Cloudflare, Inc. (NET) Earnings Call Transcript & Summary

Good morning. Please welcome Managing Director and software research analyst, RBC Capital Markets, Matt Hedberg; and Co-Founder and Chief Operating Officer of Cloudflare, Michelle Zatlyn.

Thank you.

Thank you, Michelle. All right. Here we are.

Here we are. Coffee in hand.

Coffee in hand, just coffee with Michelle and Matt, day 2 of the tech conference. I spoke with a lot of you yesterday. This is our first time back in person in 2 years, and I -- virtual is fun, and virtual is convenient. But this is -- it's way better, just being able to see people interact. And so I appreciate all of you for attending this conference, wouldn't be a conference without all of you, and especially Michelle and all the companies that are here with us. We are truly grateful and really appreciate your time and effort and attending. So from all of us in RBC, thank you. And Michelle, thank you as well.

Well, thanks so much for having me. I'm thrilled to be here, and it's so great to meet so many folks here and look forward to meeting more of you. And always great to see you, Matt.

Thank you. Yes, Michelle and I have known each other for a long time, and so it's always fun to kind of reflect back on your career and whatnot. And so we'll try to get into a wide range of topics today, and hopefully you can learn a thing or 2 and hopefully spark further conversation with us and with Michelle. So maybe, Michelle, for those of us out here that aren't as maybe as familiar about your past, maybe just a little bit of your background. I think we're tethered -- although I'm not Canadian, I have a kindred spirit with you from that regard. So maybe a little bit about your past, what led you to cofound Cloudflare in 2009, I believe it was? Yes.

Sure. So I am Canadian. I'm proudly Canadian, although I now live in San Francisco. And I grew up in the prairies in Canada from a really close-knit family. I have great parents. And they always told my sisters and I, "You do really well at school and go do whatever you want. You just can't stay here." And so many of you are parents, so just imagine your parents telling you that. And so I worked very hard at school, got good grades. Anyhow. So I found myself in Montreal, in Toronto, a bunch of different operating roles. I did a lot of different things. And for the longest time, I thought I wanted to be a doctor. I wanted to study like a science degree, a chemistry degree, and I really thought I wanted to be a doctor. And everything -- all the decisions I lined up in my life was to be a doctor. And at some point I realized, actually, I don't know if I want to be a doctor. And I kind of started to be exposed to all these different things. And actually, that's how I ended up falling in love with technology. And what I love about technology was some of the things why I wanted to be in the medical profession is I love the idea of being able to help people. And I always thought that medicine was the way to do that, and it absolutely is the way to do that. But it turns out, in technology, you can build things that help people at real scale around the world. And that's what I really fell in love with. And so fast forward, I had done a lot of different operating roles in Canada, and I was going to do my MBA. Except at this point, I realized I was not going to be a doctor and I wanted to pursue this career in business and technology. And I said like, okay, I should go round out my skill set. Let's get an MBA. I went to Harvard Business School in Boston. And it was there that I met my now business partner, Matthew Prince, and it was there that we started to work on the idea for Cloudflare. It was actually a school project at Harvard Business School. And at the end of our second year second semester, we entered a business plan competition with this idea and this business, and we ended up winning. And I still remember to this day all of our section mates were cheering us on. And the next thing I knew, we were packing our things in a U-Haul, and Matthew and his mother drove the U-Haul from Boston to San Francisco. That's a really far drive, really far drive with your mom in a U-Haul. And we showed up in San Francisco in the summer of '09 saying, "Hey, can we take this idea and make it happen?" And we did a bunch of things for about a year. And then September 27, 2010, Cloudflare launched to the world, and we just celebrated our 12th birthday. And now I'm on stage at the RBC Capital Markets Conference.

It's an amazing journey. We're going to go on a little bit of a ride today. We're going to be covering a lot of topics. Thank you for that. I think you have such an interesting background, and you shared a little bit of that now.

Before we get into some more granular questions, one of the questions that I get all the time is what makes Cloudflare so special? Because I think there's still -- you've been a public company now for a number of years, and you've been around for 12 years as a company. What is -- because I get asked this every day from investors, what is the secret sauce, what makes Cloudflare so unique and so different than a lot of other technology companies today?

