“Snowflake Investment Boosts Observe’s Data Observability Platform with $115M in Funding”

Observe — not to be confused with Observe.AI — builds observability tools for machine-generated data that aims to break down data silos, useful for developers to understand how apps are working, being used, and potentially failing. The main use case for Observe today is to analyze data to troubleshoot when an application is not working as it should be. It’s very permissive.” The company today works with third-parties to enhance that work but he doesn’t rule out native applications in these and other areas down the line. “We see it as a lever to unlock new customers,” he said of the investment thesis of Snowflake Ventures. [In data,] there is nothing that competes with Observe right now,” Williams added.

Today’s fast-paced and ever-evolving enterprises face a common challenge: the overwhelming amount of data scattered across various applications and locations. The sheer volume and complexity of this data make it incredibly difficult to manage and analyze effectively. However, one startup has caught the attention of the tech world with its solution to this problem. Observe, a company focused on building observability tools for machine-generated data, has just announced a massive $112 million funding round. With an estimated valuation of $400-500 million, Observe is positioned as a valuable player in the market. (The startup declined to comment on the exact figure.)

“Observe is dedicated to breaking down data silos and providing developers with comprehensive insights into their applications’ performance and usage,” explains CEO Jeremy Burton.

Not to be confused with Observe.AI, Observe offers a unique approach to managing machine-generated data. Its tools are tightly integrated with Snowflake, a prominent data-as-a-service platform, and Observe’s strategic partner. In fact, Snowflake has not only joined Observe’s latest funding round but has also become a strategic investor. Alongside lead investor Sutter Hill Ventures, previous backers Capital One Ventures and Madrona have also participated in the Series B round.

This funding round, all equity-based, also includes a conversion of previous debt that Observe had raised. This is just the latest step in Observe’s growth, with a previous $50 million debt raise in October 2023. According to Burton, the company plans to convert the remaining debt in an upcoming Series C.

The latest influx of funding reflects key trends in the market. For one, enterprises are under intense pressure to find more cost-effective solutions to manage their technology. This demand has driven the growth of software-as-a-service in the application layer and now extends to platforms like Observe, Snowflake, and AWS. As Observe primarily charges for queries rather than data ingestion, companies can pay for only what they use.

Additionally, Observe’s ability to consolidate and analyze silos of semi-structured data in a unified “lake” also helps reduce the time and effort required to query this data, ultimately cutting costs.

But the demand for more efficient data management is not the only driving force behind Observe’s success. The startup has also tapped into the desire for enterprises to maximize the value of their data. While Observe’s main use case currently is troubleshooting application performance, the company recently launched a generative AI tool that provides users with suggestions for potential data queries. This tool has expanded Observe’s capabilities beyond troubleshooting and into areas like marketing and security.

“We are data agnostic,” says Burton. “Our platform can ingest and analyze any type of data, whether it’s security-related or related to customer experience.” While Observe currently works with third-party integrations to enhance its services, Burton does not rule out the possibility of native applications in these areas in the future.

As Observe’s strategic partner Snowflake continues to experience significant growth, its investment in Observe holds great significance. Snowflake’s VP of corporate development, Stefan Williams, runs Snowflake Ventures and reveals that the company is currently focused on expanding its core database business. This investment is seen as a means to drive even more activity on the platform, alongside other key players in the same space. Essentially, Snowflake has chosen to partner with Observe rather than build or acquire its own data observability tools and compete with other third-party businesses driving activity on its platform.

“Observe is a lever to unlock new customers,” explains Williams. He adds that investing in Observe also serves as a tacit endorsement against its competitors, which range from giants like Splunk to other startups like Acceldata. “In the data space, there is no direct competition for Observe right now,” Williams notes.

While Observe does not disclose its revenue, it reports a 171% increase in annual recurring revenue and a 174% increase in net revenue retention compared to the previous year. With strong demand for its data management and analytics tools, Observe is poised for continued growth and success in the market.