CloudFlare and China

Our portfolio company CloudFlare operates one of the Internet’s largest networks. This blog is hosted on the CloudFlare network so all of you are passing through CloudFlare on your way to AVC.

CloudFlare wanted to operate its network in China but obviously that created some challenges. So for the past four years CloudFlare has been working with various partners in China to come up with a model that would work. About a year ago, they entered into a partnership with Baidu and now CloudFlare and Baidu’s joint venture is operating one of the largest networks in China.

The New York Times has a good post today on the partnership, how it works, and why it works.

This is a good example of how US companies can do business in China. It requires a lot of work but given the size of the chinese market, it is worth it for many companies to undertake such a thing, particularly if having a global network is strategic to your business.

#Web/Tech

Comments (Archived):

  1. Adrian Bye

    I’m living in central china and dealing with this exact issue right now. Hosting across China and the West is a huge pain point. Internet connections to the outside are filtered, and even if you get everything right, they still randomly go down 10-20% of the time.To have a company which bridges both sides very efficiently sounds like a dream come true.

    1. William Mougayar

      Curious how do the Bitcoin miners do it?

      1. Adrian Bye

        they would just connect to multiple servers outside china. once one goes down, another would be used in its place.using a VPN here is a little like having 10 neighbors with open wifi connections because your home internet doesn’t work well. once one neighbours connection isn’t working properly, you just switch to a different one.

    2. Simone

      Hi Adrian, can you please recommend what are the websites preferred/trusted by expats looking for jobs in China?

        1. Simone

          thank you!

          1. Adrian Bye

            here’s one more option, a newsletter for jobs in beijing:http://mp.weixin.qq.com/s?_…you can subscribe to it via wechat. if you don’t have that already, download it and set it up, and follow the account “radar” or scan the code on that page

          2. Simone

            thanks a lot!

  2. kenberger

    Everyone with this (China hosting) need should check out http://www.chinanetcloud.comGood friend of mine runs it, 500 Startups invested.

  3. Twain Twain

    Thanks for sharing. Congrats to Cloudflare. I’m a big fan of East+West collab.V. interesting perspective from Cloudflare’s CEO, Matthew Prince: “He added that the intellectual property is not the most critical part of the company.“We had much less apprehension about sharing our code, because we don’t think there’s any line of code we write that’s so clever that gives us a sustained advantage,” Mr. Prince said. “That comes from the network itself.”Still…“At some level, we designed the contract so we both have leverage,” said Joshua Motta, CloudFlare’s head of special projects. “We’re both pointing guns at one another, to some extent.”A partner like Baidu lends some trust that IP wouldn’t be misappropriated anyway.It’d be a VERY different ball game if Cloudflare had invented an algorithm and system to solve Natural Language that’s either competing directly with Baidu in Machine Intelligence and/or enables Baidu to beat Google, IBM Watson and Facebook in that space.

  4. Jess Bachman

    I wonder what CloudFlare’s relationship is with the Great Firewall. Internet companies working with China is not just a challenge technically, and bureaucratically, but ethically.

  5. Twain Twain

    Interesting the service is called Yún jiāsù (匀加速). It translates as “uniformly accelerated” which is a nice way of saying it’s the opposite of patchy, slow networks.

  6. Russell

    Feeling like the #OTchamp around here. But someone in the bar has to wander off topic after a few 🙂 @fred thought you’d love this album Golden Rules that I picked up on the weekend featuring a track from the artist FKA Mos Def. http://www.factmag.com/2015

  7. William Mougayar

    Congrats. Does this mean that AVC is now accessible (and faster) from China? You said this in July of this year:”I’ve been told a number of times that avc.com is blocked in China but I have never verified that and it may not be true now or in the past. If it is true, I am very proud of that fact.” And a user in China said access was very slow.http://avc.com/2015/07/some

    1. jason wright

      why would AVC be blocked in China?

      1. William Mougayar

        i have no idea. but it’s interesting there is an AVC Corp. in China that does packaging for electronic products.

        1. awaldstein

          No surprise.I’ve never bothered to have a trademark protected in China. Just not enforceable or at least it wasn’t up to a short time ago.

        2. LE

          Actually appears to be a California company that has expanded to China or found it cheaper to set up manufacturing there.JUST THE TYPE OF STUFF WE LOVE IN THE USA!!http://avccorp.com/press-re

        3. jason wright

          so it would claim rights in that class of goods for the mark, but there are many classes of goods and services. no company has absolute rights to a mark across all goods and services. Perhaps avc corp should go to ICANN and submit a dispute case against Fred. your post might give it ammunition.

