Upwind Raises $400M at $3.8B Valuation After Rejecting Datadog

Upwind has raised a $400 million Series C at a $3.8 billion valuation, nine months after turning down an acquisition attempt from Datadog that offered no premium on that number. Bessemer Ventures led the round, with existing backers Greylock Partners and Craft Ventures participating, according to a person familiar with the San Francisco startup.

The financing almost collapsed during the Datadog negotiations, that person said. Datadog, the publicly traded observability company that sells tools for monitoring how software runs, declined to offer anything above the $3.8 billion valuation Upwind's venture investors had already set. Upwind chose to stay independent.

How fast is Upwind actually growing?

The four-year-old company, which uses AI to secure cloud infrastructure, has been adding $20 million to $30 million in annualized recurring revenue each quarter, a person familiar with its financials said. It is projected to end the year at roughly $90 million ARR.

That growth comes amid rising AI-driven cybersecurity threats. It also means investors — and Datadog — priced Upwind at more than 40 times its forecast ARR, a common yardstick for software company valuations. Put plainly: buyers were paying more than $40 for every $1 of the company's expected yearly subscription revenue.

The multiple looks rich but is not the sector's ceiling. Investors valued Cyera, another fast-growing cybersecurity startup, at 80 times ARR earlier this year, according to TechCrunch reporting. Upwind's pricing is half that benchmark — a discount that either reflects discipline or questions about durability, and the company has not said which.

Theory Ventures general partner Tomasz Tunguz recently wrote in his widely-read blog 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. That thesis helps explain why VCs keep bidding up security startups despite sparse exit activity.

What does walking away from Datadog signal?

By rejecting the offer, Upwind is betting it will ultimately be worth more than the $3.8 billion Datadog was prepared to pay. That is a bold wager for a company whose most likely exit remains a sale: few cybersecurity companies have gone public in recent years, which limits the alternatives.

The betting may not be idle. Upwind continues to draw acquisition interest, according to a person familiar with the company. Neither Upwind nor Datadog has commented publicly; TechCrunch has reached out to both.

Who is behind the company?

Upwind was founded by Amiram Shachar, who previously sold his cloud spend management startup Spot.io to NetApp for $450 million. He now has a track record of building infrastructure software and exiting — a fact that will not discourage future acquirers.

The company calls its approach "runtime" security. Rather than scanning code or static systems, it alerts on and remediates attacks and vulnerabilities in active services in real time.

What happens next?

The new cash buys Upwind time — $400 million is more than four times its expected annual revenue — but it also raises the bar. To justify a valuation above $3.8 billion, the company must keep compounding ARR at its current pace while the M&A market it will likely depend on stays interested.