Upwind spurns $3.8B Datadog bid to raise $400M at same valuation

Cloud security startup Upwind has turned down a $3.8 billion acquisition offer from Datadog, opting instead to raise $400 million in a Series C round at the same valuation. The move, first reported by AndroGuider, marks one of the most aggressive bets yet on the future of the cloud-native application protection platform (CNAPP) market.

Upwind’s founders and board concluded that selling now would limit their upside, according to sources close to the negotiations. Datadog, which has been expanding beyond observability into security and AI-driven cloud monitoring, saw Upwind as a way to instantly acquire a best-in-class CNAPP platform. The startup, founded in 2022 by former Spot.io executives, has positioned itself as a direct challenger to Wiz and Palo Alto Networks’ Prisma Cloud, two of the most dominant players in the space.

The $400 million round, which brings Upwind’s total funding to over $600 million in just three years, suggests the company is positioning itself for a long-term push. The infusion of capital could support its ambitions as it looks ahead to potential milestones in the coming years. The involvement of late-stage and crossover funds hints at broader market confidence in its trajectory.

What makes this decision notable is not just the size of the valuation but the message it sends. Raising at the same price as Datadog’s offer suggests Upwind’s leadership sees more value in independence than in an immediate exit. The move echoes Wiz’s rejection of a $23 billion bid from Google last year, though Upwind’s approach appears to prioritize a different path. Unlike Wiz, which later struck a $32 billion deal, Upwind’s founders seem focused on a different kind of outcome.

Upwind differentiates itself with a runtime-first approach to cloud security, focusing on real-time context rather than just vulnerability scanning. The company claims its platform reduces alert noise by over 90%, helping security teams prioritize critical threats that are actively exploitable in production. This runtime focus has become a key battleground in the CNAPP market, where observability and security are increasingly converging.

Remaining independent allows Upwind to maintain flexibility in its partnerships, avoiding the constraints that might come with being part of a larger platform. The decision also keeps the CNAPP market competitive, with Upwind now positioned as a standalone player alongside Wiz and Prisma Cloud.

Datadog, meanwhile, may need to reassess its strategy in the space. The company has been aggressive in expanding into security, but this rejection could prompt a shift in its approach. Some observers suggest the cloud security market is still evolving, with new opportunities emerging as AI and other technologies create fresh challenges.

The road ahead won’t be easy. Upwind faces pressure to demonstrate sustainable growth while competing with established players that have deeper resources. Its ability to execute on its vision will be closely watched as it navigates a crowded and rapidly changing landscape.

For now, Upwind’s bet is clear: it’s not building to sell. It’s building to lead. The next phase will determine whether that gamble pays off.

Sources: androguider.com