Cybersecurity startup Upwind raises $400 million after rejecting Datadog's acquisition bid

Upwind, a San Francisco startup that uses artificial intelligence to protect cloud infrastructure, has secured $400 million in a Series C funding round, valuing the company at $3.8 billion. Venture firm Bessemer Venture Partners led the round, with existing investors including Greylock Partners and Craft Ventures also taking part. The deal points to strong investor appetite for AI-related cybersecurity companies.

The new money arrives nine months after Upwind's previous round, when it raised $250 million at a $1.5 billion valuation.

The Datadog offer

According to a person familiar with the company, the financing nearly collapsed because Datadog tried to acquire Upwind. Datadog is a publicly traded company that sells tools for monitoring how software runs, a field known as observability. The source said it did not offer a premium above the $3.8 billion valuation set by venture investors, so Upwind chose to remain independent.

Growth

The four-year-old company has grown quickly as AI-driven cyber threats increase. Upwind adds $20 million to $30 million in annualized recurring revenue (ARR) every quarter and is projected to finish the year at about $90 million. That implies venture investors and Datadog valued it at more than 40 times forecast ARR. According to TechCrunch reporting from earlier this year, another fast-growing cybersecurity startup, Cyera, fetched 80 times ARR.

Upwind continues to attract acquisition interest. Its founder, Amiram Shachar, previously sold the cloud spend management startup Spot.io to NetApp for $450 million. Upwind describes its approach as "runtime" security, meaning it alerts on and remedies attacks and vulnerabilities in active services in real time.

TechCrunch has asked both Upwind and Datadog for comment.