HiddenLayer Raises $100M as Enterprise Demand for AI Security Surges

Three years ago, when HiddenLayer secured its $50 million Series A funding, the industry questioned whether AI threats would reach a scale that justified a dedicated market. However, the landscape has evolved rapidly. Security firms are now racing to develop monitoring solutions for both agents and their associated tools and add-ons. While large-scale agent exploits remain relatively rare in headlines, the risk of misbehavior during production is undeniable, driving a market explosion. According to Gartner, companies will spend $2.83 billion this year on AI security products, an 83% increase from the previous year, with projections reaching nearly $4.78 billion next year.

HiddenLayer, which specializes in protecting AI models, agents, and workflows from adversarial attacks and malicious code, has capitalized on this surge. CEO Chris Sestito reported that the company’s annual recurring revenue has more than doubled over the last year. Although he declined to disclose the exact figure, ARR is now in the "tens of millions," with over 90% of this growth attributed to new customer acquisitions. The company’s primary customer base consists of financial services firms and major tech companies developing AI products, and it also holds contracts with the Department of Defense and the intelligence community. Notably, one client is a "leading frontier model provider" serving "more than 700 million weekly users."

Leveraging this momentum, HiddenLayer has successfully raised $100 million in a Series B round led by Delta-v Capital, with participation from Ten Eleven Ventures, Morgan Stanley, Microsoft’s M12, and others.

Despite the shift in focus, the Austin-based startup maintains its core offerings but has expanded its scope. Sestito explained that the company has extended its existing product suite—covering discovery, runtime protection, attack simulation, and supply chain security—to address specific challenges like prompt injection, agent manipulation, and malicious tool use.

Sestito emphasized that while the underlying technology remains grounded in the principle that "inference is still inference," applicable to both traditional machine learning and Gen AI, the company has prioritized runtime security. He likened this approach to traditional endpoint detection and response (EDR) solutions, but tailored specifically for artificial intelligence.

Reflecting this strategic direction, HiddenLayer has introduced capabilities to scan open-source models. Sestito highlighted that the startup parses and scans approximately 50 different AI file frameworks to ensure that open-weight models are genuine. The company looks for instances where a model purports to be one thing but actually contains hidden components.

The new capital will primarily fund sales and distribution efforts, while the startup continues to expand its engineering and research teams. Additionally, HiddenLayer plans to expand its operations into Europe and the EMEA region.

HiddenLayer is preparing for potential future acquisitions, as established cybersecurity giants like Cisco, Palo Alto Networks, and Check Point often prefer to acquire technology rather than build it internally. However, Sestito acknowledged that some aspects of their products might eventually be integrated into larger platforms. He predicts that AI infrastructure will increasingly rely on governance features like discovery and identity controls, leaving specialized tools like HiddenLayer’s to focus on scaling vertically with AI and horizontally across the cybersecurity ecosystem.