Data Observability Platform Raises $115M with Snowflake Investment
Data management and analysis have become increasingly complex for enterprises as data is stored and utilized across various applications and locations. This fragmentation creates challenges in managing and querying data holistically. However, the rise of startups developing tools to bridge this gap presents an opportunity to address these issues. Observe, a leading provider of observability tools for machine-generated data, is capitalizing on this demand and has recently announced $112 million in funding.
Observe, not to be confused with Observe.AI, focuses on breaking down data silos and offers observability tools for machine-generated data. The startup was built from the ground up with tight integration with Snowflake, the data-as-a-service giant. Snowflake has now become a strategic investor, joining the Series B funding round alongside lead investor Sutter Hill Ventures, Capital One Ventures, and Madrona, among others. Sources indicate that the latest funding round values Observe between $400 million and $500 million.
CEO Jeremy Burton revealed that while the round is primarily equity-based, it also includes a conversion of previous debt raised by the company. The plan is to convert the remaining debt in an upcoming Series C round. This funding round showcases several significant trends in the market.
Cost-effectiveness is a major concern for enterprises, driving the search for more efficient technology solutions. Software-as-a-service (SaaS) has gained popularity at the application layer due to its pay-as-you-use model. The growth of platforms like Observe, Snowflake, and AWS demonstrates the pervasiveness of this model at the data layer as well. Observe charges primarily for queries rather than data ingestion, allowing companies to pay for what they actually use. Ingesting silos of semi-structured data into a unified “lake” not only helps cut down on time and effort but also reduces costs associated with querying the data.
Another trend is the desire for enterprises to derive more value from their data. Observe’s main use case is analyzing data to troubleshoot when applications are not functioning optimally. However, the company’s generative AI tool, launched last year, has expanded its scope beyond troubleshooting. Users can receive suggestions on what to query for and what is upcoming, leading to applications in areas such as marketing and security. Observe is open to collaborating with third parties to enhance its work but does not rule out developing native applications in the future.
Interestingly, Snowflake has chosen to invest in Observe rather than developing or acquiring data observability tools itself. Stefan Williams, Snowflake’s VP of corporate development, explains that the company sees Observe as a lever to unlock new customers and generate more activity within its core database business. Snowflake values partnerships and does not want to compete against key business partners. This investment serves as a tacit endorsement of Observe in a competitive space that includes giants like Splunk and other startups like Acceldata.
Although Observe does not disclose its revenues, it reports a 171% increase in annual recurring revenue (ARR) and a 174% increase in net revenue retention compared to the previous year. These impressive growth metrics indicate the market’s recognition of Observe’s value proposition and the increasing demand for data observability solutions.
In conclusion, Observe’s latest funding round reflects the growing need for efficient data management and analysis in enterprises. With its focus on breaking down data silos and providing observability tools, Observe has attracted strategic investments from Snowflake and other notable investors. The market trends of cost-effectiveness and maximizing data value further contribute to the demand for platforms like Observe. As the company continues to grow, it remains a key player in the data observability space, offering innovative solutions that address the challenges faced by enterprises today.