Data Lake Maker Secures $115M in Series B Funding

Observe, a SaaS observability company, has closed a Series B funding round with $115 million of capital.

The new round of financing, which values the company at 10x its Series A valuation four years ago, was led by Sutter Hill Ventures, with contributions from existing investors Capital One Ventures and Madrona, as well as a new investment from Snowflake Ventures.

Observe helps businesses efficiently find and fix problems in their software systems by organizing and analyzing their data more effectively. The company’s SaaS-based data technology eliminates traditional data silos through a unified data lake, a large, centralized repository designed to store, process, and secure vast amounts of structured and unstructured data from various sources.

Observe’s software technology also provides a powerful data graph tool that organizes different pieces of data so that they can be easily understood and analyzed.

Unlike traditional databases or data warehouses that require data to be organized in a predefined structure before being stored, data lakes allow for the storage of data in its natural form. This flexibility means you can dump data – everything from text and images to log files and video – into a data lake without having to first structure it, making data lakes highly scalable and versatile for data storage. Data lakes are particularly useful for big data and real-time analytics, where they can store massive volumes of data in various formats, then allow for the use of analytical tools and machine learning to derive insights directly from the raw data. According to Observe, its technology allows for three times faster troubleshooting of applications compared to traditional observability solutions.

Observe currently has more than 60 customers including Capital One, Topgolf, and F5. “Capital One is focused on building seamless customer experiences that make banking and commerce simpler and easier — wherever those customers are, digital or in-person,” said Mark Cauwels, a managing vice president at Capital One. “Like many cloud-first organizations, our data volume continues to expand. Observe provides a centralized and pre-correlated data layer that meaningfully organizes telemetry data from many sources at scale, helping drive faster response times.”

“We believe Observe is the future of Observability and we’re incredibly excited to lead the Series B round,” said Mike Speiser, Managing Director at Sutter Hill Ventures. “Observe has built a world class team and delivered a product that is architecturally different to everyone else. The incredible growth in ARR and NRR is testament to the fact that this new architecture is now paying off for their customers.”

In the fiscal year 2024, Observe reported increases in several key financial metrics: a 171% rise in annual recurring revenue (ARR), a 194% boost in total contract value (TCV), and a net revenue retention (NRR) of 174%. According to Observe, the combination of these increases are indicative of exceptional product loyalty and satisfaction. The company has also expanded its workforce by over 50% with a focus on scaling its sales team.

Observe is headquartered in San Mateo, California, and was founded in 2017 and incubated by Sutter Hill Ventures at their Palo Alto office. The company’s founders include Jacob Leverich, Jonathan Trevor, Philipp Unterbrunner, Jon Watte and Mike Speiser.

“Legacy monitoring and APM players, shackled by outdated architectures, are dead companies walking,” said CEO Jeremy Burton. “As private equity or strategic acquirers strip them down for parts, Observe is taking a new approach designed for today’s modern distributed applications and massive data volumes. We’re thrilled to have investors who are thinking big and validating Observe’s approach in one of the fastest-growing segments in tech.”

Looking forward, Observe plans to expand its presence in North America and anticipates doubling its business size once more in the coming year.

“At Snowflake we believe there’s no such thing as an AI strategy without a data strategy,” said Stefan Williams, VP Corporate Development & Snowflake Ventures. “Observe recognized this from the outset and built a data company. Our team has worked closely with Observe as a partner since the company’s founding and with this investment, we’re bolstering that relationship and emphasizing our belief in Observe as the company enters its next stage of rapid growth.”

Palo Alto, California-headquartered Sutter Hill Ventures specializes in providing early to growth-stage funding to startups across various sectors, including technology, software, enterprise services, and biotechnology. The firm was founded in 1962 and is one of the oldest venture capital practices in the United States.

Capital One Ventures is the corporate venture capital arm of Capital One Financial Corporation. The firm focuses on investments in startups and growth-stage companies within the fintech, cybersecurity, data analytics, and digital commerce sectors. Capital One Ventures is headquartered in McLean, Virginia.

Seattle, Washington-headquartered Madrona invests in early-stage technology investments with a specific interest in software, cloud computing, data analytics, e-commerce, and artificial intelligence.