Matthew Prince, CEO of Cloudflare, doesn't just tolerate being a public company; he loves it. It's a "healthier" relationship, he argues, with a clear and brutal accountability. "If I do something stupid," Prince says, “they call me up and they say, ‘That was stupid. I sold your stock.’” That direct feedback loop means a more honest, less codependent relationship than private market dynamics. This perspective, along with some truly unconventional IPO advice, shaped Cloudflare's path to going public.

Key Takeaways

  • Prince sees public markets as a "healthier" investor relationship. Unlike private investors who might be locked in, public shareholders offer immediate, unambiguous feedback: sell your stock if you falter.
  • The S-1 document isn't merely a legal filing. Cloudflare leveraged it as a strategic opportunity to redefine its entire company narrative, creating a foundational story they still reference today.
  • Cloudflare meticulously managed its IPO day "pop," intentionally targeting a roughly 20% gain. They priced it to close around 18%, precisely hitting their goal to foster stable investor relations.
  • Forget friends and family. Cloudflare's smart IPO allocation strategy, borrowed from Qualtrics founder Ryan Smith, focused on building long-term influence with future difference-makers.

The Ryan Smith's IPO Allocation Strategy

Matthew Prince received unique advice on how to think about IPO share allocation, moving beyond the traditional "friends and family" round.

  • Identify Key Individuals: Think about the people who if they owed you a favor, they could make a meaningful difference in the future of Cloudflare. Compile a list of these individuals.
  • Offer IPO Participation: Offer these identified individuals the ability to participate in the IPO. Even if some have conflicts and cannot accept, the act of offering itself will be remembered fondly and build goodwill.

When This Works (and When It Doesn't)

This strategy shines when your goal is to build long-term strategic goodwill rather than simply rewarding close connections. Cloudflare used it specifically for its IPO, aiming to line up future allies and advocates who understood the company's potential. It works best when you have a clear vision for who could genuinely impact your company's trajectory down the line, beyond just a financial investment. This isn't about transactional favors; it's about cementing relationships with people whose influence matters. However, it can backfire if the individuals feel the offer is insincere or if the shares don't perform well, potentially damaging the goodwill you tried to build. It also requires you to have enough control over your share allocation to make these targeted offers, which might not be the case in every funding round or IPO.

What to Do With This

Even if an IPO is years away, this thinking applies to your next major funding round. Imagine you're raising a Series B this quarter. Instead of only thinking about institutional investors, identify 3-5 influential people in your industry—perhaps a retired executive, a renowned operator, or a startup founder a few stages ahead of you. Now, apply Ryan Smith's strategy: Offer them a small allocation of shares, maybe through a SAFE or an advisory role with equity. Frame it not as charity, but as an invitation to be part of your future success, knowing their network, advice, or future endorsement could move mountains for your company. The goal is to build a long-term favor bank before you actually need to cash in.