
Fastly S-1 - directionless
https://www.sec.gov/Archives/edgar/data/1517413/000119312519111675/d702138ds1.htm
======
tedk-42
/* Work for a Media Company */

We're looking to move one of our sites off Akamai mostly for costs reasons.
Fastly configuration in Varnish VCL - Senior Engineers from my company highly
rate Varnish as a cache software so Fastly was an easy choice.

I believe Akamai have been our CDN from the start. The amount of
reconfiguration we'd need to do to get everything off would create a huge
number of tickets in our work queue. The primary advantage of Akamai has been
the number of datacenters they have to service our traffic. A customer can be
in remote Australia and have their packets cached in a datacenter in the
nearby telephone exchange. That's the reach of Akamai that AWS and Fastly
can't compete with.

Their WAF and Bot detection products are also very good. They are a definitely
an enterprise/full service CDN provider. I definitely wouldn't call them
'legacy' by any means but the type of service they provide is so different to
a new player like Fastly.

~~~
xfitm3
Fastly’s major advantage is near instant CDN config changes, where Akamai can
take an hour to push a new cdn config.

~~~
madeofpalk
Is that an actual advantage though?

~~~
notyourday
Yes, it is an amazing advantage, especially paired with configuration being a
VCL.

------
celestialcheese
From 2017 to 2018, they added 147 new paying customers. Of which, 57 were
enterprise and based on their metrics claiming > 80% of revenue was from these
"enterprise" deals, probably high dollar.

Still, ~$50m in marketing/advertising spend to earn 147 new paying customers
(340k/customer) seems high to my untrained eye. Do those enterprise deals and
that "132% Dollar Expansion Rate" justify such high CPA?

Those with experience with this kind of enterprise-focused company - is this
normal?

~~~
onlyrealcuzzo
Wait. What? 147 paying customers? I was personally one of those customers,
paying like $100 a month, mostly just as a test. They really only added 147
paying customers? How many of them were just paying $100 a month for the base
price?

~~~
rajeshp1986
I highly doubt if they counted you as an enterprise customer. Enterprise
customers have significantly large multi-year contracts. I have worked in
sales org before and we reported only contracts which fetched ~ 100k/year as
enterprise customer. 10k to 100k were reported as SMB customers. These numbers
may be different for Fastly but I doubt $100/month customers are called
Enterprise customers.

~~~
user5994461
Good luck getting 100k/year contracts in CDN and at a second grade provider.

The market has been commoditized by CloudFlare. CloudFlare is charging
$200/month for the business plan, or $2000/month for the enterprise plan with
everything.

There can be banks or government paying 10 times more for custom plans
(extensive support and long cycle cycles). These would never adopt Fastly.

Akamai can get away with charging millions of dollars to some historic
customers who really don't need the service. If they ever migrate away, that's
explicitly to take a zero off the bill.

------
tylermenezes
As a user, Fastly is really, really good. Akamai is the only serious
competitor, but they are a lot more traditional in their sales and
configuration. (You can theoretically use Azure as a middleman as some have
pointed out, but they don't support custom SSL, and configuration changes take
literally hours-to-days to propagate.)

Cloudflare is fine but they are still an order of magnitude slower, which is
why we switched. I just tested and Cloudflare is still taking 48ms their own
DNS server to resolve our Cloudflare-hosted DNS, but only 14ms for Fastly to
establish a connection and send the first byte.

That speed does make a difference. When we switched from Cloudflare to Fastly
we had about a 7% increase in completed sales.

I think their ROI is still too low for most small businesses, the only way
that actually makes sense for us is because it's free for open
source/nonprofits. But I can imagine it's a big deal for larger ones.

~~~
cosjef
DISCLAIMER: Akamai Product Manager here.

Deployment times for config changes have been operating at the sub-5m
timeframe for at least two years. It used to take hours (never days) to
propagate changes across the server estate, but not anymore. And while we were
admittedly late to the DevOps train, we have made up lost ground. We have
nearly 100 individual APIs to control almost any aspect of our products. CLIs
if you don't want to write to the API. A Sandbox to test config changes
locally. The ability to validate OAuth tokens at the Edge, cache GraphQL
responses, and throttle and/or quota API traffic on a global basis. Hashtag
"legacy CDN."

