Upwind turned down Datadog's offer and raised 400 million dollars: the cloud security startup is now worth 3.8 billion dollars

San Francisco startup Upwind, which uses artificial intelligence to protect companies' cloud infrastructure, has raised 400 million dollars (about 345 million euros) in a Series C round at a valuation of 3.8 billion dollars. The round was led by Bessemer Venture Partners, with existing investors Greylock Partners and Craft Ventures also taking part.

The backstory is more interesting than the number. According to a source familiar with the talks, Datadog tried to buy Upwind but didn't offer anything above the 3.8 billion valuation. Upwind decided to stay independent - even though the takeover attempt nearly derailed the round.

The pace is fast even by Silicon Valley standards. Just nine months earlier the company raised 250 million dollars at a 1.5 billion valuation. Upwind has existed for four years, adds between 20 and 30 million dollars of annual recurring revenue every quarter, and is expected to finish the year at around 90 million. So investors are paying more than 40 times expected annual revenue - which sounds like a lot, but is almost half the roughly 80-times multiple Cyera reportedly achieved.

Founder Amiram Shachar is no beginner: he sold his previous company, Spot.io, to NetApp for 450 million dollars. Upwind focuses on real-time security - flagging and fixing attacks and vulnerabilities while services are running. That's exactly where investors are now pushing money. Tomasz Tunguz of Theory Ventures argues cybersecurity will be the third big wave of AI software that companies pay for, after coding tools and customer support.

But this story rarely ends on the stock market. Few cybersecurity companies have gone public lately, so the most likely outcome for Upwind is a sale too - just later and at a higher price. Turning down Datadog today is a bet that tomorrow someone will offer more. The only question is whether such a buyer turns up.