Venture Investors See Potential In Data Observability

It’s unlikely the term “data observability” gets most folks too excited. Unless they are investors. We’ve seen several startups in the space raise serious cash over the last couple months.

In fact, in the span of one week three companies alone raised more than $400 million. This shows the significance of a sector that helps companies review, evaluate, index and, in general, control what has become the lifeblood of so many large enterprises—their data.

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Even in a venture market that has taken a downturn, investors took note recently with huge rounds, including:

On May 24, San Francisco-based Cribl raised $150 million in Series D funding led by Tiger Global Management. Cribl’s platform allows users to index and search data used to determine the health of a company’s infrastructure and applications.
That same day, San Francisco-based Monte Carlo raised a $135 million Series D led by IVP valuing the company at $1.6 billion. The company helps DevOps teams track data reliability.
The following week, San Francisco-based Coralogix continued the party as it closed a $142 million Series D co-led by new investors Advent International and Brighton Park Capital. The company provides another way for DevOps teams to analyze data streams.

Those numbers don’t even count other rounds raised last month, such as: a $70 million Series A raised by San Mateo, California-based performance management tools developer Observe; a $63 million Series B closed by Seattle-based stream processing platform Edge Delta; a $35 million round raised by Florida-based data lineage platform Manta, or the $240 million Series D closed by New York-based open observability platform Grafana Labs in April.

Data explosion

While all that money may sound surprising, it illustrates the importance of data. Not only in gaining insights and analytics to help businesses get ahead, but also to ensure a company’s internal infrastructure runs properly and efficiently.

“There are two major driving forces,” said Tomas Kratky, CEO of Manta. “First is our stronger bias toward data-driven decision-making, and therefore our growing dependency on data.

“The second driving force is the complexity of our data infrastructure,” he added.

Many of the startups that have raised cash work in different areas of the observability market. Some check on the health of the data itself or help DevOps team with analysis. Cribl’s platform helps companies index and search data—even over distributed networks—to help monitor things such as performance and security.

“Observability shows you the health of your infrastructure and application,” said Scott Raney, a managing director at Redpoint, which participated in the recent round for Cribl. “Driving insight from that data is important.”

That is especially true in a world that is only becoming more digitized.

“There will always be a need to understand the health and security of our systems, it has a direct impact on the health of the business,” said Coralogix CEO Ariel Assaraf.

Funding numbers

Getting hard funding numbers on startups in observability can be difficult, but it is part of the much wider information technology stack that continues to see massive amounts of venture dollars pour into it. Just last year VC-backed IT startups raised more than $56.6 billion—an all-time high—according to Crunchbase data.

This year may not match it, but it could come close. Through more than five months, the space has already seen $24.8 billion invested.

A growing market

While the observability market is not new in the IT space—think of publicly traded companies like Splunk and Datadog—newer generations of technologies are needed as data increases and the speed it must be analyzed becomes faster.

Raney said he sees significant space to grow as companies’ technological architecture continues to change and needs new solutions..

“We’ve watched this market for a long time,” Raney said. “There’s high net retention (of customers), which we like.”

While more complex infrastructure and a dependence on data is driving observability’s growth, the intersection of these two trends can be very dangerous—and intriguing—to investors, said Kratky.

“Complex systems tend to break, and when they do, due to our data dependency, it can have a catastrophic impact on the organization, which can cost millions of dollars,” he said. “Investors see this trend very clearly.”

Illustration: Dom Guzman