~~~
notyourday
> Deployment times for config changes have been operating at the sub-5m
> timeframe for at least two years.

Fastly is sub 5 seconds.

> And while we were admittedly late to the DevOps train, we have made up lost
> ground.

Not anywhere close. Your cache invalidation takes forever. Ability to assign
tag objects does not exist. Engaging "professional services" to make a config
change like it is 2002?

~~~
siwyd
> Not anywhere close. Your cache invalidation takes forever. Ability to assign
> tag objects does not exist. Engaging "professional services" to make a
> config change like it is 2002?

Akamai also has a fast purge these days, sub 5 seconds as well I believe.
Works nicely.

~~~
notyourday
Fast purge only works on certain kind of objects in certain kind of
configurations, not to mention the idea of "I would like tom make 20k purge
requests in a second via an API" is met with stares.

Fastpurge is a hack.

~~~
siwyd
Interesting. I only have experience with the occasional simple (manual) purge
and I could verify the object was invalidated quickly. Can you elaborate on an
example config where this goes awry?

~~~
notyourday
Fast purge works with all kinds of site delivery ( and site delivery based )
products. Unlike modern CDNs Akamai other products ( such as for example VOD
and media services ) do not live in the same object space and hence are not
fast purge compatible.

You would think purging a video stream would be the same as purging a standard
site delivery object, after all it the stream is http(s) accessible .m3u8 and
a pile of .ts chunks but that's not the case -- in some cases it can take up
to one hundred and twenty minutes.

~~~
siwyd
I see, thanks for the info.

------
moderation
via
[https://twitter.com/justincormack/status/1119217911380545536](https://twitter.com/justincormack/status/1119217911380545536)
interesting to see some technical detail in the S1 including a likely
reference to WASM, WASI and Lucet [0].

"Moreover, our platform is highly technical and complex and relies on the
Varnish Configuration Language (VCL). Potential developers may be unfamiliar
or opposed to working with VCL and therefore decide to not adopt our platform,
which may harm our business."

"We will continue to work on open source projects, which will empower
developers to build applications in multiple languages, and run them faster
and more securely at our edge"

[0] [https://github.com/fastly/lucet/](https://github.com/fastly/lucet/)

~~~
slivanes
I was tasked to integrate Fastly into our infrastructure having not done any
configuration with Varnish (VCL) before. ~10k req/s

VCL can be challenging for complex flow control (IMO), but it is made easier
with Fastly enhanced/custom VCL modules.

Their documentation was good, and the Fastly support team was excellent. Their
sales engineers gave us a baseline configuration that suited our needs and
were quick to answer any followup questions.

Haven't noticed any downtime or response delays to date.

~~~
greenleafjacob
Check out this flow diagram for Varnish 2 [1].

[1] [http://www.kalenyuk.com.ua/wp-
content/uploads/2009/12/varnis...](http://www.kalenyuk.com.ua/wp-
content/uploads/2009/12/varnish-2.0.4-flow.jpg)

------
mxstbr
> We generated a net loss of $30.9 million for the year ended December 31,
> 2018, and as of December 31, 2018, we had an accumulated deficit of $146.2
> million.

Wow, I did not think an "enterprise-y" company like Fastly could be burning
that much cash on growth!

~~~
pault
It says something about the industry when "only" a $30.9M annual burn rate
sounds small.

~~~
wongarsu
The $30M is 20% their annual revenue, or 18% of their current assets. That
doesn't seem out of line for a growing business, and is something you can do
without Venture Capital.

------
tyingq
The whole "edge compute" space seems poised to do well to me. Cloudflare's
edge KV store and edge server-side JavaScript are obvious, but great ideas.

The wildcard seems to be the companies that own cell towers. If they build a
credible edge offering, that's a moat that is hard to beat.