Okay. Well, maybe just before I answer that question, I'll just give a quick overview how I would describe Cloudflare and then what makes it so unique. And so Cloudflare helps anything connected to the Internet. So if you're a website, an application, an API, we help make sure -- we provide cybersecurity services and performance reliability services. So it's like the world's largest digital bouncer meets best personal trainer for anything online. And what's interesting is Internet is only about 30 years old and a lot of things are online. And actually, way more things are online today than even 3 years ago because of the pandemic. And that's what Cloudflare does. We run the network that helps make everything faster, safer and more reliable. And so at first, you're like, why does that -- a, is there even a need for this? The answer is yes. Whether you are -- if you have a high school student at home and they're into coding and they're putting their project online for some school project, if it doesn't have a digital bounce around it, it will get attack. It just will. That's just how the Internet works because security was never built into the underlying foundations of the Internet. Now fast forward to a company like RBC or any Fortune 1000 company, they also have to make sure they're protected fast and reliable. It's a very universal problem, from the nonprofit up to the government up to the Fortune 1000. And so it's a universal need. And it's interesting. Cloudflare has built a service that services that entire market. So we started, when we showed up in the Bay Area, back to our U-Haul story, where we saw this opportunity. It was '09 when we were working on this. We saw that big companies were buying servers from companies like Sun and HP, and there was this company called AWS that was kind of growing. And people were like, "Oh, no, that's a fad. No company will ever actually use AWS." Well, that turned out to be a wrong thesis. So we saw this happening on the storage compute side. Then on the software side, there were companies like Salesforce that were growing crazy. They had turned these software applications into a SaaS application. And so we said, hey, Cisco is what's giving a lot of this reliability to organizations. Networking as a service is going to become a thing. It's like the part of the stack to make the Internet work. And that's what we saw, and that's really today what we do. And so why us, what makes us special? Or how do we do what we do? It's not one silver bullet, which actually should make our shareholders feel really good and our employees because it's not one silver bullet. It's not like one thing we did better and if you go and find a better way to do that, you could disrupt Cloudflare. It's not like that. I would look to 3 things that make us very different and that they all kind of are a flywheel in each other. The first is how we're architected. So we do have a technical and architectural difference, and we made some very specific decisions way back in like very early on that continues to help us sustain our momentum today. And the way it works is, today, Cloudflare runs in 100 countries. We're in 275 cities around the world. And when I say that, we actually buy hardware. So we have a CapEx expense, if you look at our balance sheet, where we're buying routers, switches and servers. And they are in 100 countries, 275 cities around the world. That's important because we're very close to where people, all of us, are connecting online. And that's how we become this digital bouncer and personal trainer. We got to be close to where people, the eyeballs, are connecting to the Internet, and we are very close. But the way we architected this solution is that every single server that we run runs every single suite of our services. And we have over 30 services that we offer. We do a lot of different things. People say, "Oh, you're a DDoS vendor, a WAF, a Zero Trust. You do compute. You do CDN." And the answer is yes, yes, yes, yes, yes and 25 other things. Like we do a lot of things because we're this platform that runs at this edge. But architecturally, we made a decision that every one of our servers runs every single one of our services. And the reason why that matters is it's a much easier scaling problem than if we'd only said, okay, this part of our network is only doing the security, and this part of our network is doing reliability, and this part of our network is doing performance. Well, when a customer comes, how do you forecast demand? How do you do all these sorts of things? We don't have that problem. We have a really intelligent network. We have a really interesting code we've run, and we call this is our serverless architecture that we've developed. But we use it ourselves to scale our network. And at the end of the day, our network is one of our core differentiations. And so that is a decision we made years ago. It's proved to be very useful. It allows us to add more services, offering more value to our customers and with a very linear sort of scaling challenge, which is much easier than an exponential scaling challenge. So the technical and the architecture is the differentiation. So that's one smart thing we've done. The next thing is we started by offering a suite of application services that help make applications fast and safe. And so websites, apps, APIs, that's where we started. But from day 1, we knew we were going to add to that. And so over time, what we've done is we've been able to add additional services so we can build a platform so customers can get more services from the same provider. And because of the architectural decisions we made, it's kind of when we add a new service, it doesn't really have a marginal cost to us. And so we can all [ sell ] bundle suite of services to our customers, and it's not -- instead of saying, okay, well, if you go by this vendor, it's this much and this vendor, it's this much. You can put -- 100,000 plus 100,000 together, you make 200,000. I can get both for Cloudflare, and I can get both for less. Plus, it's easier to operate, and it's faster. Well, that's a really good value proposition. And so that integrated platform where we can add additional services and expand our portfolio is really powerful. If we only did one thing, we wouldn't be able to grow for a long time, and it wouldn't be a very exciting thing. We want to be able to really leverage this global network. We have this global network that's everywhere, that's hard to build. Now it has to do a lot, and so you have to be able to expand the number of services. And so if you look at our innovation -- if you don't believe me, follow our blog. We push things every single day. It's amazing. We have these innovation weeks. Right now, we're in the middle of an innovation week for developer services, one of our suite of things that we offer on this integrated platform. And it's just we're constantly adding to the suite that we offer our customers. And so you go to our customers and they're like -- they have something -- they have a problem they need solved and they've already bought into our network. It's great. We'll put it in our road map, and we'll ship it for you. And we have a really good muscle around innovation and shipping new things. And that's different than most technology or software companies. They don't -- shipping is something new. It's really hard. We have that muscle built in this rate of innovation. So that's the second thing. And the third thing that kind of ties back to, at the end of the day, companies are groups of people. You got to get really great people to come work for you, and we have really great people that work at Cloudflare. One, our mission is to help build a better Internet. People are proud to work on a company that wants to help make the Internet better. Internet is 30 years old. It's not going away. It's only going to become more important. Making it better is really important. This layer of cybersecurity that I mentioned, it was never -- the Internet was never designed with security baked in from the beginning, and we're going and layering that in. We're baking it in. Same with performance, same with reliability, same with a privacy. A lot of the privacy things, we're layering that in so that we can make a more private Internet for all of us. I mean if you're looking for an engineer who wants to figure out what they're going to do next and they've been looking for something interesting to do, we work at huge scale and then you get to solve hard problems, it becomes this place where we can attract really great people to work at Cloudflare to solve these really hard problems and it becomes this flywheel. And when we were a start-up, and we're not anymore, but when we were, it's really hard to get good people to get work for you because they could go work at any other company. It's like why would I choose to go work for that start-up that most fail? And just because we've always worked at scale, we've been able to attract the talent because of our mission and ambition and because we continue to execute on it. I think the people is a really big aspect to what we've been able to do. And if you look, we just have long tenure, lots of stability. People stay for a long period of time. And that just drives all of -- this whole flywheel of what makes it not something you can replicate overnight. So those are the 3 things. It's kind of a long answer. But again, it's better than it's not one -- if you could go do a faster widget that the idea is gone, it's -- no, it's a series of smart decisions.

