Upwind Secures $400M Series C at $3.8B Valuation After Rejecting Datadog Acquisition — Cloud and enterprise technology

San Francisco-based cloud security startup Upwind has closed a $400 million Series C round led by Bessemer Venture Partners, valuing the company at $3.8 billion. The funding follows the firm's decision to decline an acquisition offer from Datadog that matched this valuation, as leadership aims for greater long-term growth.

Upwind, a four-year-old San Francisco startup specializing in AI-driven cloud infrastructure security, has successfully raised $400 million in a Series C funding round. The investment values the company at $3.8 billion and was led by Bessemer Venture Partners, with participation from existing investors Greylock Partners and Craft Ventures. This latest financing marks a significant increase from the company's previous round nine months ago, which secured $250 million at a $1.5 billion valuation.

The new funding round nearly collapsed after Datadog, a publicly traded observability firm, attempted to acquire Upwind. According to sources familiar with the situation, Datadog did not offer a premium above the $3.8 billion valuation established by venture capital investors. Consequently, Upwind's leadership decided to remain independent rather than accept the acquisition terms.

Financially, Upwind has experienced rapid growth amid escalating AI-driven cybersecurity threats. The company is reportedly adding between $20 million and $30 million in annualized recurring revenue (ARR) each quarter and is projected to reach approximately $90 million in ARR by the end of the year. This trajectory implies that both venture capitalists and Datadog valued the startup at more than 40 times its forecast ARR. While this multiple is high, it remains below the 80x ARR valuation achieved by fellow cybersecurity startup Cyera earlier this year.

Industry analysts suggest that cybersecurity represents a major wave of AI software adoption following tools for coding and customer support. By rejecting Datadog's offer, Upwind signals confidence that its eventual worth will exceed the $3.8 billion acquisition price. However, given the limited number of recent cybersecurity IPOs, an eventual sale remains a probable outcome as the company continues to attract acquisition interest.

Upwind was founded by Amiram Shachar, who previously sold his cloud spend management startup, Spot.io, to NetApp for $450 million. The company distinguishes itself through "runtime" security, a methodology designed to alert and remediate attacks and vulnerabilities in active services in real time. TechCrunch has reached out to both Upwind and Datadog for comment regarding the transaction.

Sources: TechCrunch Startups.