    2. fredwilson

      Good question! I will find out

        1. Sam

          I was in Shanghai a couple weeks ago and was unable to access the AVC.com web site from my standard hotel WiFi Internet. When I logged in through my US-based employer’s VPN, I could access it fine. My experience would seem to contradict the greatfire.org site above.

      1. Guillaume

        From a very quick check, I have avc.com between 40 and 60 MB/s from Japan, and between 70 and 80 MB/s from Beijing (without VPN)By the way, congrats to CloudFlare and Baidu teams for the deal. The more links we weave between West and East the more resilient is our planet. BTW I do it myself, working as the only foreigner in a web company (douban) in China.

        1. Twain Twain

          Upvoting THIS a billion times: “The more links we weave between West and East the more resilient is our planet.”The more East+West integrates, the more INTELLIGENT all our systems will be.Some of the most interesting Machine Intelligence is being led by Chinese folks educated in the West:* Andrew Ng, Chief Scientist of Baidu (ex-creator of Coursera and Google Brain).* Fei Fei Li, Director of AI Lab, Stanford University.Imho, East+West is the ONLY WAY we’ll be able to solve the hardest problem in Machine Intelligence: how to filter and understand Natural Language.

  8. creative group

    Because of the massive potential of acquiring scale by doing business in China there appears no laissez faire capitalist attitude. Many justify and overlook the human rights violations and manipulation by the Chinese Government. We realize the actions are done to control the 1.2 Billion people by any means necessary but many continue to block any entrepreneurial ties that can established in Cuba. (Broken record playing)

  9. DJL

    I started using CloudFlare before I even knew it was an AVC portfolio company. Once I started looking at the company, their adoption rate truly astounded me. But then I realized that the ONE thing these guys did better than anyone else was make the signup process almost seamless. (Their position in the market makes them ideal for laying on other security services. But that is another story) I am not a big fan of China. But Capitalism and Communism/Socialism cannot co-exist for long. Giving them a glimpse into prosperity and freedom through technology might be our best approach.

    1. fredwilson

      yuppppppp. easy on matters way more than anyone realizes

      1. DJL

        Agreed. It is now becoming the key feature of our new it security app – otherwise we will never be able to scale to the numbers we need to hit the SMB market via resellers.

    2. Twain Twain

      China is a CAPITALIST country with two differences:(1.) Central legislation with increasingly devolved powers to regions.(2.) An Eastern heritage wrt democracy and republicanism that flows back to Yin+Yang (female+male) from 700BC and before then.It’s not the case there’s no democracy in China; that’s a fallacy. It’s simply a DIFFERENT democracy because the roots and branches of Chinese philosophy developed INDEPENDENTLY from Plato’s Republic / Kant / Adam Smith etc which US and European philosophy stem from.Chinese startups know plenty, in some areas even more than Silicon Valley startups, about prosperity and freedom and inclusion through technology:* http://qz.com/207398/the-ge…The monetization models are also different:* http://edition.cnn.com/2010…Does innovation by Chinese social networks give a glimpse of Facebook’s future?* https://econsultancy.com/bl

  10. pointsnfigures

    China is difficult to navigate. There are so many players, so many levels it’s hard to know if you are actually doing business or not. Good for Cloudflare to do a deal. Conversely, bad on China in general for not opening their markets. Their stock market is totally rigged, and so is most of the data coming out of the government.

    1. awaldstein

      As someone who reported into Singapore for 4 years, I can attest to the challenges and upsides of having an Asian company.I had nothing to do with their China ops, getting products ordered, made in Malaysia and to the states was enough.

