Upwind raises $400M Series C at $3.8B valuation after turning down Datadog bid

Upwind, a San Francisco startup that applies AI to securing cloud infrastructure, has raised a $400 million Series C at a $3.8 billion valuation, TechCrunch reports. Bessemer Venture Partners led the round, with earlier backers Greylock Partners and Craft Ventures also investing.

The financing arrives only nine months after Upwind's previous $250 million round, which valued the company at $1.5 billion — a more than twofold jump in valuation in under a year.

The Datadog offer that went nowhere

The funding, which had been in negotiation for months, came close to collapsing because of acquisition interest from Datadog, the publicly traded company whose monitoring tools fall under the category of observability. According to a person familiar with Upwind who spoke with TechCrunch, Datadog put forward a buyout offer but did not propose paying a premium above the $3.8 billion figure venture investors had already set, so Upwind chose to remain independent.

TechCrunch also reports that acquisition interest in the startup has continued.

Declining the bid is a wager that Upwind will eventually be worth more than Datadog was willing to pay. That is a bold position given the exit environment: as TechCrunch notes, very few cybersecurity companies have completed public listings in recent years, which makes an eventual sale the likeliest endgame for the startup in any case.

The numbers behind the valuation

Upwind is four years old and was founded by Amiram Shachar, who previously sold the cloud spend management company Spot.io to NetApp in a $450 million deal. Upwind markets its product as "runtime" security, meaning it detects and remediates attacks and vulnerabilities in services while they are actively running, rather than only scanning code or configurations.

A person familiar with Upwind's finances told TechCrunch that the company has been adding $20 million to $30 million in annualized recurring revenue every quarter and is on track to finish the year at roughly $90 million. On that basis, both the new investors and Datadog were effectively pricing the company at more than 40 times its forecast ARR, a standard benchmark for valuing software businesses. TechCrunch points out that while that multiple is high, it sits well below the roughly 80x ARR reportedly commanded by Cyera, another fast-growing security startup, based on the outlet's earlier reporting.

The wider context supports the bullishness. Tomasz Tunguz, general partner at Theory Ventures, recently argued on his blog that cybersecurity is positioned to become the third major wave of AI software spending by enterprises, after AI coding tools and AI customer support.

Why it matters

A startup rejecting a multi-billion-dollar offer from a large public acquirer is a strong signal about where the cloud security market is heading. It suggests that both founders and investors believe demand for AI-driven threat defense is durable enough to justify staying independent and compounding value, rather than selling into an incumbent.

The deal also illustrates two competing forces in enterprise software. On one side, established players like Datadog are looking at security as a natural adjacent market and are willing to bid at headline valuations in the billions. On the other, venture investors are still prepared to pay premium multiples — here, more than 40x forward ARR — for security companies riding the AI wave.

With scarce IPO activity among cybersecurity firms, the open question is whether Upwind can grow into its valuation before consolidation pressure returns. Until then, its decision to walk away sets a reference point for other AI security startups weighing similar offers.