Upwind raises $400M after walking away from Datadog acquisition offer

Upwind, a cloud security startup using AI to secure cloud infrastructure, raised a $400M Series C round at a $3.8B valuation led by Bessemer Venture Partners, with participation from existing backers Greylock Partners and Craft Ventures. This comes nine months after Upwind closed its previous $250M financing at a $1.5B valuation. The funding was nearly derailed by Datadog's acquisition offer, which didn't meet the $3.8B valuation set by VCs.

Upwind has grown rapidly, adding $20M to $30M in annualized recurring revenue (ARR) each quarter, and is projected to end the year at $90M. This represents a high multiple of 40 times its forecast ARR, albeit lower than the 80x ARR fetched by Cyera, another fast-growing cybersecurity startup.

Cybersecurity is expected to be the third big wave of AI software that companies will pay for, after AI coding tools and customer support, as per a recent blog post by Theory Ventures general partner Tomasz Tunguz.

By walking away from the acquisition offer, Upwind believes it will ultimately be worth more than the $3.8B that Datadog was willing to pay.