Palo Alto Networks is in talks to acquire Clutch Security, a startup that secures AI agents’ access to company systems, for $500 million in cash plus additional milestone-based payouts, according to a person familiar with the discussions.

Three-year-old Clutch was last valued at $85 million when it raised a $20 million Series A round in January 2025, led by Lightspeed and SignalFire, according to our source. The startup is currently approaching $10 million in annual recurring revenue (ARR). That means the acquisition, if completed, would value Clutch at about 50 times its ARR, a standard way of pricing software companies.

Palo Alto Networks and Clutch Security did not respond to a request for comment. The Information was the first to report the acquisition discussions.

The high valuation is not an anomaly in a market increasingly focused on securing software against bad actors using AI to breach systems more easily. Upwind, a startup using AI to secure cloud infrastructure, recently turned down an acquisition offer from DataDog that valued it at roughly 40 times ARR, TechCrunch reported last week.

If the deal happens, it would be Palo Alto Networks’ seventh acquisition this year, according to PitchBook. The cybersecurity giant has a history of buying innovation rather than building it in-house, and it has ramped up dealmaking this year in response to rising AI-driven cyberattacks.

In September, Palo Alto Networks acquired Console, a two-year-old startup that uses AI agents to automate routine IT help desk tasks. The transaction valued Console at $500 million in stock and cash, TechCrunch reported. Other VC-backed companies that Palo Alto Networks has scooped up this year include NEA-backed Embrace, for $325 million; Chronosphere, an observability platform backed by Greylock and Lux Capital, for $2.95 billion; and Koi, a cyber startup backed by Battery and Team8, for $231 million, according to regulatory filings.

Several of Clutch’s competitors have also been acquired. Cyera, a cybersecurity startup valued at $12 billion earlier this year, acquired Oasis Security, which, like Clutch, focuses on managing AI agents’ access to systems, for $1 billion. Meanwhile, Cisco bought Menlo Ventures-backed Astrix for roughly $400 million, Calcalist reported.