Observe Secures $156M Series C for AI-Powered Observability Growth
Observe Inc., a company specializing in AI-powered observability, has successfully closed a Series C funding round, securing $156 million. This significant investment was led by Sutter Hill Ventures, with additional participation from Madrona Ventures, Alumni Ventures, Snowflake Ventures, and Capital One Ventures. This funding round underscores a growing industry trend where enterprises are increasingly shifting towards AI-powered observability solutions to manage complex IT infrastructures at scale.
Observe’s platform is designed to analyze diagnostics generated by applications, helping enterprises quickly identify and resolve technical issues. For instance, it can pinpoint why an e-commerce checkout page might be experiencing problems. The company’s approach aims to simplify troubleshooting by unifying logs, metrics, and traces within a single, cost-effective data lake built on Snowflake. This allows for faster problem resolution without the need for engineers to switch between multiple tools.
Over the past year, Observe has demonstrated substantial growth, tripling its revenue and doubling its enterprise customer base. The company also boasts an impressive net revenue retention rate of 180%. Monthly active users of their platform now process a combined 150 petabytes of telemetry data, indicating a strong adoption by large enterprises and modern SaaS and AI-native companies. This growth is attributed to Observe’s ability to offer a more scalable and cost-efficient alternative to traditional observability tools such as Datadog, Splunk, and Elasticsearch.
The company’s platform is differentiated by three core components: the O11y Data Lake, the O11y Knowledge Graph, and the O11y AI SRE. The O11y Data Lake is a scalable, low-cost data lake optimized for collecting, transforming, and storing real-time observability data, built on open standards like Apache Iceberg and OpenTelemetry. The O11y Knowledge Graph provides a contextual, real-time model of the customer’s entire IT system, mapping services, resources, users, deployments, and incidents. Finally, the O11y AI SRE is a newer agentic AI component that automates the investigative process, generating its own instrumentation and assisting with complex troubleshooting to accelerate problem resolution. The platform also features an OpenAI-powered chatbot, O11y, which guides the troubleshooting process and allows users to query data using plain English.
This Series C funding will be strategically used to further advance Observe’s product development, enhance its agentic AI capabilities, and expand its teams globally. The investment also deepens Observe’s partnership with Snowflake, with Snowflake Ventures recognizing that “AI is only as powerful as the data behind it” and that Observe “built a data company.”
The broader market for AI in observability is experiencing robust growth, projected to reach $10.7 billion by 2033, up from $1.4 billion in 2023, with a CAGR of 22.5% from 2024 to 2033. This growth is fueled by the increasing need for robust IT system monitoring, the escalating complexity of digital infrastructures, and a rising demand for predictive analytics and real-time data insights. Large enterprises are leading the adoption of AI in observability, accounting for 65.7% of the market, due to their complex IT infrastructures and significant data volumes. Cloud-based deployment models are also dominating the market due to their flexibility, scalability, and cost-effectiveness. This indicates a clear industry-wide shift towards more intelligent, proactive, and cost-efficient observability solutions, with AI playing a central role.