Skyflow Secures Additional $30M Funding as AI Boosts Demand for Privacy Solutions

This morning, Skyflow announced it has successfully raised a $30 million Series B extension, led by Khosla Ventures. This funding round is noteworthy for several reasons, particularly its structure and the impact of growing AI technologies on Skyflow's business.

The new capital injection follows Skyflow's expansion of its data privacy services to accommodate emerging AI technologies last year. In an interview, Skyflow co-founder and CEO Anshu Sharma revealed that AI-related software offerings now constitute a significant portion of the company's overall business.

Skyflow has experienced remarkable growth, with revenues related to large language models (LLMs) skyrocketing from 0% to approximately 30% recently. This surge indicates a heightened market demand for data-management services, driven by the information hunger of LLMs.

Originally, Skyflow functioned as an API that securely stored personally identifiable information (PII) for its clients. However, AI's evolution has expanded the range of data types the platform can accommodate. In today's era of massive data accumulation—where companies like Databricks and Snowflake have gained prominence—effectively managing permissions and governance for LLM usage has become increasingly crucial.

Skyflow's current fundraising efforts are unsurprising. After raising $45 million in a Series B round back in 2021, the company explained that a portion of that funding was allocated to enhancing its regional presence in compliance with important data residency regulations, such as those in China. Though initiating another fundraising round a few years later is typical, the choice to frame this round as an extension rather than a Series C was notable.

When asked about the rationale behind this classification, Sharma noted that both his firm and its customers prioritize substance over nomenclature. “Money is money to us,” he stated, emphasizing that maintaining “very low dilution” while securing growth capital is what truly matters.

There’s a strategic aspect to the round's naming worth considering. Sharma shared insights from conversations with venture capitalists indicating that late-stage investors are becoming more cautious, while those categorized as “early growth” investors are more engaged. By designating the funding as a Series B extension, Sharma could refine his fundraising strategy. He highlighted that Khosla Ventures has previously invested heavily in AI, understanding the critical nature of data privacy and security in corporate LLM applications.

Vinod Khosla, in a prepared statement, emphasized that establishing trust and privacy infrastructure is essential for protecting sensitive data. He underscored that developing tools to prevent data leaks is vital for any enterprise.

On a broader level, Skyflow's revenue has more than doubled, climbing by 110% last year. Although Sharma refrained from specifying the exact revenue type associated with this growth—be it annual recurring revenue or trailing revenue—he did confirm that the company is now operating within the double-digit million revenue range.

This latest funding round aligns with observed trends in the startup landscape. Companies that raised large sums during the peak of 2021 are now pursuing more modest follow-on funding. The rapid growth in AI is also fostering successful ventures in LLM infrastructure and support. Furthermore, API-based service providers continue to thrive, despite a challenging period for usage-based pricing.

Skyflow's swift ascent in AI-driven data privacy positions it as a key player, offering valuable insights into the escalating enterprise demand for LLMs and the potential profits to be gained from supporting this latest software revolution.