So we're going to double-click on a few of those things in a minute here. But I think one of the things that maybe looking out more from a macro perspective. You guys have been calling out weakness, I think you and Matthew, since about Q1 of this year, correct? Now we've started to see a lot of software companies and tech companies in general talk about weakness. I guess from your perspective, what's changed from a macro perspective now and how do we cut through that?

So it's interesting. I was saying that we service a lot of part of the market. So we have a big pay-as-you-go business where anybody can come and sign up and then they put a credit card in and they start to use our service. And then we have an inside sales team, a field sales team. We service kind of the mid-market, commercial, enterprise. So we span a wide portion of customer segments. And what's interesting, because of that, some of our sales cycles are really short. In the mid-market, it's like a really short sales cycle. We are closing these deals in a very short amount of time. And so we did get early indication that there was macroeconomics, which is why we were starting to talk about it earlier this year. We could see it. We could see it in the pipeline, deals slowing down. And so that's continued. I mean I don't -- I feel like at this point, most leaders have said kind of what's there to be said about this. But every business is reevaluating their spend. And you, as a partner to them, need to be in the must-have category, not nice-to-have category. And so luckily for Cloudflare, many of our services are in the must-have category. Cybersecurity is not really a nice-to-have. It's a must-have. Even last night, David, the CIO of RBC, was talking about where you're going to spend more next year, cybersecurity, because you can't be exposed and there are real threats online. And so again, that's [ hard for an ] Internet, but we have a good solution to help solve these problems. Having said that, all the deal cycles are slowing down because even though if you're a must-have, companies are checking 5 times before they're committing. The budget owner has to go back to the CFO many times to make sure, "Are we sure? Are we sure? Are sure? Okay. Good." So instead of one call, there's just like a little bit of confusion internally at large organizations of saying, "Are we really ready to spend? Can we really commit on making this investment now?" And so I would say it's kind of like measure 4 times, cut once. Whereas before, it was measure once, cut once, or measure maybe half -- quickly measure and then cut once, which is really very fast. And so things have slowed down and really -- but we feel fortunate that we have services that are must-haves, not nice-to-haves. And so working with our customers to be on the journey. The other thing that's interesting is in an environment where things are slowing down, how do you derisk some of these decisions? And one way to derisk is saying, okay, well, you don't have to rip and replace every single thing in your infrastructure. It's how do you make it additive? How do you make it a migration path? These are sorts of things that organizations are looking for. They want kind of an on-ramp that makes sense where it derisks this big financial decision but also this big integration decision for them. And from a service like Cloudflare where you don't have to adopt the whole platform on day 1, it becomes a real superpower where it's like, yes, adopt this service, start to get used to it, see and then over time, you can adopt more. And by the way, when you adopt more, it's a click in the dashboard because you're already running on our network and you get all the services. It's not a new implementation. That's very appealing for organizations.

Yes, I think -- we had a dinner last night, and I think one of the most overused terms out there, at least in software, is platform. Everybody is a platform. But I think like you and I were talking, when you see it, you know it. You know what true platforms are. And I guess even though there are lengthening sales cycles or additional deal scrutiny, does that ability to truly consolidate spend, as you referred to, is that resonating even more so today than if things were like great?

