Upwind Raises $400M, Having Turned Down Datadog’s Acquisition Bid

Upwind, a San Francisco-based startup using AI to secure cloud infrastructure, has closed a $400 million Series C at a $3.8 billion valuation, led by Bessemer Venture Partners with participation from existing investors Greylock Partners and Craft Ventures.

The raise comes just nine months after Upwind’s previous $250 million round valued the company at $1.5 billion. Getting this new round done wasn’t straightforward: according to a person familiar with the matter, the deal nearly collapsed after Datadog made a bid to acquire Upwind outright. Datadog, the publicly traded observability company, reportedly wasn’t willing to pay more than the $3.8 billion valuation VCs had already set, so Upwind opted to remain independent rather than sell at a flat valuation.

The four-year-old company has been expanding quickly as AI-driven security threats proliferate, adding $20-30 million in annualized recurring revenue each quarter and tracking toward roughly $90 million in ARR by year’s end, per a person familiar with its financials. That puts its valuation at more than 40 times forecast ARR — a steep multiple by conventional standards, though still well under the 80x multiple cybersecurity peer Cyera commanded earlier this year.

The broader bet here is that cybersecurity is shaping up as the next major category of AI-driven software spending, following coding tools and customer support — a thesis Theory Ventures’ Tomasz Tunguz laid out recently in a widely circulated post.

By turning down Datadog’s offer, Upwind is signaling confidence that it’s worth more than $3.8 billion long-term. Still, with so few cybersecurity companies reaching the public markets lately, acquisition remains the most probable eventual outcome — and sources say Upwind continues to attract interest from potential buyers.