Networking startup Tailscale raises $160M at $1.5B valuation

Tailscale Inc., a startup that helps enterprises establish secure network connections between their systems, has raised $160 million in funding.

The Canadian software maker disclosed the investment today. Accel led the Series A raise with participation from CRV, Insight Partners and other institutional backers. The chief executives of CrowdStrike Holdings Inc. and Squarespace Inc. participated as well.

Tailscale, which is now valued at $1.5 billion, develops a virtual private network platform of the same name. Customers can use it to establish encrypted connections between remote systems. Tailscale says that its installed base includes more than 10,000 organizations, including SAP SE, Hugging Face Inc. and other high-profile tech firms.

Business users rely on the company’s platform to securely connect to cloud-based applications. Developers, in turn, can use Tailscale to link together workloads spread across different data centers. The software also eases related tasks such as moving applications between clouds.

Most VPNs create network connections using a VPN gateway, a server that functions as a kind of switchboard. Data traffic doesn’t travel directly to its destination but is rather sent to the gateway, which forwards it to the recipient system.

Tailscale’s namesake VPN platform takes a different approach. Systems that use the software send data to one another directly without the help of a switchboard. The company says its technology provides several benefits over the traditional switchboard approach, most notably lower latency.

Companies typically use a single gateway to manage all their VPN connections. If two systems linked by a VPN connection are both located in San Francisco but the gateway is in New York, data traffic has to travel to New York and back. The fact that Tailscale doesn’t use a gateway allows it to skip this round-trip and thereby boost network performance. 

The reason most other VPN tools do use a gateway is that creating connections without one is highly challenging. One source of complexity is the fact that a device has to find the system to which it wishes to connect before it can start sending data. In theory, the task can be performed fairly easily using the system’s IP address. In practice, however, it’s far from simple because IP addresses change regularly.

Tailscale tackles the challenge by creating a public key for every device. Unlike IP addresses, the public key doesn’t change regularly, which makes it easier to establish connections. A Tailscale-powered device can retrieve the public keys of the other systems in a network from a centralized server that also contains the cybersecurity rules it should implement.

The company’s VPN is free for personal use. It generates revenue by selling paid tiers for individuals and organizations. Those plans offer higher usage caps, as well as additional cybersecurity features that ease tasks such as blocking malicious devices from establishing VPN connections.

Tailscale will use its newly closed funding round to grow its engineering and product teams. The company plans to make new investments in the free version of its platform, as well take steps to ensure future releases will be backwards compatible. 

Image: Unsplash

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