~~~
treis
>The whole "edge compute" space seems poised to do well to me.

IMHO, I think it's mostly a solution in search of a problem. The internet
backbone is fast enough to not be noticeable for end users. A centrally
located server in the U.S. will have a maximum ping of 40 ms to anywhere in
the U.S. That's faster than is perceptible to the end user. The only
mainstream usage I can see is cloud gaming where ping is that critical.

~~~
nyc_pizzadev
That's only good for small media like websites and images. Videos and
downloads need to be cached in the provider networks, you simply cannot serve
terrabits of data from a single origin. Well, you can, but networks don't like
to operate like that. So ya, at scale, you need edges. The internet is
dominated by companies at scale.

~~~
treis
That's more of a CDN than edge compute. Edge compute would be something like
having your Rails app run in a bunch of edge locations and then doing some
eventually consistent magic to sync them up.

------
burger_moon
Interesting that just 10 customers make up over a third of revenue for them.

~~~
lkbm
Judging from pages 4-5, I'm guessing these include NYT, New Relic,
Ticketmaster, Alaska Airlines, Spotify, and Github.

They mention other cloud platforms as competition, and Azure has a CDN. I
doubt Github would switch anytime in the near future, but the dangers posed to
smaller companies by the consolidation under giants is interesting. What
happens when your competitor doesn't just try to steal your clients, but can
actually just acquire them?

They also mention one risk as their dependence on AWS, a competitor, and that
if all the cloud providers blackballed them, they'd be in trouble.

~~~
SteveNuts
I think if Amazon hasn't kicked a competitor like Netflix off of their
platform, Fastly has little to worry about.

~~~
maybeiambatman
That's probably not the right analogy. Kicking someone off of your platform
isn't the same as using your own platform instead of a competitors.

I'm sure Azure would welcome competitors to use their product - same way AWS
welcomes Netflix. A good analogy would be Amazon switching from Oracle to AWS
based solutions. In which case, they do have something to worry about.

~~~
lkbm
With regard to their "what if all the cloud providers block us" issue, it's is
a good indication that they're fine. (Page 30 "We rely on third-party hosting
providers that may be difficult to replace.") I don't think that's a serious
risk.

For the Github thing, you're right, it's a different situation.

------
peteretep
I love the people behind Fastly. Congrats to Artur and the crew :-)

------
kyledrake
Fastly's bandwidth prices are high to me: $0.12-$0.28/GB is 2007 rates for
transit. Perhaps this is why when GitHub pages started capping bandwidth to
lower limits they had also switched to Fastly? For a comparison, I pay less
than $0.01/GB for a CDN right now, and the price of transit on average drops
40%/year so even that's above market rate now.

A lot of people (including Cloudflare) just give it out for free, making this
really a space for enterprise plays, which at their size, have the clout to
push for better rates across many similar competitors, or just running their
own infrastructure.

I honestly just don't get the value add here. It really doesn't feel like an
IPO play.

~~~
Jgrubb
That's the card rate. Their bigger customers aren't paying that.

~~~
kyledrake
It's part of why I don't get it. Large companies have multiple competitors to
negotiate with, driving down prices (and this does not look to change anytime
soon, it's dropping 40%/year for transit).

We're talking about an S-1 here. Where's that growth going to come from?
Cannibalizing Akamai is not a long term IPO strategy.

~~~
doppel
At my previous job, we had Fastly as a potential new CDN provider set up
against our existing CDN provider and two other new potentials. After a few
rounds of calls for bids, Fastly won out.

Based on my experience with the other providers they were also, by a large
margin, the most modern - it felt like moving from a 2008 integration to a
modern, fully RESTful API with great documentation and decent UI.

This is all anecdotal, but they did combine a great technical platform with
great support. If transit prices are the same or similar for all providers in
that size category, they have to fight on features and support instead.

~~~
user5994461
They won based on what?