      1. Twain Twain

        Several of our strategic investments were domiciled in Singapore and HK so I learnt a lot when I was a banker re. Western co’s doing business in Asia Pac — adding to my pre-existing Chinese knowhow (being Chinese).The advantage of HK & S’pore jurisdictions is they operate “common law” inherited from the British legal system. The US has its variant on common law.Meanwhile, China has operated a civil law system for millennia. Civil law is also operated by European Union (excluding UK), all of Asia Pac (excluding HK & S’pore), Russia and most of Latin America.Doing business in China — when the US startup is rooted in and familiar with common law — presents similar challenges to the US startup doing business in Europe (as Google is finding wrt. EU demands)[email protected]igures:disqus — Wrt “market rigging”, reciprocally, the Chinese could say the American market is rigged: “Look at all the lobbying! Look at how the American banks caused the global crisis!”I was at a presentation by China’s central banker at London School of Economics where there were discussions about a future “Third Way of East+West cooperation” to reduce the risks of such re-occurrences.Even amongst AVC’s community there are differences in each of our definitions about “fairness” and whether price encapsulates value.There will be a lot of work ahead before East and West arrive at some type of parity of definitions wrt “What is democracy, freedom of speech, human rights…?” etc. because the US, the UK, the EU and China all have different versions of common and civil law.Rudyard Kipling famously wrote, “East is East, West is West and n’er the twain shall meet.”I disagree with him on this. I believe East+West in synch will augur in a new age of global economic prosperity and new models of intelligent systems for the greater good.

        1. awaldstein

          great comment, thanks

    2. Tom Labus

      economic data is pure fiction

  11. PhilipSugar

    I sent somebody to the Chinese Embassy in D.C.for a Visa today. I am really hoping our servers clear customs today. Literally they got held up when somebody in customs cut the packing strap off the pallet. The one big box that was palletized became eight. We put in special code so that datacenter is on its own island. Yes lots of work.

  12. Sam

    << Baidu and CloudFlare’s virtual joint venture relies on a principle generally considered anathema to foreign companies looking to do business with China: trust…. “At some level, we designed the contract so we both have leverage,” said Joshua Motta, CloudFlare’s head of special projects. “We’re both pointing guns at one another, to some extent.” >>Funny definition of “trust.”I was speaking to an investment banker a couple weeks ago about IPOs on the Hong Kong exchange. He said they recently changed the rules to put more of a burden on the listing bank to verify that the filings are accurate. I asked what this meant in practice, and he said, “I’ll give you an example. We were preparing to list a dairy company a few months ago, and I had to send junior bankers out to count the cows.”The US mindset in an arms-length business relationship is that you may spin the truth to your advantage, but you won’t lie boldly to my face. The Chinese mindset is that it’s fair game if I lie to your face and can get away with it.Two loaded guns pointed at each other seems the right metaphor for “trust” in the early days. And hopefully a real partnership and deeper roots of trust can grow over time.One thing is certain, Fred. You’re going to learn some things on this journey.

  13. Ryan Laughlin

    We use CloudFlare at my company so without getting into the details I know first-hand their product is fantastic. What I love about this deal is that CloudFlare worked to come up with an innovative solution that didn’t compromise their values. What has always bothered me about other U.S. tech firms is their willingness to compromise (via political favors, censorship, etc) in favor of that pot of gold (business in China). When CloudFlare made the decision to buck the status quo and hold true to their values, they risked never getting into China. That’s usually when true innovation happens, when you’re forced to find another way, coming up with a ground-breaking deal (or product). Love it.

    1. Matt A. Myers

      Compromise their values of not censoring? In this case they actually completely “cut their hands off” and gave them to another company to keep them clean – they gave their IP to another company in China that already censors and that company is agreeing to pay CloudFlare.

      1. Ryan Laughlin

        Good grief. I thought that by excluding the obvious in my comment, it went without saying that yes, of course, Baidu is censoring content. Perhaps I should have included the inference, which is that if U.S. companies really want to promote democratic ideals in communist China, then they should come up with innovative solutions that help further that cause, not just decide between giving in or isolationism. In this case, CloudFlare is speeding up web traffic significantly. If you’re familiar with censorship in that country, then you know how fast the governing body is able to close down all traffic to/from external sources. (Hint: It’s not fast.) So for the traffic running through Baidu’s new service, information will spread faster than ever before.

  14. Matt A. Myers

    Matthew Prince looks pissed … or is that just his resting face?

    1. eastdakota

      Ha! Photographer said: “Be serious.” That’s my “serious” face.

  15. JamesHRH

    I once hosted a young Chinese couple (both engineers) for a dinner (1995). Of the 2 or 3 takeaways, my fave was: ‘In China, all things are possible; nothing is easy.’Congrats – and mutually assured detraction sounds like the right approach.

  16. Joe Sacca

    I told you before .. Twitter is fake. Much to the chagrin of losing business due to a non existing g revenue model, here comes a jolt.. The site was down for nearly 4 hours yesterday. I am sure the stock takes a hit again