Toronto-based corporate virtual private network (VPN) startup Tailscale has raised $160 million USD ($230 million CAD) in Series C funding to grow its team and keep up with the “surprising number” of artificial intelligence (AI) companies now using its software.
The all-equity round was led by Silicon Valley venture capital firm Accel, with participation from returning investors CRV, Insight Partners, Heavybit, and Uncork Capital. Tailscale has emerged from the capital raise with a $1.45 billion USD (approximately $2 billion CAD) post-money valuation, co-founder and CEO Avery Pennarun told BetaKit in an email statement.
“This funding reflects our maturity as a company.”
The round also saw some angel investors, including existing backer George Kurtz, the CEO of cybersecurity giant Crowdstrike, and first-time investor Anthony Casalena, the CEO of website builder Squarespace.
The new funding will be used to expand Tailscale’s global operations, and grow its engineering, product, and sales teams to support the “surprising number of leading AI companies,” using its product, the company said in a blog post. Pennarun did not share exact hiring goals, but said the company continues to be “eager” to place as many of its new roles in Canada as it can, especially “in light of rising global trade tensions.”
“Canadians are well-positioned to lead a new generation of global collaboration and Tailscale wants to be at the forefront of that,” Pennarun said.
Pennarun spoke with BetaKit about Tailscale’s accelerated growth this past January as the company hit 10,000 paid business clients after doubling its customer base in just 10 months. At the time, Pennarun said the then 100-person company was well-capitalized and could become cash-flow positive without additional financing, but had begun to contemplate another fundraise.
While the company hasn’t disclosed its annual recurring revenue, it claimed the metric was growing more than 100 percent year-over-year. Pennarun told BetaKit following this latest raise that the company now has 150 employees, and has seen another 20 percent increase of its paid business clients since January.
“This funding reflects our maturity as a company: we’ve moved rapidly beyond our past market-peak valuation as we grow exponentially, adding more and larger enterprise customers,” Pennarun said in a statement.
Tailscale also said it would invest in products, including its free plan and backwards compatibility platform.
RELATED: Tailscale hits 10,000 paid business clients after doubling customer base in 10 months
Founded in 2019 by former Google software engineers, Tailscale helps companies and individuals secure and control their data with its zero-configuration VPN, which can be installed on any device, manages firewall rules for users, and works from anywhere. One of Tailscale’s key selling points is its software’s accessibility, which enables people and teams to securely access network services without the long setup times and complexity of traditional VPNs.
Tailscale says it serves some of the world’s most prominent AI startups, including Perplexity, Mistral, Groq, Hugging Face, and Toronto-based Cohere. Tailscale’s other enterprise customers include Instacart, SAP, Telus, Duolingo and Motorola.
This round brings Tailscale’s total funding to date to $275 million USD ($395 million CAD), with previous investments coming from Montréal-based Inovia Capital and Panache Ventures. Tailscale last raised a $128-million Series B round in May 2022, which valued the company at more than $1 billion CAD. Pennarun reportedly told Bloomberg that the company has attracted attention from would-be acquirers, but that it’s “not interested right now” in a sale.
Pennarun confirmed the company had been approached by potential acquirers, but told BetaKit that the company intends to grow as a private company and work towards an initial public offering (IPO).
“Tailscale intends to remain independent and we are on a likely IPO track, although any IPO is several years out,” Pennarun said. “Meanwhile, we have an extremely efficient business model, rapid revenue acceleration, and a long runway that allows us to become profitable when needed, which means we can weather all kinds of economic storms.”
Feature image courtesy Tailscale.