------
speeq
Interesting that Brexit uncertainty is in their risk factors:

> These developments, or the perception that any of them could occur, have had
> and may continue to have a significant adverse effect on global economic
> conditions and the stability of global financial markets, and could
> significantly reduce global market liquidity and limit the ability of key
> market participants to operate in certain financial markets. In particular,
> it could also lead to a period of considerable uncertainty in relation to
> the UK financial and banking markets, as well as on the regulatory process
> in Europe. Asset valuations, currency exchange rates, and credit ratings may
> also be subject to increased market volatility.

~~~
huac
basically legally required for anyone doing business in europe/UK to add that
boilerplate

------
mevile
Where I work, a website/app in the top 20 US alexa rankings, we use Fastly and
it is pretty great. If I have a complaint it's that their varnish version is
old. The web UI is great, the service is great. I've never had an issue with
them in my many years of working with them.

~~~
merreborn
Yeah they run a fork of varnish 2 with inline C disabled, and a number of
custom extensions (surrogate keys, tables/dictionaries, etc.) -- as well as
likely customizations to support their massively multi-tenant deployment and
more

Add in the necessity of porting vcl for all of their customers, and the
prospect of upgrading varnish is obviously pretty daunting.

I suspect they'd rather focus on their new webassembly-based configuration
solution, rather than try to keep up with changes in VCL

------
ggm
I don't use fastly on the supply side but I do use it as a consumer and the
services they host that I use have good responsiveness and availability.

The fastly engineers I know are nice people. They take care, they're smart and
afaik they've stayed small and focussed as a group. They're active in
operations groups, standards.

What's not to love?

------
foobarbazetc
Honestly, I love Fastly but wasn’t expecting this? Seems early.

Maybe it’s just a good time to strike while the market is frothy.

------
rsweeney21
Is it a coincidence that there has been such a large uptick in IPOs just over
10 years after the real-estate meltdown? Or did the meltdown kill off a
generation of unicorns that couldn't get funding during the crunch?

It's just anecdotal evidence, but I talked to a CEO that had just closed a
deal with his A round from Kliner Perkins in August or September 2008. When it
came time to fund the deal, the partners at the VC firm made the capital call
and the LPs couldn't fund. So Kliner Perkins called the CEO and told them they
had to cancel the deal.

The CEO had to make big cuts, couldn't pay rent on the building, etc. He
eventually sold the company, but I wonder if it or others would have been
IPOing around 2014-2015 if they had gotten the funding they needed.

~~~
pfranz
I know very little about that world, but I heard Dodd-Frank made going public
less appealing. The first google hit for "IPO over time"[1] shows a drop after
the dot-com bubble around 2000 and not much around when Dodd-Frank got passed
--but it seems surprisingly flat. Money has been really cheap since the
recovery. This, plus the amount of VC money, has likely made the threshold for
IPO much higher.

[1] [https://www.statista.com/statistics/270290/number-of-ipos-
in...](https://www.statista.com/statistics/270290/number-of-ipos-in-the-us-
since-1999/)

------
Rafuino
I'm not experienced with S-1 filings, but don't they usually include the share
price targeted and amount they're looking to raise? It's blank up top on the
document right now. When is that typically filled in?

~~~
pbreit
Not until closer to the IPO date after investors haven been able to make an
evaluation and been pitched by company and bankers.

A 7x multiple on $140m in sales might suggest around $1b (divide that by #
shares to get a possible share price).

~~~
arosier
Or look at Zoom's 47.7x multiple and you've got a $6.6B market cap

------
sytse
At GitLab we use Fastly and we’ve been very happy with their service. It was
fast to implement and greatly helped to speed things up. As a fellow
Commercial Open Source Software (COSS) company I think it is cool that they
are based on Varnish.

------
joshua_gallardo
This guy has compiled the breakdown of equity owned by founders at IPO, of all
the recent (and some historical) IPOs:

[https://grph.com/d/mzo1W9QP4Mk](https://grph.com/d/mzo1W9QP4Mk)

You'd be surprised how random these appear. I guess there's no science to it,
and much more chance is involved than we would like to admit.

