Sumo Logic joins the enterprise software IPO parade, raising $326M to watch over the cloud

It's almost impossible to understate the complexity of managing a modern cloud infrastructure deployment, even at huge companies with hundreds of expert engineers. Sumo Logic wants to be the alarm system for the cloud, and just raised $326 million to further its monitoring efforts.

After listing at $22 a share Wednesday evening, shares of Sumo Logic opened at $26.64 Thursday during its initial public offering on the Nasdaq. The shares closed at $26.88, valuing the 10-year-old company around $2.6 billion.

"There's a huge tailwind for the general way that we're thinking about things," said Christian Beedgen, co-founder and CTO, in an interview with Protocol on Thursday. As we saw Wednesday with Snowflake and JFrog's well-received IPOs, investors are very attracted to companies attacking modern tech infrastructure problems with software services.

The numbers vary across industries, but according to a report released by Okta earlier this year, customers of its access management service have an average of 88 software applications running various parts of their businesses. The top 10% of its customers are running more than 200 applications across their network, and that is a lot of data and activity to track, measure, and evaluate.

Sumo Logic's services help companies monitor application performance as well as security incidents, and like many other vendors working with vast amounts of data, it uses machine-learning algorithms to tease out insights from that data. The hope is to prevent outages or breaches before they happen, and to give customers a better picture of how their applications are actually working across cloud platforms.

Monitoring, and its newer companion category, observability, are "a means to an end," Beedgen said. "The end is reliability, the end is for your apps to be reliable so your business can run on top of them."

Companies like Splunk rose to prominence providing similar services for on-premises data centers, but almost everyone in the monitoring business has shifted their efforts to the cloud. Last year, Datadog, which provides similar cloud-monitoring services to Sumo Logic, raised $648 million in an IPO, and its stock price has doubled over the last 12 months.

Sumo Logic provides its services across multiple clouds as well as hybrid cloud setups that involve some degree of self-managed servers, but it runs its own operation entirely on AWS. That might seem like a bit of a head-scratcher, especially given AWS' intent to provide similar monitoring services to its clients as part of large package deals designed to woo cloud newbies onto its platform.

But in reality, the relationship is more complicated, Beedgen said. Sumo Logic competes with AWS to some extent, but the two companies are also partners, and as Sumo Logic's customer base grows, that actually generates more revenue for AWS as well.

"Every innovator needs to live in fear of being disrupted," Beedgen said. "If they manage to build a better product than us, then that's on us."