Upwind, a startup from San Francisco focused on utilizing AI for cloud security, has successfully secured $400 million in a Series C funding round, achieving a valuation of $3.8 billion. The round was led by Bessemer Venture Partners, with participation from established investors such as Greylock Partners and Craft Ventures.
This funding follows Upwind’s previous financing of $250 million, which closed nine months ago at a valuation of $1.5 billion.
The latest investment, which has been in development for several months, nearly fell through after Datadog expressed interest in acquiring Upwind. Datadog, a public company specializing in software performance monitoring, reportedly did not provide a bid exceeding the current valuation, prompting Upwind to retain its independence.
Since its inception four years ago, Upwind has experienced substantial growth in response to escalating AI-enabled cybersecurity challenges. The company has been generating an additional $20 million to $30 million in annual recurring revenue (ARR) each quarter and is projected to finish the year with approximately $90 million in ARR. This valuation suggests that investors valued the startup at more than 40 times its anticipated ARR, a typical metric for evaluating software firms. While this multiple is lower than the 80x ARR commanded by Cyera, another rapidly expanding cybersecurity company, it still reflects strong potential.
Cybersecurity is emerging as a significant area for investment in AI-driven software, following AI tools for programming and customer service, according to Theory Ventures partner Tomasz Tunguz, who recently discussed this trend in his popular blog.
By opting against the acquisition, Upwind demonstrates its confidence in achieving a valuation beyond the $3.8 billion proposed by Datadog. However, given the scarcity of cybersecurity firms going public recently, a sale remains a probable scenario for the startup’s future.
Upwind continues to attract acquisition interest, as reported by sources familiar with the situation.
Founded by Amiram Shachar, who previously sold his cloud management company Spot.io to NetApp for $450 million, Upwind employs a “runtime” security strategy. This approach enables real-time alerts and responses to attacks and vulnerabilities affecting active services.
Inquiries have been made to both Upwind and Datadog for their responses regarding these developments.
