Interview with Cloudflare co-founder Michelle Zatlyn on its IPO, its dual-class stock structure giving employees 10x the voting rights over public shares, more
Shares of Cloudflare rose 20% today in its first day of trading on the public market, opening trading at $18 after it priced …
Context & Ripple Effects
Cloudflare's debut caps a fast run-up in its own coverage: the company filed in August with 2018 revenue of $192.7M and an $87.2M net loss, then set an initial price range of $10-$12 before pricing at $15 and raising $525M — well above its own range, at a market cap near $4.4B. Shares then closed up 20% on day one.
The interview adds the governance angle to that story: a dual-class structure giving employees 10x the voting rights of public shareholders. It follows the template set when Zscaler popped 72% in its March 2018 IPO, part of a stretch where cloud-infrastructure sellers are reaching public markets while still loss-making and founder-controlled.
First-order effects
- Cloudflare's employees and early holders retain outsized control — 10x voting rights per share means public buyers of the day-one pop get economics without proportional say, even as the raise puts $525M on the balance sheet against an $87.2M annual loss.
- Pricing at $15 against a $10-$12 range, then a 20% first-day gain, means Cloudflare left roughly the gap between range and open on the table — capital it raised more cheaply than the market was willing to pay.
Second-order effects
- The above-range pricing and day-one pop strengthen the case for other cloud-infrastructure and security companies to file while still unprofitable, following the Zscaler precedent rather than waiting for profitability.
- Public-market investors now face a recurring trade in this cohort: accepting founder-and-employee super-voting stock as the price of access to high-growth infrastructure names, which pressures exchanges and underwriters to keep dual-class listings available.
Third-order effects
- If dual-class structures keep clearing the IPO window for loss-making infrastructure companies, public shareholders' governance leverage over cloud-platform companies structurally weakens — the vote concentrates with insiders while the capital comes from the market.
- The pricing pattern — file with a risk-heavy disclosure like Cloudflare's 8chan exposure, price above range, pop — points to an IPO market that rewards infrastructure scale over current profitability, extending the runway before these companies must show net income.
The trend: Cloud-infrastructure companies are going public earlier in their loss-making lives and on founder-favorable dual-class terms, with investor appetite for first-day pops setting the pace.