Absolutely. Absolutely. I mean I'm sure many of you -- yes, the answer is absolutely. Organizations are looking for vendor -- strategic partners who can help them consolidate their spend. They don't want 70, 80, 100 vendors set up. They were saying, "Hey, how do we reduce the number of vendors? How do we do more? How do we consolidate our cost?" Absolutely, we hear that all the time. We've had -- the answer is absolutely.

Yes. I'm going to come back to some product questions, but I wanted to pivot just briefly something that's super relevant and important to a lot of us, the topic of D&I. And you've noted, as a management team, that diversity, inclusion and equity are not just nice-to-haves. They're essential to the success of Cloudflare. And you talked about that earlier about attracting some of the best talent. Could you talk about what that truly means to Cloudflare in terms of who you're hiring, that culture internally that Cloudflare is developing and how that is a competitive advantage for you?

Definitely. Well, more diverse teams drive better business results and are a better place to work, frankly, because -- that's what all the research shows. And in my experience, that's what I -- what we've experienced, too. And so we really care about this. We care a lot about having a diverse team at Cloudflare. That means both women in our organization as well as underrepresented minorities. And there's lots of different things that we do around this. We talk about it internally. We have set internal goals. We have dashboards that managers have so they can see how they are going compared to the organization and their peers. And so it's something that we really care about and we believe in at Cloudflare, and we invest in it. And I think that it's been something that I care a lot about and many leaders at Cloudflare care a lot about, including Matthew Prince. And so that's point one. I think point two is just as an industry, we have a lot of work to do. I mean there's lots of different hats that I can wear. That could be as a technology founder. That's like one hat that I wear. I mean we need way more women founders. Like it just would be great for society to have more women founders. We have so many, but we need more. There are more men. We need more underrepresented minorities, absolutely. From an enterprise standpoint, we need more women. Like there's just -- like you kind of think there are certain parts of tech that has more men than women than others. And so there's a part where we need more in this industry as well, as well as underrepresented minorities. And so I think that I'm really proud of the role Cloudflare has played. I know we have women and underrepresented minorities like come work at Cloudflare because they feel like they belong. They can do great work. They can be part of a winning team. And we are a better company [ before it ], like which is amazing, and we need more -- as an industry, we need to rise all tides. And so we talk about it. We love -- we talk about it, and we try to show that it's possible. And at the end of the day, like we need to win as a business to show that you really do drive better business results and with a more diverse team to help that flywheel because it's a long arc. That is not a 5-year project. That's just a long arc in the industry. What's really interesting, in the last 2 months, I spent a lot of time with our customers and our team. I love spending time with our customers. And we had a very large Fortune 50 company come into our office, and an oil and gas company came in. And they had heard internally from their team that Cloudflare was one of the companies that they should get to know better. So they were here. We were chatting with them. And at the end of the conversation, they had spent a whole week in Silicon Valley, they said -- we were on the last day of their tour. They said, "Can I tell you what really stands out about you? I said okay. They're like, "Not only super exciting what you're doing, you do so many different things, but you have the most diverse team we've met with this week." And it really shows, and that matters to us. And I've actually had that happen many, many times in the last couple -- another organization said the exact same thing 3 weeks before that. And so it is different than some of our peers, and we're proud of it. And I think it shows up a lot in our culture, too. I was calling somebody in our London office, a gentleman, this week and giving him some good news. It was an award or good news that he had earned and received. And his name is Mark, and he said, "Michelle, I got to just tell you, I've been in this industry a very, very long time and we are just different, utterly and completely different than any other company and I can't tell you how proud I am about that." And so I think that, that -- I don't know if there's just a lot of it in there, but it's really important and we need more. And so if you know great women, if they're looking for a role, send them to Cloudflare or hire them yourselves. We just need way more women to participate and underrepresented minorities to participate.

I think a lot of people talk about D&I, but it's great to see that there's -- it works. There's a true competitive advantage that you guys are seeing, and that's great.

