Tailscale CEO and co-founder Avery Pennarun. The company sells an alternative to VPN systems provided by incumbents such as Cisco and OpenVPN.Supplied
Tailscale was already growing at a blistering pace. Then 2025 happened.
The Toronto company, which has rapidly become the virtual private network technology provider of choice to artificial-intelligence companies, doubled its number of paying customers, to 10,000 in January, 2025, from 5,000 the previous March. That helped it place 14th on Deloitte’s list of the country’s fastest growing companies, with three-year revenue expansion of 3,299 per cent through 2024.
That helped Tailscale raise $230-million, led by Silicon Valley venture capital giant Accel, an early backer, valuing it at $2-billion.
In the 10 months since it hit the 10,000 mark, Tailscale has doubled again, reaching 20,000 paying customers this month, and more than one million monthly active users, about half of whom use a free version of the product. Revenue, now running well into the tens of millions of dollars a year, has grown at an accelerating rate in 2025, chief executive Avery Pennarun said in an interview. “There is a lot of viral growth and as the product gets better the virality increases,” he said.
Tailscale raises $230-million, reaching $2-billion valuation on surging demand from AI companies
Tailscale could be growing even faster. Mr. Pennarun said Tailscale still has all the money it raised in April “plus more in our bank account. We get a bit of flack from our investors for not spending quickly enough. Almost all of them are American, they have a carefree attitude to spending, whereas we’re Canadians. We’re a little more cautious.”
Accel partner and Tailscale director Amit Kumar said while he loves Mr. Pennarun and the company’s growth, “my job is just to help him understand, this is really a special moment of opportunity right now, we can be more aggressive. We certainly encourage him to not be constrained artificially.” Nonetheless, Tailscale’s pace “feels extremely durable. A lot of people out there chase shiny objects. That is not the Tailscale way.”
Tailscale sells an alternative to VPN systems provided by incumbents such as Cisco Systems Inc., OpenVPN and Palo Alto Networks Inc. It doesn’t require costly hardware or infrastructure, or even for users to sign in to their employers’ systems to access their enterprise software. Instead, customers establish direct, secure networks between devices, fellow employees and their software. Companies keep tabs on users not by routing their traffic through their systems, but by ensuring the programs’ or devices’ users connect to receive the correct login information.
Setting up and administering Tailscale is simpler and less expensive and results in faster-running programs because traffic doesn’t have to route through a central point.
Tailscale was founded by Canadians Mr. Pennarun and David Carney and Australian David Crawshaw. Montreal-based Mr. Pennarun and Mr. Crawshaw had worked at Google Inc. as software engineers, while Mr. Carney worked for two of Mr. Pennarun’s prior startups.
The trio saw an increasing amount of internet traffic being routed through cloud operations controlled by a handful of giants, but felt the vast infrastructure wasn’t optimized for solving simple problems that took up most of users’ time. They felt that could be more efficiently handled by facilitating direct connections.
Tailscale’s product debuted in 2020 and benefited from the pandemic as employees looked for ways to connect to their workplaces.
It was quickly adopted by engineers who spread the word to their colleagues, and eventually their employers, a “bottom-up” viral growth pattern that similarly helped Slack and 1Password win over corporate IT departments.
Demand from AI startups has driven much of its recent growth as the company has added Cohere, Mistral, Hugging Face, Groq and Perplexity as clients.
That is because AI companies have to move significant amounts of sensitive data securely between remote machines and multiple cloud-computing providers to cost-effectively optimize access to processors that power calculations.
That’s a task Tailscale is well suited to handle, and AI companies use it as their network infrastructure, which Mr. Pennarun said his company discovered almost “by accident. We didn’t go after a big AI market, we’re not an AI company ourselves. It took a while to even notice it.”
Jared Perry, a security consultant based in St. John’s, said “lots of people in the security and IT world use Tailscale for their home labs because it’s easy to get it going and the lower plans are free. “Companies I work with use it a lot. It’s a big step change from the old-school enterprise equipment and it gives security and IT and development teams a way to move faster without getting all the networking pieces in place.”
Tailscale has also expanded features to appeal to larger customers; its clients include Telus Corp., Instacart, SAP SE, Nvidia Corp. and Microsoft Corp.