Investors Banking On Observability Boom

Despite an overall spending slowdown in the tech sector after a sluggish 2023, one area of tech is showing serious signs of life: Observability software that allows IT teams to measure, monitor, and analyze an app or system, is gaining steam as tech leaders look to cut downtime costs and secure their data pipelines.

In the past few weeks, observability-focused companies – including Observe, Acceldata, and Pantomath – have secured millions in funding as investors hope to cash in on what 650 Group forecasts to be a $2 billion observability market by 2027 (compared to $278 million in 2022). One driver of investors’ sudden interest may be Cisco's plan to purchase observability giant Splunk for an estimated $28 billion.

"I'm surprised that it took this long to catch on," says Chris DePuy, founder and technology analyst at 650 Group. "I think Cisco is sort of forcing consolidation in the market."

Investors Taking Notice

Pantomath on Monday announced raising $14 million in Series A funding to bolster its observability platform and workforce. Observability platform Observe raised $50 million earlier this month, and startup Acceldata added $10 million to its total $100 million venture capital haul. These fundraising efforts fly in the face of a venture capital market that has been shrinking since the first quarter of 2022. For the first three quarters of 2023, global venture capital funding was down 42% from the same period a year earlier.

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But it might be the shrinking market and cost-cutting in the tech world that's making observability tools such an attractive proposition. According to a 2023 white paper from Cribl, companies adopting an observability data strategy will save 30% on cloud costs compared to competitors…

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