly tailor and personalize content served to users;
  • Edge computing language – giving customers a series of edge client insight tools, including geolocation and device detection
  • Edge Dictionaries, which assist in making real-time decisions from every server in the Fastly network. The edge dictionaries serve as a distributed database at the edge made up of key-value pairs; those keys act as unique identifiers for client data that its edge computing language can reference inside the client’s Fastly service;
  • Other use cases from Fastly’s clients that are leveraging its edge features and capabilities.

Embracing QUIC

Fastly is embracing QUIC, the new transport protocol for the Internet, intended to replace the most commonly used transport today, TCP. The first application for QUIC is HTTP/3, which has been designed to leverage QUIC’s features. QUIC is designed to mitigate last-mile issues of loss and latency and improve performance in particular for poorly connected users in remote parts of the world.

QUIC is currently undergoing a standardization process at the Internet Engineering Task Force (IETF) and Fastly’s engineering team includes one of the IETF QUIC working group’s chairs and an editor of the core document. Fastly is also working on quicly, its own custom implementation of the new protocol.

Fastly is also continuing to open source its projects, including:

Lucet

Lucet, Fastly’s native WebAssembly compiler and runtime, was open sourced just last month. WebAssembly has been shipping in the four major browsers since 2017; it is a technology built to enable web browsers to execute programs safely at near-native speeds. Fastly built Lucet to take WebAssembly beyond the browser to work on Fastly’s edge cloud. Lucet is the engine behind Terrarium, and it will soon be made available on Fastly’s edge cloud. It has been designed to execute on each request that Fastly handles. This has entailed creating a WebAssembly instance for every single request that Fastly receives, which necessitates a significantly lower runtime footprint than is possible with a browser JavaScript engine. Lucet is capable of instantiating WebAssembly modules in fewer than 50 microseconds, using only a few kilobytes of memory overhead. This allows Fastly’s edge cloud to execute tens of thousands of WebAssembly programs at the same time in the same process without compromising security.

Conclusion

According to Crunchbase, Fastly has raised $219 million in financing from investors. The edge compute platform raised its last round of financing around nine months ago, a Series F $40 million investment, which Fastly said would be the last one before a public offering.

Fastly has grown at an astonishing rate over the last eight years, tripling its customer base over the past three alone. It had a $100 million revenue run rate in 2017 and wants to reach $500 million.

Buzz around Fastly’s filing for an IPO has been positive. “Investors have jumped back into growth and are receptive to companies with fast growth and high margins like Fastly,” said Matthew Kennedy, a senior IPO market strategist at Renaissance Capital.

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