Google GOOGL -1.68%, Microsoft MSFT -2.33%, Qualcomm QCOM -1.89% and Baidu have all joined forces in a strategic investment in CloudFlare. The five-year-old security startup announced Tuesday that the four Internet giants had all participated in Cloudflare’s latest $110 million funding round led by Fidelity.
The strategic investment is evidence of CloudFlare’s vision to expand globally while honing in on mobile and enterprise. Today’s funding announced comes just over a week after CloudFlare unveiled a new partnership with Baidu to bring its security services to China’s 650 million Internet users. With more than four million customers in 30 countries, CloudFlare says it processes 5% of all Internet requests each month and mitigated more than 200 billion cyber attacks in August alone.
CloudFlare CEO Matthew Prince is far more focused on the strategic partnerships the funding round created than the cash it generated—less critical for the already-profitable CloudFlare. Prince says CloudFlare still has $50 million from its Series C in the bank, while this round brings the startup’s total investment to $182 million.
Instead, Prince says the partnerships with Google, Qualcomm, Microsoft and Baidu stemmed an attempt to answer five big questions CloudFlare has been asking itself as it contemplates its future growth: 1) What’s your China strategy? 2) What’s your mobile strategy? 3) How will you sell to big enterprises? 4) How will you work with Google? 5) Will the public market take you serious seriously?
Investments from four large public companies provides a clear answer to the last question. After working with Cloudflare on the partnership announced last week, the Chinese search giant approached CloudFlare about an investment. The term sheet’s numbers were so high Prince says he blushed when he first saw it. Encouraged by Baidu’s interest, CloudFlare turned to key U.S. companies it felt would help the startup expand in key areas. Qualcomm was CloudFlare’s answer to chips and mobile, while Microsoft held the key to enterprise customers. By partnering with Google, CloudFlare is able to build on its existing partnership with the search giant.
Finally, CloudFlare’s partnership with and investment from Baidu has allowed the startup to enter the exploding Chinese market. “China is a complicated market,” Prince says, noting that the deal with Baidu took four years to bring to fruition.
Now, the startup has 17 data centers in China and hopes to grow that number to 50 by next year. In just one day of operation, CloudFlare says its already saved Chinese users 243 years of time that might have been spent waiting for content to load.
“CloudFlare offers a differentiated technology that fundamentally improves the performance and security of any Internet application,” said Baidu President Ya-Qin Zhang. “Our partnership is the first step towards extending the accessibility of this innovative technology across Baidu’s network in China.”
Google and Baidu don’t often invest together—the other prominent example of a joint investment between the two search giants is Uber. “That’s not terrible company to be in,” says Prince with a laugh. Uber is facing its own struggles competing with Chinese ride-hailing company Didi Kuaidi for dominance of the Chinese market.
According to Prince, CloudFlare’s China strategy is built on trust. CloudFlare shares its code and works closely with Baidu, whose engineers operate CloudFlare’s data centers in China. “Everyone screws up China,” Prince says. “There’s no way a U.S.-based tech company can navigate the challenges alone.”
Prince says CloudFlare’s competitive edge is not in the code itself but in how the data running through its system constantly makes the network smarter and better able to fight cyber attacks. Giving Baidu control over its Chinese data centers has another advantage at a time when China-U.S. tensions over cybersecurity are running high. Keeping its Chinese data separate from the rest of CloudFlare’s data assuages concerns Chinese customers might have about the United States snooping on their data as well as concerns customers outside China might have about giving China access to CloudFlare’s intellectual property.
With Baidu and the other three strategic investors, CloudFlare is seeking to bring together all the biggest individual players in cloud services and offer all their customers endpoint protection as a service. In the cloud space, Prince compares Amazon to Apple AAPL +0.88% because of the company’s desire to provide all services for customers under a single umbrella.
“The world is looking for their Android,” Prince says. “We’re the Android of cloud services.”
Source: Forbes Article