The "Oil Drilling Platform" of the Future
If Etsy was a nostalgic investment in humanized e-commerce, then the investment in Datadog was a forward-looking, cool, and precise technological insight. Index foresaw that the enterprise migration to the cloud would not be an option, but a tsunami sweeping away everything. And in this tsunami, one of the most indispensable services would be a monitoring platform that helps enterprises "see" and understand what is happening within their complex, dynamic cloud environments.
1. Investment Background & Opportunity: A Golden Opportunity Discovered from Developer Pain
Datadog was founded in New York in 2010 by Olivier Pomel and Alexis Lê-Quôc. Both were seasoned infrastructure engineers who had personally experienced the acute pain of the transition from physical servers to virtualization, and then to cloud computing. Traditional IT monitoring tools (like IBM Tivoli, HP OpenView) were designed for static data centers and appeared cumbersome, slow, and fragmented in the face of the dynamic, distributed, and microservices-based architectures of the cloud era.
Jan Hammer, a partner at Index Ventures,They astutely identified this pain point. He saw not just a "better monitoring tool," but a platform that could become core infrastructure for the cloud era. Datadog's vision was to provide a unified, real-time observability platform covering infrastructure, application performance, logs, and user experience. This perfectly aligned with the rise of DevOps culture, which emphasizes collaboration between development and operations—a collaboration predicated on having a unified view of data.
In 2012, Index led Datadog's $6.2 million Series B round. At the time, the company was still small, but its product vision was advanced, and it had already demonstrated strong appeal to technical decision-makers.
2. Index's Deep Involvement: Building a Sales Engine and Expanding the Global Footprint
Index's involvement with Datadog, distinct in style from its involvement with Etsy, focused more on building a ruthlessly efficient machine targeting the enterprise market.
· Strengthening and Expanding Product-Market Fit: Index helped the Datadog team deeply understand the procurement processes and security requirements of enterprise customers. They assisted in refining its pricing strategy, sales narratives, and customer success systems. More importantly, they encouraged and supported Datadog's rapid expansion from a pure infrastructure monitoring tool into a comprehensive "observability" platform, successively launching product lines for Application Performance Monitoring (APM), log management, and user experience monitoring. This platform strategy significantly increased average contract value and customer stickiness, building a deep moat.
· Building a Top-Tier Sales and Marketing Machine: Leveraging its deep expertise in the SaaS sector, Index helped Datadog build a world-class sales team. They introduced the "land-and-expand" model: first getting developers and team leads to use the product at a relatively low cost ("land"), then using superior product experience and proactive account management to drive its adoption and sharing across the entire organization, ultimately leading to enterprise-wide agreements ("expand"). This bottom-up sales strategy was key to Datadog's success in beating many competitors who relied on traditional top-down sales approaches.
· Accelerating Global Expansion: Similar to Etsy, Index once again leveraged its global network. They provided crucial support for Datadog's expansion into the European market, including helping it establish an international headquarters in Dublin to comply with data regulations and introducing local channel partners and key customers. This gave Datadog a global gene from the start, enabling it to quickly respond to the needs of multinational corporations.
· Strategic Fortitude in Fierce Competition: Datadog's market quickly became crowded, with competitors ranging from public companies like New Relic and Dynatrace to countless startups. As a board member, Index acted as a steady hand, helping management analyze the competitive landscape and maintain strategic focus. They insisted the company stay focused on product innovation and customer experience, rather than getting bogged down in endless price wars.
3. Key Turning Point & Long-Term Outcome: Defining the Benchmark for the Cloud-Native Era
In 2019, Datadog successfully went public and has now become a giant with a market capitalization of tens of billions of dollars. Its success is a model of Index's accurate judgment of macro trends (cloud computing, DevOps, observability).
Index's financial return was astronomical, but more importantly, Datadog's success cemented Index's reputation as having the "Midas touch" in the enterprise services sector. It proved that, in the right track, investing in a company led by top-tier technical founders, solving a core pain point, and possessing platform potential, can yield returns far beyond expectations. Datadog is not only the "gatekeeper" of the cloud era but has also become a dazzling pearl in Index's investment portfolio, providing an unparalleled case study and ecosystem synergy value for its subsequent investments in the enterprise services field
