Observe raises $115M from Sutter Hill, Snowflake Ventures to supercharge data cloud observability 

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Today, San Mateo-based Observe, a startup taking a data-centric approach to application observability, announced it has raised $115 million in a series B round of funding.

The investment has been led by Sutter Hill Ventures with participation from existing investors as well as Snowflake Ventures — the venture capital arm of data giant Snowflake.

While it remains unclear how much Snowflake is contributing to the round, the entry of the Sridhar Ramaswamy-led giant on Observe’s cap table is certainly not a surprise.

The two companies have been working together for quite some time, with Observe using the data cloud of Snowflake as the foundation for its platform.

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The investment is expected to take that work to the next level as Observe takes its observability capabilities into the data cloud, enabling users to better monitor and manage their environment.

The startup, which competes with the likes of Cisco-acquired Splunk and Datadog, also said it will use the capital to expand its teams and scale up its presence in North America.

What makes Observe unique?

Today, enterprise technology stacks have become more complicated than ever. Dozens of complex applications run around the clock, generating a flurry of telemetry spanning logs, metrics and traces.

Now, in a typical environment, this data usually remains siloed, requiring teams to use different tools to correlate everything and identify potential incidents like application downtime. The problem gets even worse for organizations operating at scale, where the application surface area is massive.

Executives from Snowflake, Splunk, Wavefront and Roblox saw this challenge back in 2017 and started Observe as the answer. The idea was simple: develop a centralized data lake that could ingest all telemetry data in one place and curate it into a “data graph” that could enable easy analysis and provide users with relevant context to quickly identify and resolve incidents. 

The company used Snowflake’s data cloud to build this unified observability cloud, becoming the first vendor in the category to use a modern data platform. Since then, it has been expanding its capabilities to give teams a full-fledged generative AI-driven observability solution to troubleshoot distributed applications faster, at a fraction of the cost.

“Because all the data is in one place, Observe can form relationships within the data making it easy to pivot to additional context during an investigation e.g. ‘Show me the logs for that spike in CPU’. So Observe is faster for troubleshooting and, because of its architecture, it’s a lot less expensive (Snowflake’s architecture separates storage and compute),” Jeremy Burton, the CEO of the company, told VentureBeat. 

In FY2024, Observe’s annual recurring revenue increased 171%, total contract value increased 194% and net run rate, an indication of a product’s stickiness, surged to 174%. Dozens of enterprises, including Topgold, Reveal, F5, Linedata, Auditboard and Edgio, continue to use the company’s platform to stay on top of application incidents. 

Snowflake to tap Observe’s capabilities

With this funding, Snowflake, which has seen Observe evolve closely for years, plans to tap the startup’s observability capabilities to give its customers a better way to monitor their respective data cloud environments, including applications and pipelines, for incidents.

“Observe plans to develop best-in-class observability features that will help our customers monitor and manage their Snowflake environments even more effectively. Solutions such as out-of-the-box dashboards and new visualizations will empower developers and engineers to accelerate their work and troubleshoot problems more quickly and easily,” the company wrote in a blog post. 

One of the capabilities, Burton confirmed, would be monitoring for Snowflake Native Applications built using Snowpark Container Services. This will allow Snowflake customers to troubleshoot the apps easily and cost-effectively.

“More recently, Snowflake introduced capabilities such as ‘Snowpipe streaming’ which enables Observe to reduce the latency of data from minutes to seconds and halves the cost of the infrastructure required to ingest data,” the CEO said while detailing the work done with the data company.

Other than this, Burton added, Observe will use the round to scale its R&D and sales teams and expand its presence in the North American market. He says the company’s decision to handle telemetry data in a centralized way gives it an edge in the market and is very difficult to reproduce by legacy monitoring and APM players like Splunk. 

“The company with the largest revenue stream (in this space) is Splunk and as Cisco digests the acquisition it should present an opportunity for Observe. Datadog has the broadest and strongest product but, like Splunk, is 10-15 years old and its aging architecture is showing up in the form of exorbitant costs and overage for its customers. New Relic and Sumo Logic have recently been acquired by Private Equity and likely are being stripped down for parts and optimized to pay their debt holders,” he noted.

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