So just like one other anecdote on this point of view is a few years ago, it doesn't just happen. You got to be deliberate about it. And I think that for -- there was a period of time where we thought it would just happen, especially with a woman founder. We just -- kind of we had women on the team. We thought it would just kind of naturally happen. It turns out, that doesn't work. And so a years ago, we realized, hey, this is not going in the right direction. It's kind of flat. Like what's going on? We got to -- like we want it to be growing. And we started to talk about it more in our leadership team, and it was interesting. There were some people in our leadership team, some leaders, some senior executives, that had a really hard time talking about it. They didn't want to put their foot in their mouth. That's what our Chief People Officer would describe it. It's like they're worried they were going to offend somebody. And so it became this thing where it's like the more we talk about it and say, hey, yes, we don't have enough women on this team. Let's go help find -- like create diversity. But that's a -- you can say it in a way that is exciting, like that is positive and we kind of all got better as a team and an organization. And so the point is it doesn't just happen. You got to work at it, and you got to invest in it. And then on Monday, I was -- or last Monday, I was meeting a new person who joined our team. And she could go anywhere and she's like, "I came to work here because there are so many women leaders." And she could go anywhere. And I think it just becomes this something you build on -- and so you put it in and over time, you can build on top of it, which is like every single business leader -- every single business lesson that exists. It's like you put the time in, and you kind of reap the rewards over time.

I'm going to ask one company-specific question. One of the questions that I get all the time, as you do as well, is Workers. And you and I -- Michelle and I had the opportunity to spend some time in Canada right before the pandemic started. And I remember sitting in those meetings and you're talking about some of the use cases for Workers. And that was, well, over 2 years ago now. Refresh us on like what are people -- like let alone niche applications, but what are Fortune 100 companies -- how are they leveraging Workers today to change their business trajectory?

Okay. We love Workers. Super exciting part of our business. So back to our network that's in 100 countries, 275 cities, at each of those cities that we're doing the personal -- like the digital bouncing and the personal training really close to where people are connecting to -- devices are connecting to the Internet, at those same locations, we can run some compute and do some storage. And so if you put anything on the Internet, you've got to pick a server. So some people have on-premise stuff. Most people are using the cloud to this day. They spend up in AWS instance or Microsoft Azure instance or GCP instance. But the premise of Workers is, it's called the serverless architecture, how do you run code in the network? So how do you just run the storage compute at each of Cloudflare's 275 cities around the world? And we do this today. We've been doing it for years. It's so cool. It's amazing because now you don't have to go back to your back end wherever it's sitting because you got -- server sits somewhere. Normally, they sit somewhere physically. And so the fact that all of a sudden your code can run in 275 cities, it opens up a lot of possibilities, which is exciting in innovation. And it's been great to see what people are doing with it, back to your point. And so I was saying that I was actually just in Toronto. My last trip there was with you, Matt, but then I just went back. We have a big team there. We have a lot of customers. I was just there in September, and I had a day lined up to visit customers. And it was a Tuesday night I got there, and I was like, "Oh, rainy night in Toronto," in Twitter. And an entrepreneur I met a long time ago emailed me and say, "Hey, I saw your Tweet. Do you have any time to meet while you're in town?" I said, "Well, actually, I got a really full day." But it was 10:30 at night and I said, "Do you want to -- if you can, I can meet tomorrow morning at 9 at Yonge [ and Queen's ]." And he said, "I'll be there." Love entrepreneurs. So he shows up the next morning at 9:00 a.m. and/or 9:15 and we're chatting. He was a YC, Y Combinator, founder. He has 2 companies now, and he moved back to Toronto after living in the Valley for a little bit. And both of his companies were built 100% using Cloudflare Workers. Super cool. Even better, I was telling the story to someone at dinner last night, that he came with his list of requests from his engineers. Here's all the things they want to make it better. I was like, this is amazing. Like I love that. And so he built his whole company on this, 2 whole companies, and I've met many entrepreneurs since who have done the same thing where they're just building -- they're not using AWS or GCP. They're just using Cloudflare Workers as their tech stack to build these companies, which is interesting. And then during -- we celebrate our birthday every September. September 27 is our birthday. So during our birthday week, we launched something called the Workers Launchpad where it was -- if you're a company building using Workers early stage, we've got all these venture capitalists together to help look at those opportunities. And so it's been amazing to see all of these entrepreneurs from around the world who have built these ideas using Workers. So that's like the early of the funnel, top of the funnel, the next crazy ideas that we'll all be sitting and listening to in 10 years because that's how long ideas take. But it's interesting that these founders and developers are picking our compute platform. So that's one. It's not just the entrepreneurs though. And so a lot of the large organizations are using Workers to solve problems that used to be really, really hard that their teams used to like bang their heads against. And so there's one retailer and e-commerce site that's coming up Black Friday, really busy time of the year. And every single year, they have these waiting room problems where they're selling PlayStations or whatever it is and things crash. And so because they have all this distributed traffic, it's a real problem. And so they're using Workers to build -- they built a waiting room using it, their own application to be a waiting room. And there are vendors who sell waiting rooms, including us. But this team was technical. They want to build it their way for -- their special purpose-built way. And so they decided to build it their own using Workers. And again, the idea is it's distributed all across the U.S., North America, Latin America, their global business, and they're feeling really good. And that's an interesting like architectural thing that they're solving. There's another Fortune 500 company where they want to be able to inspect the packet more for other cybersecurity things. And so the compute can open up the packet around the edge. There's no latency. To see things that used to be really hard, easier. And then the last one that's not obvious that is really interesting is because the Internet is only 30 years old, it's amazing. It's enabled so many different things. But all of a sudden, it's changing economies and societies. And there's a lot of -- and there's some risks to it, too. And so all these countries are waking up feeling like, "Oh my God, how are we going to have the policy in place for the Internet?" And there's lots of things around data privacy. There's lots of pieces. It's a huge whole realm of what's going on in the policy landscape. And so what's happened is that there's a lot of data privacy laws locally in countries around the world. Something like over 80 countries have passed some sort of data privacy law. Okay. Now imagine you're an organization that has to comply with all these laws. And some of the fines are hefty, by the way. It's really hard. How do you do that? If you have users in Spain, France, U.K., how do you comply with the laws in those 3 countries that are different? Some similarity, but different. And so what's interesting is Cloudflare is a global network. We sit in 275 cities, 100 countries. We can help you comply with the data localization laws using Workers. We can say your data won't move outside of these countries and it's because we've got the compute layer sitting on this network that's very flexible and the network is everywhere. And so all of a sudden, you can take this thing that's very hard for a business to have to comply with and say, "Hey, we can offer a solution using our network." And so we see a lot of organizations adopting Workers to meet their data localization needs, which is great, which is great, which means continued innovation in those countries because what will happen otherwise is a lot of companies would pull out of the country. They'd say it's not worth it. But all of a sudden -- or they'd have to invest a lot. And so it's a way of -- it's a really elegant solution, and that's a really interesting use case that we see over and over again around the world.

