HiddenLayer nabs $100M as enterprises rush to secure their AI deployments; plus, AfterQuery reportedly becomes Y Combinator’s fastest-ever unicorn

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1:13That's Framer.com slash tcstartups rules and restrictions may apply. When AI security startup Hidden Layer raised its$50 million Series A three years ago, one of the big questions in the space was whether the AI threats the startup was protecting against would manifest in enough quantity to make for a real market. As TechCrunch's Kyle Wiggers pointed out in 2023, it's difficult to pin down real examples of attacks against AI at scale. Well, how quickly things have changed. Security companies are now scrambling to build products that can monitor not just agents, but also the tools and add-ons that they use.

1:57While there still are not many headlines about agents being exploited, the risk of agents going haywire during production is nevertheless real. And so the market for tools to prevent that from happening has exploded. So there is an estimate that companies will spend$2.83 billion this year on products meant to secure AI tools, 83 % more than last year. And the expectation is that spending will reach about$4.78 billion next year. Hidden Layer, which makes tools to protect AI models, agents, and workflows from adversarial attacks, vulnerabilities, and malicious code injections, has been able to take good advantage of that shift.

2:43Its co-founder and CEO Chris Sestito told TechCrunch that the startup's annual recurring revenue grew more than 10x over the past year. He declined to give an exact number, but said ARR is now in the tens of millions of dollars, and over 90 % of that growth was driven by new customers signing in the past year. Financial services and large tech companies building AI products are currently the company's largest verticals, and it also has contracts with the Department of Defense and Intelligence community. One of its customers is apparently a leading frontier model provider with more than 700 million weekly users, which sounds like OpenAI or possibly Anthropic.

3:26To make the most of that momentum, the startup has now raised$100 million in a Series B funding round that was led by Delta V Capital with participation from 1011 Ventures, Morgan Stanley, Microsoft's M12, Booz Allen Hamilton, and others. The Austin-based startup broadly still sells what it used to in 2023, but Sestido told TechCrunch that the biggest change it's had to make was to extend its existing products—discovery, runtime protection, attack simulation, and supply chain security—to address prompt injection, agent manipulation, and malicious tool use. Sestido said inference is still inference, so whether it's on a traditional machine learning model, whether it's Gen AI, Whether it's an agentic workstream, a lot of our technology still applied.

4:16So really, we haven't had to pivot, but we've had to grow our scope, from traditional modeling to Gen.AI to agentic. Sestido addressed that runtime security has especially become a priority as AI deployments grow common across businesses and likened it to traditional endpoint detection and response solutions, but specifically for AI. The company's new products reflect that shift, and Sestido highlighted a new opportunity for attackers in exploiting open-source models, saying, we parse and scan about 50 different AI file frameworks to make sure that, especially in the case of open-source, open-weight models, that the tool you're working with is the one you believe it to be, and it's the one it's purporting to be.

5:04We are looking at things like models purporting to be one thing, but they're another. Hidden models inside of models. The startup says the new$100 million is going to help it build in that direction, though with more of a focus on sales and distribution, while continuing to expand its engineering and research. It also plans to expand into Europe and EMEA. Hidden layer may find itself tapping that war chest for more, though. Large cybersecurity companies like Cisco, Palo Alto Networks, and Checkpoint often prefer to buy rather than build this sort of tech, while startups like Noma and Zenity have raised over$100 million each to take on adjacent or overlapping areas of this space.

5:52Sestito acknowledged that some parts of the AI security products his company offers could eventually be bundled into the platforms built by companies such as Microsoft, OpenAI, and AWS, but he expects AI infrastructure will grow towards governance features such as discovery, identity, and policy controls, rather than the kind of tools that his company builds. For now, he says Hidden Layer's job is to scale vertically alongside artificial intelligence and eventually expand horizontally into parts of cybersecurity that increasingly depend on AI. That is an ambitious goal, but the startup first has to prove it can turn its head start into an enduring business before the rest of the industry catches up.

6:40AI training data startup AfterQuery has reportedly raised a round that valued it at$3.2 billion. This just five months after announcing its$30 million Series A at a$300 million valuation in April. Now, that's more than a 10x increase in less than half a year, and according to Y Combinator partner Gustav Estromer, the fastest that any startup has gone from launch to unicorn status in the accelerator's history. After Query's founders, today 22 and 23 years old, attended Y Combinator's Winter 2025 cohort just 18 months ago. In April, the San Francisco startup said it had reached an annualized revenue run rate of$100 million, and that it was working with many of the biggest labs.

7:31It has named companies such as NVIDIA, Ligora, and the Korean AI Lab Motif Technologies as customers. AfterQuery is among the new crop of startups, following in the footsteps of Mercore and Scale, that employ knowledge professionals like doctors, lawyers, and other specialists to do model training. However, rather than ensuring that models answer questions accurately, AfterQuery trains models and agents on how to work like professionals would to complete tasks, what the company describes as encoding the patterns, decisions, and reasoning of the world's best practitioners. That's all for now. For the latest startup tech news, go to techcrunch.com.

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