Upwind, a San Francisco startup that uses AI to secure cloud infrastructure, has raised a $400 million Series C at a $3.8 billion valuation, a round that nearly fell apart after publicly traded observability company Datadog attempted to buy the startup, according to a person familiar with Upwind. The round was led by Bessemer Venture Partners, with participation from existing backers including Greylock Partners and Craft Ventures.
The financing comes nine months after Upwind closed its previous $250 million round at a $1.5 billion valuation, and as the four-year-old company has grown rapidly amid rising AI-driven cybersecurity threats.
According to a person familiar with Upwind, Datadog, which sells tools for monitoring how software runs, did not offer a premium above the $3.8 billion valuation set by venture capital investors.
Upwind has been adding $20 million to $30 million in annualized recurring revenue each quarter and is projected to end the year at roughly $90 million, according to a person familiar with its financials. That means VCs and Datadog valued the startup at more than 40 times its forecast ARR, a common yardstick for pricing software companies. The high multiple is also well below the 80x ARR fetched by Cyera, another fast-growing cybersecurity startup, according to TechCrunch reporting from earlier this year.
Theory Ventures general partner Tomasz Tunguz recently wrote that cybersecurity is poised to be the third big wave of AI software that companies will pay for, after AI coding tools and customer support.
Upwind was founded by Amiram Shachar, who sold his previous company, the cloud spend management startup Spot.io, to NetApp for $450 million. Upwind calls its approach to thwarting threats "runtime" security, meaning it alerts on and remedies attacks and vulnerabilities in active services in real time. Given how few cybersecurity companies have gone public in recent years, an eventual sale remains the most likely outcome for the startup, and Upwind continues to draw acquisition interest, according to a person familiar with the company.
Analysis
Why This Matters
- The $400 million round at a valuation above 40 times forecast revenue shows how far investors will go to back AI-driven security startups.
- Upwind's decision to stay independent is a bet that it will be worth more than Datadog was ready to pay, but with few cybersecurity IPOs in recent years, a later sale remains the likely test of that bet.
- The near-collapse of the round during the acquisition approach shows how a buyout attempt can complicate a large venture financing.
Background
Upwind is a four-year-old San Francisco company that applies AI to cloud security, a niche that has drawn heavy venture investment as AI-powered threats have grown. Its founder, Amiram Shachar, previously sold his cloud cost management startup Spot.io to NetApp for $450 million. The company says its "runtime" approach detects and responds to attacks in active services in real time.
Key Perspectives
- Upwind: decided to stay independent because Datadog offered no premium above the $3.8 billion valuation, and believes the company will ultimately be worth more than that.
- Tomasz Tunguz, Theory Ventures general partner: wrote that cybersecurity is poised to be the third big wave of AI software companies will pay for, after AI coding tools and customer support.
What to Watch
- Whether Upwind hits its projected roughly $90 million in annualized recurring revenue by year's end.
- Whether a new acquisition offer emerges, since the startup continues to draw acquisition interest.
- Whether the market for cybersecurity IPOs reopens, which would shape the likelihood and timing of a future sale.
Checked
12 claims in this story checked against 1 source: 12 supported.
Show each claim
- SupportedUpwind raised a $400 million Series C at a $3.8 billion valuation.Startups | TechCrunch: “Upwind, a San Francisco startup that uses AI to secure cloud infrastructure, has raised a $400 million Series C round at a $3.8 billion valuation”
- SupportedUpwind walked away from Datadog’s acquisition offer and chose to stay independent.Startups | TechCrunch: “the person said, so Upwind decided to stay independent.”
- SupportedUpwind believes it will ultimately be worth more than the $3.8 billion Datadog was prepared to pay.Startups | TechCrunch: “Upwind clearly believes that the company will ultimately be worth more than the $3.8 billion that Datadog was ready to pay for it.”
- SupportedThe financing round nearly fell apart after Datadog attempted to buy Upwind.Startups | TechCrunch: “The fresh funding, which has been in the works for months, nearly fell apart after Datadog attempted to buy the company, according to a person familiar with Upwind.”
- SupportedThe round was led by Bessemer Venture Partners, with existing backers Greylock Partners and Craft Ventures participating.Startups | TechCrunch: “led by Bessemer Venture Partners, with participation from existing backers including Greylock Partners and Craft Ventures.”
- SupportedUpwind’s previous $250 million financing at a $1.5 billion valuation closed nine months earlier.Startups | TechCrunch: “The round comes nine months after Upwind closed its previous $250 million financing at a $1.5 billion valuation .”
- SupportedDatadog did not offer a premium above the $3.8 billion valuation set by venture capital investors.Startups | TechCrunch: “It didn’t offer a premium above the $3.8 billion valuation set by venture capital investors, the person said”
- SupportedUpwind has been adding $20 million to $30 million in annualized recurring revenue each quarter.Startups | TechCrunch: “The startup has been adding $20 million to $30 million in annualized recurring revenue (ARR) each quarter”
- SupportedUpwind is projected to end the year at roughly $90 million in ARR.Startups | TechCrunch: “and is projected to end the year at roughly $90 million, according to a person familiar with Upwind’s financials.”
- SupportedThe $3.8 billion valuation is more than 40 times Upwind’s forecast ARR.Startups | TechCrunch: “That means that VCs and Datadog valued the startup at more than 40 times its forecast ARR, a common yardstick for pricing software companies.”
- SupportedCyera fetched an 80-times-ARR valuation, higher than Upwind’s multiple.Startups | TechCrunch: “The high multiple is also well below the 80x ARR fetched by Cyera, another fast-growing cybersecurity startup, according to TechCrunch reporting from earlier this year.”
- SupportedAn eventual sale remains the most likely outcome for Upwind.Startups | TechCrunch: “given how few cybersecurity companies have gone public in recent years, an eventual sale remains the most likely outcome for the startup.”