Yes, every time we're together, there's always another story of how a company is leveraging that to do some stuff that I think everybody just thinks AWS or some of the hyperscalers, but the reality is, is there's a lot of really interesting innovation being built on Workers. I wanted to ask you about M&A. Now you guys have not -- you guys have been an organically built company for the most part. But you see a lot of tech companies, and there's a lot of -- we've seen a lot of companies have been built over the years. What is your perspective just on the tech landscape? I mean do you think M&A will pick up? Do you think -- and I'm not necessarily suggesting for Cloudflare, but just in general, do you think we need more consolidation as an industry? Who wins, who loses? And kind of how do you think that plays out?

Yes, I think that's a better question for your investment banking folks. Kirk, Owen, where are you? What do you think? It's interesting. So I've kind of gone through that journey as a founder, and now we're at different stages as the business and we've become the acquirer for different organizations. So it's interesting how your role shifts when you're a successful tech entrepreneur. It's super interesting. A couple of us were joking before for this. I mean it got really frothy. I mean last year was kind of -- I mean, everybody was a genius every day. I mean everyone is making a lot of money every day. Crypto, everything was up and to the right every day. I mean just everyone was a genius and very frothy, and I think last year was especially frothy. But really, I think if you look back, the last 10 years has been mostly a lot of good times, and there was maybe some hard times that changed really quickly back to good times. And that's been fun. That's been fun. There's just been -- when we started Cloudflare, again, we launched in 2010. A couple of years later, Aileen Lee, she's a venture capitalist down in the Valley, put some research out saying how -- and she was the one who coined the term unicorn when a company was worth $1 billion. I don't know if you remember that. Everyone uses unicorn, left, right and center. It was Aileen Lee's research. At the time, the research showed that there's basically 4 to 8 unicorns created every year. And at that point, we kind of looked -- we were unicorn, a private company. We were one of them. And it kind of made sense. In our class, there were a bunch of like these unicorns that have been created. But there was only like 4 -- like 8 to 12 a year [ was what it was ]. Sorry, I said 4 to 8, but it was 8 to 12 a year. I think last year, there were 383 tech unicorns. So just like -- so it went from 10 to 380 in a decade in a year, which is -- I mean, I think that just kind of speaks to the rate of innovation in tech and the groundswell on the Internet, and it's like here to stay. Not all of those companies are here to stay, for sure not. But like it's just like it's not slowing down. It's only going to continue to accelerate and get richer. And so the opportunity is to spot any opportunities that are going to be sustained and stick around and the ones that are fads. And that's hard. It's hard to predict the future. It's really hard to predict the future. It's hard to predict the future in technology as well. Same with macroeconomics, it's just hard to predict the future. But I do believe that tech is here, and it's accelerating. And so that just creates a lot of opportunities, and there's a lot of things that get started. And again, I know a lot of the founders who -- where it's easier to start something when you can get your hands around all the sides of it. It's so much easier -- it's easier to answer the question of what do you do when you can say, well, I do this, this, this and it's like all neatly in a bow. I can almost promise you, when a company can answer like that, they're not a very good stand-alone company because the opportunity is very [ bounded ]. This is a word that [ Kim ] told me last night. It's like it's true. It's just like you kind of see everything. And so a lot of people start companies that are very -- you can understand all the pieces of it. And the really -- the best investments are ones that expand over time, where the opportunities get wide over time, don't narrow. And so I do think there'll be a lot of M&A in the sense of I just think there's a lot of people who started a company and they are pretty narrow opportunities and that they belong better in a suite of opportunities. And so I do think that that's something that we'll see. And I think there'll be some bunch of zombie companies, too, that just kind of -- those are the ones that never get talked about where they are definitely not winners, but they're not losers and they just kind of are there as a zombie traversing the night.

