“We want to replace Datadog”: groundcover raises $100 million at $500 million valuation as AI reshapes observability
The Israeli startup says traditional monitoring platforms were not built for the explosion of data generated by cloud and AI systems. The Series C brings groundcover’s total funding to $160 million as it targets a market dominated by legacy giants.
Groundcover has raised $100 million in a Series C funding round led by One Peak, with participation from Morgan Stanley Expansion Capital and existing investors Zeev Ventures, Angular Ventures, Heavybit, and Jibe. The round brings the company's total funding to $160 million since its founding. The company was valued at around $500 million, approximately four times its valuation in the previous round.
In a conversation with Calcalist, Shahar Azulay, CEO and co-founder of groundcover, said: "It's a very established and mature market with giant companies like Datadog alongside newer startups. Every company in the world relies on observability products. All existing solutions are built on the same principle, you need vast amounts of data to understand how your code is performing. The volume of information keeps growing, but in practice companies pay much more without getting proportionally greater value."
"That challenge existed before AI, but today we're also expected to monitor AI systems and AI agents," Azulay added. "We now provide the ability to monitor AI agents. Almost all of our customers are deploying telemetry and observability systems early in their AI adoption journey. This is the biggest transformation the observability market has seen since the shift to the cloud. There have already been two acquisitions in our space worth more than $1 billion. The market is changing rapidly."
"We want to replace Datadog, and that's what we're building toward today while laying the infrastructure for a much larger business," he said. "We built the company on a completely different model. We manage the data inside the customer's own cloud environment, so we don't pay the cloud infrastructure costs ourselves. That allows us to price differently while delivering greater value. Datadog's pricing model is beginning to show its age, and customers are finding it increasingly difficult to justify the costs."
The company is currently generating tens of millions of dollars in annual revenue and aims to reach approximately $100 million in annual sales over the coming years. "We'll continue expanding our engineering team, may acquire talented teams, and will make significant investments in marketing and sales," Azulay said.
Groundcover said the funding follows a year of rapid growth in which it tripled annual recurring revenue (ARR) and doubled its workforce to 140 employees, including 80 in Israel and the remainder in Boston and San Francisco. The company now serves more than 250 paying customers, ranging from startups to Fortune 500 enterprises, and has signed multiple seven-figure customer contracts over the past year.
Groundcover was founded in 2021 by Shahar Azulay, CEO, and Yechezkel Rabinovich, CTO. The two served together in the cyber unit of Israel's Prime Minister's Office, where they developed and managed cyber and infrastructure systems.
The volume of telemetry data required to monitor modern software environments is growing rapidly, a trend that has accelerated with the adoption of AI infrastructure and agentic workflows. As organizations deploy more AI technologies, observability has become increasingly important because AI agents can make reliable decisions and operate autonomously only when they have access to a complete and accurate picture of system performance. Traditional observability platforms, however, often struggle with the exploding volume of telemetry data, forcing organizations to sample data, split information across multiple systems, or discard large portions of it altogether.
Groundcover says its platform was built specifically to address that challenge. At its core is an eBPF-based sensor that can be deployed within minutes, without instrumentation or code changes, enabling full-fidelity telemetry collection across applications, infrastructure, and AI workloads. Combined with native OpenTelemetry support, the data is stored in a Bring Your Own Cloud (BYOC) architecture within the customer's own cloud environment, allowing organizations to retain control over their data while eliminating sampling and cardinality limits. Unlike traditional SaaS observability platforms, the company's pricing model is not tied directly to the amount of telemetry data collected.
The new funding will be used to expand groundcover's North American operations, invest in new product capabilities for AI-driven observability, strengthen partnerships with major cloud providers, and support further geographic expansion.