~~~
jedberg
Be careful making assumptions from those graphs. In some cases they include
employee owners and in other cases they don't. For example, for Pagerduty, one
of the cofounders is missing, presumably under "Other" since he's the only
cofounder that's an employee. But for Google Larry and Sergey are listed. So
I'm not sure how it was decided who goes in the graph.

------
javiramos
Is Fastly a competitor to Akamai?

~~~
firebird84
Under the "Risks" section they specifically mention their competitors:

The market for cloud computing platforms, particularly enterprise grade
products, is highly fragmented, competitive, and constantly evolving. With the
introduction of new technologies and market entrants, we expect that the
competitive environment in which we compete will remain intense going forward.
Legacy CDNs, such as Akamai, Limelight, EdgeCast (part of Verizon Digital
Media), Level3, and Imperva, and small business-focused CDNs, such as
Cloudflare, InStart, StackPath, and Section.io, offer products that compete
with ours.

~~~
tyingq
_" small business-focused CDNs, such as Cloudflare"_

That's an interesting statement. Supposedly, 10% of web requests on the
internet route through Cloudflare. And I imagine their free tier has plenty of
non-business use.

~~~
firebird84
They may be distinguishing them based on their type of customer, rather than
their quantity of traffic. Other CDNs may tend to exclusively pursue much
larger customers like big banks, governments, etc., while Cloudflare from my
understanding is quite happy to serve the smaller market segment.

~~~
tyingq
Ahh, yes, I read it as "small, business-focused CDN" though there's no comma
there. You're right..they meant focused on "small business." I suppose the
dash threw me off.

~~~
boulos
Fascinating, that’s because they did the dash wrong for the compound
adjective.

It should have been the ugly but correct “small-business-focused CDN”. If they
didn’t want to double hyphenate then “small-business focused” would have been
read properly by everyone. But you definitely parsed their “small[,] business-
focused” correctly :).

~~~
tyingq
Makes me appreciate the importance of grammar a bit more. I assumed I was
reading it wrong. Thanks for sharing the detail.

------
m3kw9
How is this different than AWS?

------
godelmachine
May I ask how can I download this in PDF?

~~~
omarchowdhury
File > Print > Select 'Save as PDF' under Destination.

------
JMTQp8lwXL
I haven't looked at any other details, but Googling Fastly says this:

"Fastly, Inc. is an American cloud computing services provider. Fastly's edge
cloud platform provides a content delivery network, Internet security
services, load balancing, and video & streaming services"

Just judging by that statement, I feel they're going to be eaten by AWS, GCP,
and maybe Azure. However, it seems their focus may be on creating a viable
business, rather than trying to spin an open-source project into a business
(e.g., Docker Cloud). We already see that Docker is losing business to people
using the OSS, but paying Amazon or Google for ECR and GCR, respectively.

That being said, there are some smaller somewhat related players, such as
PagerDuty that seem to be off to a good start. Twilio's stock has performed
well historically, too, as has Splunk. But these later companies seem to be
solving problems that make them less direct competitors with the bigger
players.

~~~
justincormack
Why don't you read the filing? It covers the competitive landscape.

Competition

Our platform spans several markets from cloud computing and cloud security to
CDNs. We segment the competitive landscape into four key categories:

•Legacy CDNs like Akamai, Limelight, EdgeCast (part of Verizon Digital Media),
Level3, and Imperva (for security); •Small business focused CDNs like InStart,
Cloudflare, StackPath, and Section.io; •Cloud providers who are starting to
offer compute functionality at the edge like Amazon’s CloudFront, AWS Lambda,
and Google Cloud Platform; and •Traditional data center and appliance vendors
like F5, Citrix, A10 Networks, Cisco, Imperva, Radware, and Arbor, as well as
networks that offer a range of on-premise solutions for load balancing, WAF,
and DDoS.

~~~
JMTQp8lwXL
I can't say I'm impressed by Akamai, but then again, Zoom came out of nowhere
and is likely to clean house in the B2B video conferencing space.

Maybe Fastly will give legacy players a run for their money.

