Virtual private network (VPN) technology has been a cornerstone of the networking landscape for decades, beginning first with the IPsec protocol then getting a bit easier with SSL-VPN technology. But little has changed with the technology.
That was the climate Avery Pennarun found in 2019 when he decided to help start a new VPN vendor called Tailscale. Unlike every other VPN vendor at the time, Tailscale decided to use the open-source WireGuard VPN protocol. It’s a decision that has worked out.
This week, just over five years after Tailscale first debuted, the company announced a $160 million C Series round of funding. The company continues to grow as AI vendors are fueling demand for the open-source based technology.
“Not only is the VPN market mature, but it’s positively ancient,” says Tailscale CEO Avery Pennarun. “Technology hasn’t been updated in like 25 years, or that was the case in 2019 when we started.”
The original strategy behind Tailscale was pretty straightforward. Simply put, the company identified a universal pain point in enterprise networking: “Every company above a certain size has a VPN and every one of them hates their VPN,” Pennarun, co-founder and CEO of Tailscale, told Network World. “But every one of them has a budget for a VPN, and every one of them is happy to have a discussion about [whether they should] spend that budget on something different.”
Tailscale’s approach was to build something that organizations are already doing, but do it in a better way.
Building on WireGuard’s foundation
At the heart of Tailscale’s technology is WireGuard, a modern VPN protocol that offers significant security and performance advantages over legacy solutions.
WireGuard is an open-source technology built in a way that minimizes the attack surface while providing greater performance than older VPN approaches. While WireGuard provides the secure cryptographic foundation, Tailscale builds the control and management layer on top.
“WireGuard provides the fundamental, really secure cryptography primitive that gets the packets from place to place with end-to-end encryption very quickly, and then Tailscale provides all the key management stuff,” Pennarun explained. “Key management, of course, is mostly about people and organizations, and that’s the kind of thing that you can’t fix necessarily with an algorithm—you have to fix with human systems design.”
WireGuard became an integrated part of the Linux kernel in 2020. Interestingly, despite WireGuard being integrated into the Linux kernel, Tailscale made an unconventional choice to use the user-space implementation instead.
“We made an odd choice in the beginning of Tailscale that I think has paid off for us,” says Pennarun. “We chose the user-space WireGuard, because that way we could use the exact same code on every platform we run on.”
The company has even managed to optimize its user-space implementation to outperform the kernel version in some scenarios—”something that most people would have said is impossible,” according to Pennarun.
Open-source strategy and business model
Tailscale maintains a strong commitment to open source while building a sustainable business. All its client software is open source, and the company actively contributes to the broader ecosystem. “We are fundamentally a very open-source-friendly company,” Pennarun said.
The company’s business model focuses on keeping the product free for individuals while monetizing enterprise use cases.
“We never intend to charge money for individuals using Tailscale. We have a really generous free plan up to three users and 100 devices for free, and we’re not planning to ever upsell those people,” Pennarun said. “What happens is those people bring it to work, and at work, they have certain things that they want—a commercially guaranteed coordination service with guaranteed uptime, guaranteed security model, and a bunch of compliance stuff like SOC 2.”
Powering AI’s infrastructure needs
One of the most significant shifts in Tailscale’s business in the last several years has been the surge in adoption by AI companies.
Tailscale highlights that leading AI companies including Perplexity, Mistral, Cohere, Groq, and Hugging Face are among its users. “When you ask almost any AI company in the world what you use for your network connectivity, the answer is Tailscale,” Pennarun said.
This adoption stems from AI companies’ need to connect disparate resources across different environments. He noted that AI companies need to have GPUs, but they’re unlikely to find the best platform, prices and availability a single big cloud provider. “Tailscale is extremely good for this kind of multi-cloud connectivity,” he said.
Tailscale’s future direction
With the new funding, Tailscale plans to accelerate product development to meet growing demand. The company sees many opportunities emerging, particularly in the AI sector, and it wants to invest in engineering to quickly respond to market demands while maintaining its core product philosophy of simplicity and ubiquity.
“I think the most important thing for me is that Tailscale needs to continue to be software that runs on everything,” Pennarun said. “Our strategy is not just like, ‘let’s keep going upwards to the enterprise market and make a lot of money.’ We want Tailscale to just run on everything, including lots and lots and lots of devices for free.”
Tailscale at a glance
- Founded: 2019
- Funding: $275 million
- Investors: Accel, CRV, Insight Partners, Heavybit, and Uncork Capital
- Headquarters: Toronto, Canada
- CEO: Avery Pennarun
- What they do: Provides secure VPN technology using the open-source WireGuard protocol.
Source:: Network World