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Data observation platform Observe raises $115 million in Snowflake investment

Today, enterprises store and use data in an increasing number of applications and locations, making it challenging, if not impossible, to manage and query data in a holistic manner. This presents an opportunity for startups to build tools to consolidate fragmentation, and today one of them — Observe — announced a $112 million round following strong demand for its technology. Sources told TechCrunch that the Series B round values ​​the startup at between $400 million and $500 million. (Observers will not comment on this image.)

Observe (not to be confused with Observe.AI) builds observability tools for machine-generated data designed to break down data silos, and it’s built from the ground up to be tightly integrated with data-as-a-service giant Snowflake. Now, that strategic partner is becoming a strategic investor: Snowflake joined the round along with Series B lead investor Sutter Hill Ventures and other participants, as well as previous backers Capital One Ventures and Madrona.

The round was all equity, but part of it included the conversion of debt the company had previously raised (we raised $50 million in debt in October 2023). CEO Jeremy Burton said in an interview that the plan is to pay down remaining debt in an upcoming Series C round of financing.

The latest funding round reflects some important trends in the market right now.

First, businesses are under tremendous pressure to find more cost-effective solutions to run their technology.

The push to pay more efficiently for services used has been driving the growth of software-as-a-service at the application layer, and now the growth of platforms like Observe, Snowflake, AWS, and others shows how this model is pervasive in the data layer as well. (The company charges primarily for queries rather than data ingestion, meaning companies pay for what they use.)

Ingesting silos of semi-structured data into a unified “lake” like Observe also helps reduce the time and effort required to query that data, thereby reducing costs.

Second, businesses want to get more from their data. The main use case for Observe today is to analyze data in order to troubleshoot when an application is not working properly. Last year, the company launched a generative artificial intelligence tool that lets users know what to query and what to query soon. This also inevitably leads to customers using the tool for more than just troubleshooting in areas like marketing and security.

“You can also get data related to security or data related to customer experience,” Bruton said. “The reality is, we don’t care what the data is. It’s very permissive.” The company is currently working with third parties to enhance this effort, but he doesn’t rule out using native apps in these and other areas.

As Snowflake continues to grow and acquire more and more data, it’s interesting that it has chosen to invest in partners building on its platform rather than setting out to build (or acquire) data observability tools to serve customers directly.

Currently, the company is seeing significant growth in its core database business, and a company like Observe is more attractive in helping it do more activity in that area, said Stefan Williams, Snowflake’s vice president of corporate development and operator of Snowflake Ventures. force, with others in the same space. In other words, it doesn’t want to compete with major business partners.

“We see it as a lever to unlock new customers,” he said in an interview. It appears to have chosen to invest in Observe as a tacit endorsement of other competitors in the space, ranging from giants like Splunk to other startups like Acceldata. “ThThis is observability of software and data. [In data,] There is currently nothing that can compete with Observe. “

The startup did not disclose revenue but said ARR was up Compared to a year ago, that’s an increase of 171%, and net income retention increased 174%.

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