Yes, that's the apocalypse. Yes, well, I think -- yes, that's something that I think -- we're asked that a lot. I appreciate that perspective. We talked about D&I a little bit ago. But ESG is another important topic, and we've been chatting about this for a long time with you. And it's important for Cloudflare. You've talked about Cloudflare impact. And I think one of the questions that I think a lot of investors struggle with is how much of it is lip service versus how much of it actually contributes to growth and sustainability of a company and as an industry? And I think your comments on D&I are interesting because I think it's building a better culture. But talk about that from an ESG lens and what does impact mean for Cloudflare?

So part of the reason why I do these conversations is that so you can all get to know Matthew, who came last year, and myself a little bit better because we're the leaders at the helm of Cloudflare. You kind of got to believe in the leaders and whatnot. And it's interesting, we're very long-term focused. We're a very ambitious company to -- like we want to build an iconic company that is around for a very long time. Like that is our goal, undeniably, at Cloudflare. And our mission is to help build a better Internet. And again, we strongly believe the Internet is around for the long time and only going to be more important. And if the Internet becomes more important, a company like Cloudflare plays a really important role to making that happen. So then it's like what are your responsibilities then if that's what your grand plan is? That is our master plan. And so you got to take that seriously. How you treat the people that work at your company matter because, again, companies are only groups of people rowing in the same direction. So how do they feel? Do they stay? Like it matters a lot. Your customers, they matter, too. Like do they like doing business with you? Do they want to do business with you? Are they rooting for your success? How we treat suppliers, and then it's like your community, right? And I think one version of community is not just like your little physical community, but the community that we operate in. And for us, that has a lot to do with the Internet and how we can do that in a more sustainable way, and we feel like stewardship over that because it's so critical to our success. And so we always want to be like how can we be a good actor in this ecosystem because, again, it's a long arc to what we're doing. We're a very long-term focused company. And when you have a mission like help build a better Internet, people work for us because they want to be part of that. They stay because of that. They show up every single day, doing their best to make the Internet a better place. And like we're really proud about that. And if you just didn't think about ESG at all, we would never be able to look our face in -- like ourselves in the mirror because it just would be kind of incongruent with this overall arc of what we're doing on -- doing. And so it's where are the places that we can help that we're uniquely well positioned to move the conversation forward? And we are a very technical company. We are such geeks at heart, which I love. We build infrastructure for the Internet. It's really important. But like every second, like a lot of requests go through our network that we're making faster, safer, more reliable. Super technical, super geeky. And so some of the things on the ESG front that we've done that align with the UN sustainability goals are around how do you make the Internet more green. There's actually a lot of wasted resources. It grew really quickly over 30 years. How do you make it more green? And one of the ways you make it more green is, well, if we can help decrease the amount of waste requests on the Internet, you save a lot of computing resources, which means you save power, which means you save this. It's great. When Google goes and crawls the web to build -- everyone here probably uses Google how many times a day to look something up, right? Where is this restaurant? Where is that? The way that Google search works is that they're crawling the web. They're looking for things that have changed on the Internet. Well, now because we have about 20% of the web that is a Cloudflare customer, we can just push to Google, here's what's changed. You don't have to go look for it. We'll tell you. It's more efficient versus like just roaming the streets of New York looking for a sign that's changed. We'll just tell you. Based on driving by it every day, this has changed. And so we can make it more efficient. And so we do a lot of things related to the Internet and how it can be more sustainable, more green because, again, it's this really important resource. It's been one of the best inventions of our lifetime. But you got to keep doing it in a way where we keep pushing the conversations forward, new standards, and we're proud of that. And we are one of the players in the ecosystem that is uniquely well positioned to really care about it and to do something about it. And then in turn, people want to work for us. Customers want to do business with us. Suppliers and customers want to do business with us because we take these stances and we care back to like principal -- being principled. And we're a very principled, transparent and curious organization, and I think that this just ties to being principled and it's just the right thing to do.

