Software startup Observe raises $156M to take on Datadog and Splunk with AI-powered observability platform

As companies wrestle with a growing flood of data and increasingly complex software systems, one startup is betting big that it can simplify the mess. Observe, a San Mateo-based software startup, just raised $156 million in fresh funding to challenge incumbents like Datadog and Splunk by offering a more unified, lower-cost way to monitor applications and track system failures.

The round was led by Sutter Hill Ventures, with participation from Madrona Ventures, Alumni Ventures, and the venture arms of Snowflake and Capital One. Observe didn’t disclose its current valuation, but this Series C brings its total funding well past the $270 million mark.

Observe is an observability platform founded in 2017 with the idea of streamlining how companies troubleshoot problems across their software stacks. As companies began shipping updates faster and more often, the volume of data generated skyrocketed—creating new challenges in tracking system behavior and pinpointing failures. Observe set out to make sense of that chaos.

Instead of using separate tools for logs, metrics, and tracing, customers store all their telemetry data in a single lake built on Snowflake’s cloud platform. That central approach, the company argues, reduces complexity and cost—especially as data volumes grow.

CEO Jeremy Burton says the company has deliberately shifted focus to enterprise customers over the past 18 months. “We’ve deliberately, I’d say, over the last 18 months, moved our go-to-market away from the smaller organizations. So, we’ve been focused on companies operating at scale,” Burton said in an interview with Reuters. “Capital One is our biggest customer. But Commonwealth Bank actually is very close.”

That focus appears to be working. Observe says it has roughly 100 customers and has tripled revenue in the past year. Its gross retention rate sits at 93%, and net revenue retention—a measure of how much existing customers spend over time—has climbed to 180%.

With $156M Funding, Observe Aims to Improve Observability in an Era of Nonstop Software Releases

The company plans to use the new capital to double down on product development and expand its team, particularly across North America. That includes hiring more salespeople to grow its 200-person headcount.

One big bet: AI. Observe has started rolling out an assistant that lets users query system data using plain English, skipping the need to write code to find out what went wrong. That could make its platform even more attractive to engineering teams short on time or lacking in deep technical expertise.

The company is going head-to-head with some big names, but its pitch is simple—store everything in one place, spend less, and fix issues faster. It’s the kind of promise that’s attracting attention in a market where every tech team is being asked to do more with less.

Observe Team (Credit: Observe Inc.)