Upwind Raises $400M at $3.8B and Turns Down Datadog

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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. Bessemer Venture Partners led the round. Existing backers, including Greylock Partners and Craft Ventures, also took part.

The money arrives nine months after Upwind closed a $250 million round at a $1.5 billion valuation.

A buyout offer that did not work out

The new round had been in the works for months. According to a person familiar with the company, it nearly fell apart when Datadog tried to buy Upwind. Datadog is a publicly traded company that sells observability tools, which monitor how software runs.

The source said Datadog did not offer a premium over the $3.8 billion valuation that venture investors had set. Upwind chose to stay independent. The company still draws acquisition interest, the person added.

Growth and the multiple

Four-year-old Upwind has grown quickly as AI-driven cybersecurity threats rise. According to a person familiar with its financials, it 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.

On those figures, the venture investors and Datadog valued Upwind at more than 40 times its forecast annualized recurring revenue, a common yardstick for pricing software companies. TechCrunch notes that this is well below the 80 times that another fast-growing security startup, Cyera, fetched, according to its earlier reporting.

Tomasz Tunguz, a general partner at Theory Ventures, recently wrote on his blog that cybersecurity is poised to become the third big wave of AI software that companies pay for, after coding tools and customer support.

TechCrunch points out that few cybersecurity companies have gone public in recent years, so a sale remains the most likely end for Upwind.

Amiram Shachar founded the company. He earlier sold the cloud spend management startup Spot.io to NetApp for $450 million. Upwind describes its approach as runtime security: it alerts on attacks and vulnerabilities in live services and fixes them in real time.

TechCrunch has asked both Upwind and Datadog for comment.

Source: TechCrunch