Upwind, an Israeli cybersecurity startup, has secured $400 million in a Series C funding round, pushing its valuation to $3.8 billion. The capital injection comes after leadership rejected a takeover bid from observability giant Datadog, opting instead to maintain independence as demand for runtime cloud security continues to accelerate.
The Decision to Reject a $4 Billion Datadog Bid
The funding round, led by Bessemer Venture Partners with participation from Greylock Partners, Cyberstarts, Craft, Salesforce Ventures, Alta Park, Picture Capital, Swish Ventures, Cerca Partners, TCV, Penny Jar, Leaders Fund, and Canapi Ventures, underscores a high-stakes bet on the company’s future. The deal nearly collapsed during negotiations when Datadog attempted to acquire the startup. While Datadog’s offer hovered near $4 billion, it failed to provide a significant premium over the valuation set by venture capitalists. Upwind’s leadership, led by CEO Amiram Shachar, determined that the company’s growth trajectory warrants staying the course as an independent entity.
SCOOP: Datadog offered to buy Upwind for nearly $4 billion as cloud security demand booms. w/ @validapau https://t.co/KZ8QNKluf4
This rejection highlights a broader tension in the enterprise software market. While Datadog, a $100 billion publicly traded entity, seeks to consolidate its dominance in observability, Upwind is positioning itself as a specialized provider for the “runtime” security era. By securing this fresh capital, Upwind effectively signals to the market that it intends to pursue a public offering rather than an early exit.
Runtime Security Architecture and the eBPF Shift
Upwind’s technical strategy relies on what it terms “runtime security”—a departure from traditional, static vulnerability scanning. Founded in 2022, the company utilizes eBPF (Extended Berkeley Packet Filter) sensors to monitor active processes directly within the operating system kernel. This approach allows security teams to detect and remediate threats in real time without the performance overhead typical of legacy agent-based solutions.
“AI is fundamentally transforming cloud infrastructure architecture, the scope of cyber threats, and the way organizations build and operate software,” said Shachar.
The technical necessity for this architecture is driven by the rise of AI-generated code. As autonomous development engines populate enterprise environments, the surface area for zero-day exploits has expanded. Upwind’s platform integrates telemetry from cloud workloads, APIs, and client-side agents to provide a unified view of risk. This capability is increasingly vital for DevOps teams managing hybrid cloud environments where traditional security perimeters no longer exist.
Rapid Financial Scaling and Market Valuation
The $3.8 billion valuation reflects a rapid climb in annualized recurring revenue (ARR). Upwind’s ARR has quadrupled since the beginning of the year, and the company’s ARR for 2026 is estimated at $80 million or more.
| Milestone | Date | Valuation |
|---|---|---|
| Series B | January 2026 | $1.5 Billion |
| Series C | October 2026 | $3.8 Billion |
The valuation multiple—roughly 40 times forecast ARR—is aggressive but remains below the 80x multiples seen in other high-growth cybersecurity segments earlier this year. The company’s ability to sustain this growth while rejecting a major acquisition suggests that investors are banking on the “third wave” of AI software spending: cybersecurity. As organizations move beyond initial AI coding tools and customer support bots, they are increasingly allocating budgets to platforms that can secure these new, complex software stacks.
The Competitive Landscape of Cloud Observability
The fallout from the rejected Datadog acquisition is already manifesting in the talent market. Datadog maintains a development center in Israel, and following the breakdown in talks, the company will likely look to recruit additional talent in Israel to accelerate its own product development. For Upwind, the challenge will be to maintain its technical edge against larger incumbents while managing the overhead of a rapidly scaling organization.
The company’s growth is also buoyed by a shifting vendor landscape. Following Google’s acquisition of Wiz, many enterprises are looking for alternative, independent security partners to avoid platform lock-in. Upwind’s client roster, which includes Nubank and Carvana, suggests that the market is currently favoring specialized, “inside-out” security tools that can bridge the gap between development, operations, and security teams.
With more than $800 million in cumulative equity backing, Upwind holds the balance sheet strength to fund extensive research and development. The firm’s next major hurdle will be proving that its runtime security model can scale across the increasingly fragmented hybrid cloud architectures that define modern enterprise IT. For now, the decision to walk away from Datadog remains one of the most significant indicators of confidence in the current cybersecurity investment climate.
