The artificial intelligence-native observability company Observe Inc. said today it has raised $156 million in a Series C round of funding.

The round was led by Sutter Hill Ventures, which also led its $115 million Series B raise in March of last year. Madrona Ventures, Alumni Ventures, Capital One and the venture capital arms of Snowflake Inc. also participated in the round.

Observe is getting a lot of traction for its AI-native observability platform, which is used by enterprises to analyze the diagnostics generated by their applications and detect the cause of technical problems. For example, the software can tell an e-commerce firm why its checkout page has suddenly gone offline or started going haywire. Once it observes a technical issue, it helps software teams investigate with a range of built-in troubleshooting tools, with the entire process guided by its OpenAI-powered chatbot O11y.

The company explained that there are three key components to its observability platform that help set it apart from its competitors. First is the O11y Data Lake, which is a scalable, low-cost data lake that’s optimized for collecting, transforming and storing real-time observability data such as logs, metrics, events and traces. It’s built using open standards such as Apache Iceberg and OpenTelemetry to ensure anyone experienced in data syntax will feel immediately at home.

The second core component of the startup’s platform is the O11y Knowledge Graph, which provides a contextual, real-time model of the customer’s entire information technology system, mapping services, resources, users, deployments and incidents. Lastly, there’s a newer agentic AI component called O11y AI SRE, which helps to automate the investigative process and help to get applications back online as fast as possible. It’s capable of generating its own instrumentation and assisting with the most complex troubleshooting to help teams close the loop as rapidly as possible.

These components come together to create what Observe says is a “developer-first” experience that automatically surfaces the context behind application incidents, leading to faster troubleshooting, without human teams needing to switch between different tools and spend time stitching together different logs, metrics and traces. Ultimately, it means problems can be fixed and applications can be brought back online much faster, the company says.

Observe Chief Executive Jeremy Burton (pictured) said the difference between his company and other observability firms is that it didn’t just bolt on AI and a data lake, it redesigned its platform with those components at the core.

“We believe the winners in this next era of observability won’t be the ones with the most dashboards,” he explained. “They’ll be the ones that surface the right context and give enterprises the ability to correlate signals at massive scale, without breaking the bank.”

Burton discussed the importance of pooling data into a centralized data lake during an appearance on theCUBE, SiliconANGLE Media’s mobile livestreaming studio, during the 2024 Data Summit, arguing that it helps to improve the scalability and cost-effectiveness of observaility operations:

Observe has sold a lot of enterprises on its vision of AI-native observability. In the last year, the company claims to have doubled its enterprise customer base and tripled its annual revenue, while maintaining a net-revenue retention rate of 180%.

It adds that monthly active users of its platform process a combined 150 petabytes of telemetry data as it increasingly replaces legacy observability tools such as Datadog, Splunk and Elasticsearch. The reason is because of scale – with Observe arguing that its agentic AI workflows, combined with its vast data lake, make it possible to troubleshoot applications faster and with lower costs.

Observe said it will use the money from today’s round to keep advancing its product and agentic AI capabilities while expanding its teams globally.

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