Yes. We have 5 minutes left. And I want to -- maybe one question and then I want to end with sort of where are we going from a tech perspective because I think we look out over the next 5 to 10 years. But before we get there, and I've asked you this before, it's kind of a fun question, but like -- I just love your background, and I love what you and Matthew and the team have built. But if you weren't doing Cloudflare, if you hadn't founded Cloudflare, what would Michelle be doing today? I know you're a former science major and -- but what would Michelle be doing if it wasn't Cloudflare?

I believe in Cloudflare so hard that it's just such a hard question to answer, Matt. I just like -- if Matthew was here, what he would say is that -- and so these are his words. If any of you know Matthew, you've probably heard him tell the story, is we're just like so proud of what we're doing and like so all-in on it that I can't imagine doing anything more important with my time right now. It's just like helping to build a better Internet. Like what is more important than that? Yesterday, how many cyberattacks did we stop for our customers? Any guesses?

I don't know.

126 billion yesterday. I mean if you're not making the Internet better doing that, it's pretty awesome. That's what I was talking about like digital bouncer, personal trainer in the last hour. Like we basically reroute requests all the time that are failing. Like it's just like it's amazing. And so I think I could do other things. I do think I'm employable, but like I'm just like so wrapped up into what we're doing. And what -- the ancillary to that is like why do you still come to work every single day? Because like a lot of people are like you kind of -- you started a company. You took it public. You're running. It's amazing. Like isn't it time to go do something else? I'm just like we're just so early innings. I have a really cheesy saying at Cloudflare and everyone now repeats it internally, which means I probably need a new cheesy saying, but like it's just we're so proud of what we've done, we really are, but we are just getting started. And now most tech companies say that, so I probably really need something. But internally, people say it all the time. We're so early in the long arc of the story that we want because, again, we want to build something iconic. And I think we have a real chance to do that and build something that's large and iconic that changes the way the Internet works.

All right. All right. Well, I would be -- there's a lot of things that I'd like to do, but we'll save that for a different conversation. Maybe just to wrap up, we've talked about a lot of your views on where technology is going in creating a better and safer Internet. What are some of the biggest tech trends that we're going to be talking about 5 years, 10 years from now that maybe we haven't already discussed? Is it AI? Is it automation? What are some of these big things that we need to focus on?

Yes, yes and yes. I mean I've said it a couple of times today, but I really believe that the Internet is becoming so much more important to businesses and people's daily lives. And so the companies that embrace it and figure out how do you build services and do something with it, it's just like a huge -- it's a huge growth lever. And so that's where AI becomes important. It's like how do you learn? How do you build services around that? It's all these sorts of things. The companies who shy away and aren't going to invest or say, "Oh, actually, we're going to try and disconnect from the Internet because it's too risky," like that makes me really -- like I don't think that's a possibility. So it's here to stay. It's very global. And so I just see there's going to be a lot of new digital-first services that continue to roll out. And that's just going to change a lot. You're going to change your talent profile. There's a lot of conflating trends that are happening, and the answer is a bit of all of it. But at the end of the day, you've got to build -- you got to solve problems for your business or you're going to build -- you either have to solve a problem for your business or you're going to build something that you can sell to a customer. Otherwise, why are you doing it? And so it's really going to be a lot of innovations tied to that, that I think that matter. And it's going to be elements of this that help power it, but it's not any one by itself for that matter. But those are really big, I think, big drivers going forward. So we're just going to see the acceleration continue.

Last question, we've got a minute, and I know we've talked about this before as well. But when you think about the importance of leadership in a really challenging economic time that we are entering, how do you think about that? And how do you drive culture in this time of stress?

Matthew and I take leadership super seriously and are proud of that, and it's like such a privilege to be a leader. And it really drives me nuts when someone doesn't take it seriously because you just kind of read about most of those in the news and you think, how is that even possible? But anyhow. And I think if you ask people at Cloudflare, they'd say they believe in our leadership and they stay because of our leadership. And so setting a vision, caring, having that human touch, I mean, at the end of the day, again, you're a group of people rowing in the same direction. Are you treating your team like a group of people, like a person versus enabling everyone to do their best work, I think, is so important. Like how do you -- in this overall mission of laying out a big mission of why and what they're doing is important, that solves a lot of problems. When you feel -- like just you, yourself. Everyone here is a high performer. You wouldn't be in this room if you're not a high performer. But when you like truly feel like your work matters and someone kind of cares about you and that you're part of something that's winning, I mean, that's a really very powerful combination. It is actually -- and you get paid well to do it. It's very hard to get all 4 to line up. You can kind of get 2 of the 4. It's hard to get all 4 to line up. And I think that as a leader, if you can line up all 4 for your organization and your team, it can really set you apart. And I feel like we've been able to do that at Cloudflare.

Great. Well, we're out of time. For all of us at RBC, we thank you, Michelle, for your time and attendance and great insight, very inspirational. So thank you, again, from all of us.

Thanks for having me.