Cloud Security Startup Upwind Raises $400M at $3.8B Valuation, Rejects Datadog Acquisition

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Upwind secured $400 million in a Series C funding round valuing the AI-driven cloud security firm at $3.8 billion, opting to continue independently after declining Datadog's buyout offer at the same valuation.

Upwind, a San Francisco-based startup specializing in AI-powered cloud infrastructure security, has successfully closed a $400 million Series C funding round led by Bessemer Venture Partners, with participation from existing investors including Greylock Partners and Craft Ventures. This recent financing values the company at $3.8 billion, marking a significant increase from its previous $1.5 billion valuation just nine months prior, when it raised $250 million.

Notably, this funding round was nearly disrupted by an acquisition proposal from Datadog, a publicly traded software observability firm. Datadog offered to purchase Upwind at the $3.8 billion valuation but did not propose a premium. Sources familiar with Upwind revealed that the startup ultimately decided to forego the acquisition, choosing to remain an independent entity and continue executing its growth strategy.

Founded four years ago by Amiram Shachar, Upwind focuses on "runtime" security—a method that detects and mitigates cyber threats and vulnerabilities in active cloud services in real time. The company has experienced rapid growth, adding between $20 million and $30 million in annualized recurring revenue (ARR) each quarter. By the end of 2026, Upwind is projected to reach approximately $90 million in ARR. This performance implies the startup is valued at more than 40 times its forecasted ARR, aligning with market valuations for high-growth software firms.

While the cybersecurity sector remains a key domain for AI-driven software development following AI coding and customer support tools, fewer cybersecurity startups have successfully gone public in recent years. Consequently, despite turning down Datadog’s acquisition bid, many industry observers consider an eventual sale to be the most plausible outcome for Upwind.

Upwind continues to attract acquisition interest from other potential buyers, indicating strong market confidence in its technology and business model. The founder’s prior success includes selling Spot.io, a cloud spend management startup, to NetApp for $450 million.

Upwind’s decision to remain independent at this juncture reflects its confidence in capturing more substantial value as it scales within the AI-enabled cybersecurity market. Both Upwind and Datadog have been approached for comments but did not provide statements as of this writing.