Datadog has offered close to $4 billion to buy Upwind Security, the Israeli cloud security startup, according to a report by The Information on Thursday. Upwind has not accepted. It is instead finalizing a $300 million funding round that values the company at about $3.8 billion. Neither company commented on the report.
Look at those two numbers side by side. The gap between the takeover offer and the private valuation is small, which tells you where the leverage sits. Upwind can raise fresh money at almost the price a buyer is willing to pay for the whole company, so it has little reason to sell unless someone pays a clear premium. The startup has reportedly turned away approaches from several companies over the past few months.
This is also Datadog’s second try. The two companies talked about a deal last year at a price of around $1 billion, and those talks fizzled out. At the time, Upwind had just closed a $100 million Series A at a valuation of roughly $900 million, led by Craft Ventures with TCV and Alta Park Capital joining existing backers including Greylock and Cyberstarts. The price for the same company has roughly quadrupled in about a year. Not many security startups can say that.
What Upwind sells
Upwind was founded in late 2022 by Amiram Shachar together with Liran Polak, Lavi Ferdman and Tal Zuri, the team behind Spot.io, which NetApp bought for $450 million in 2020. It operates out of Israel, San Francisco, the UK and Iceland.
The product sits in the category the industry calls CNAPP, short for cloud-native application protection platform. In plain terms, Upwind watches what applications are actually doing while they run in the cloud and flags or stops behavior that looks like an attack. It folds several tools that used to be sold separately into one platform: cloud posture management, workload protection, cloud detection and response, vulnerability management, identity security and container security. More recently it has pitched the same runtime monitoring at AI agents running in customer environments. Roku and the Brazilian digital bank Nubank are among its customers.
The runtime angle matters. A lot of cloud security tools scan configurations and tell you what could go wrong. Runtime tools see what is going wrong, in real time, from inside the workload. That’s data an observability company already collects in a different form.
Why Datadog wants it
Datadog built its business on monitoring servers, databases, applications and cloud infrastructure, and has spent the last few years pushing into security with products like its Cloud SIEM. Its agents already sit on customers’ cloud workloads collecting logs, metrics and traces. Adding Upwind’s detection and response on top of that footprint is the obvious move. Security teams and operations teams often look at the same signals, and a vendor that already owns the telemetry pipeline has a natural opening to sell the security layer too.
Datadog has bought Israeli companies before, including Ozcode in 2021 and Seekret in 2022, but those were small deals. An offer near $4 billion would be by far its largest acquisition.
The wider market explains the price. Google’s $32 billion deal for Wiz reset expectations for what a leading cloud security platform is worth, and every large platform vendor without a strong CNAPP offering now has a gap to fill. Enterprise spending on security tooling has also picked up as companies deploy AI agents and worry about attacks that move faster than human analysts can follow. Upwind’s pitch around monitoring AI agents at runtime lands right in that budget line.
There is a twist in the background. The Information reported in August that Palo Alto Networks’ chief executive had explored acquiring Datadog itself. A company that may be a target is now trying to become a bigger buyer, and owning a credible cloud security platform would change how any future suitor values it.
What happens next
If Upwind closes its round at $3.8 billion, any buyer will need to clear that number with room to spare. Datadog’s offer barely does. The founders have sold a company before and know the playbook: keep growing, keep raising, and let the bids come. Datadog can raise its price, walk away, or try again later at an even higher one, as it has already learned once.
For the Israeli cyber sector the message is the same either way. Cloud security startups founded only a few years ago are now being priced in the billions, by investors and acquirers alike.