Website-Services Provider CloudFlare Plans IPO in 2017, CEO Says

Website-services provider CloudFlare Inc. has been speaking to bankers and plans to go public in 2017, said Chief Executive Officer Matthew Prince.

The company, which speeds global Web traffic and provides security services for clients, is valued at more than $1 billion, Prince said in an interview Tuesday at the South by Southwest Interactive conference in Austin, Texas. Sales have grown at a 350 percent compounded annual rate for the last three years, and the company could reach an annual run rate of $100 million by year-end, he said.

The San Francisco-based company turned profitable seven months ago, Prince said. CloudFlare has a gross profit margin of 75 percent and it could reach as high as 90 percent by the time the company goes public, he said.

CloudFlare has raised $72 million from Venrock Associates, Pelion Venture Partners, New Enterprise Associates and Union Square Ventures, he said.

“There’s not a rush to go public. But we are definitely on a trajectory that’s inevitable,” Prince said.

The company’s revenue and market value at its initial public offering could be comparable with those of Workday Inc. and Salesforce Inc. when they went public because CloudFlare’s revenue growth is similar, Prince said. Workday’s shares jumped 74 percent on the day of its 2012 IPO, giving it a market value of $7.8 billion. Workday had revenue of $62.7 million for its most-recent quarter when it went public.

CloudFlare allows clients to subscribe to its services, avoiding the need to buy servers and other equipment to distribute Web traffic globally. It has been adding 5,000 customers a day, Prince said. The company’s bigger clients include Goldman Sachs Group Inc. and Bank of America Corp., Prince said. CloudFlare competes with companies including Amazon Inc., Cisco Systems Inc. and Akamai Technologies Inc.

In preparation for an IPO, CloudFlare has begun holding quarterly earnings calls, he said.

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