Upwind raises $400M after rejecting Datadog offer

The cloud security startup reached a $3.8 billion valuation after Datadog explored a deal but did not offer more than the price set by investors.

Upwind has raised $400 million in a new Series C round, giving the San Francisco startup a $3.8 billion valuation. The round was led by Bessemer Venture Partners, with participation from existing investors including Greylock Partners and Craft Ventures. The size of the financing is notable on its own. But the round also drew attention because Datadog tried to buy the company while the deal was coming together.

Upwind ultimately decided to stay independent. According to a person familiar with the matter, Datadog did not offer a premium above the valuation venture investors were already assigning to the startup.

Upwind’s valuation climbed quickly

Upwind is only four years old, but it has been growing fast as AI-related cybersecurity risks increase. The company uses AI to secure cloud infrastructure and describes its approach as “runtime” security — detecting and responding to attacks and vulnerabilities in active services as they happen.

This is not the startup’s first large raise. Nine months ago, Upwind closed a $250 million financing at a $1.5 billion valuation. The new round marks a sharp increase in its price tag in less than a year, as IT-PUB News reports.

Datadog’s interest did not lead to a deal

The financing had been in the works for months, but it reportedly came close to breaking down when Datadog expressed interest in acquiring Upwind. Datadog sells observability tools, which companies use to monitor how software is performing.

Price appears to have been the sticking point. The person familiar with the situation said Datadog did not offer more than the $3.8 billion valuation being set by investors. Upwind walked away and chose to keep building on its own.

According to the same source, the startup is still drawing acquisition interest. For now, though, it is betting that remaining independent will prove more valuable.

Revenue growth underpins the new round

Upwind’s revenue growth helps explain why investors were willing to back the company at such a high valuation. According to a person familiar with its financials, the startup has been adding $20 million to $30 million in annualized recurring revenue each quarter and is expected to end the year at roughly $90 million.

That values the company at more than 40 times its forecast ARR, a common software metric. The same source said that multiple is still below the 80x ARR reached by Cyera, another fast-growing cybersecurity company, in reporting earlier this year.

The figures show how strongly investors are pricing high-growth cybersecurity companies, especially those tied to AI. They also underscore the pressure facing startups that have to choose between taking a sale offer now or holding out for a bigger outcome later.

Why staying independent stands out

Upwind’s decision to reject the offer suggests confidence that it can eventually be worth more than $3.8 billion. That stands out in a market where cybersecurity companies do not often go public in large numbers, leaving a future sale as one of the more likely exit paths.

The company was founded by Amiram Shachar, who previously sold cloud spend management startup Spot.io to NetApp for $450 million. That track record adds to the attention around Upwind’s next steps.

For now, Upwind remains independent, well funded, and under pressure to maintain its growth. With AI-driven security demand, a rich valuation, and continued acquisition interest, the company is likely to stay in focus.