Ad-tech company MediaMath has raised $225 million from investment firm Searchlight Capital Partners, an unusually large funding round in a sector rife with turbulence and consolidation.

New York-based MediaMath has raised more than $500 million to date. The latest round values the company at north of $1 billion, according to a person familiar with the matter.

MediaMath operates a demand-side platform, or DSP — technology that lets advertisers and their agencies buy online ads using automated systems — and a data-management platform, or DMP, which lets advertisers store and analyze their data.

Some of the new funds will be directed toward buying out one of MediaMath’s investors, Safeguard Scientifics, the publicly-traded technology investment company that said in January it would stop investing in new companies amid a cost-cutting drive.

MediaMath Chief Executive Joe Zawadzki said the company would also use the funding on acquisitions and to accelerate its development of technology in areas including identity, artificial intelligence, connected-television and digital out-of-home advertising.

Mr. Zawadzki said MediaMath has grown every year for the past 11 years and now the marketing industry is looking for a “reevaluation of the next set of capabilities that need to get invented and implemented.”

The ad tech sector is going through a period of upheaval in a digital advertising market dominated by Alphabet Inc.’s Google and Facebook Inc. Digital-ad companies are also grappling with Europe’s sweeping new data legislation, the General Data Protection Regulation, which came into effect in May.

Consolidation is afoot in the sector. Last month, AT&T, said it was acquiring AppNexus, one of the biggest independent players in the space, for about $1.6 billion, and private-equity firm Vista Equity Partners said it was acquiring a majority stake in Integral Ad Science, an ad-measurement company.

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In total, there were 77 mergers and acquisitions in the ad-tech, marketing-tech and digital content sectors in the U.S. in the second quarter of 2018, according to investment bank LUMA Partners.

Searchlight Capital Partners’ other current investments include cloud-computing provider Rackspace, in-store background music and in-venue music platform Octave Group and Hemisphere Media Group, a U.S. broadcast and cable TV company aimed at the U.S. Hispanic and Latin American markets.

Darren Glatt, partner at Searchlight Capital, said the company has “no predetermined time frame” for an exit and that MediaMath was attractive because “scaled DSPs with strong DMPs are the true winners [in the ad-tech] ecosystem,” Mr. Glatt added.

Write to Lara O’Reilly at lara.oreilly@wsj.com