ExtraHop Raises $41M from TCV to Untangle Corporate Networks

5/29/14Follow @bromano

ExtraHop, a Seattle company that taps the low-level data coursing through IT systems to better manage them and the businesses they support, has raised a $41 million Series C round led by Technology Crossover Ventures.

Earlier investors Madrona Venture Group, Meritech Capital, Isilon Systems founder Sujal Patel, and other angel investors joined the round. It marks the second-largest Pacific Northwest venture round so far this year and brings total funding for ExtraHop, founded in 2007, to $61.6 million.

ExtraHop focuses on the petabytes of so-called wire data constantly moving among the various servers, switches, and other equipment and software that makes up modern IT infrastructure.

The investment “completely validates our wire data analytics approach, and the IT operations analytics market category that we’ve been trying to create,” says Raja Mukerji, who founded the company with fellow F5 Networks veteran Jesse Rothstein in 2007.

ExtraHop argues that analyzing this wire data offers a more efficient way of managing and troubleshooting IT operations, particularly as the increasing volume, velocity, and variety of data—the oft-cited three Vs of big data—strains existing technologies.

Mukerji

Mukerji

“Our approach to monitoring is fundamentally different than [application performance monitoring] technologies, because we passively monitor and analyze data off the wire in real time, providing up-to-the-second insight in the performance, availability, and security of IT environments,” Mukerji says. “Customers can extract metrics and analysis from anything traversing the wire.”

That means that in addition to the IT operations tasks, ExtraHop can help analyze core business functions.

Mukerji says hospital customers track their emergency room wait times using wire data and broadcasters use it measure their audience in real time.

ExtraHop is used to monitor more than a million customer servers carrying out up to a trillion transactions a day, Mukerji says. It lists customers including Google, Microsoft, Lockheed Martin, T-Mobile, Morgan Stanley, and Zappos.

“If you go buy a pair of shoes online at Zappos, if you activate a phone at a T-Mobile store, if you’re booking a ticket on Expedia, those transactions are running through an ExtraHop system,” he says.

Rothstein

Rothstein

ExtraHop is competing in the broad IT operations management market, which was worth $18.9 billion last year and is forecast to grow by more than a billion dollars a year, according to Gartner.

Within that market, the IT operations analytics category—worth an estimated $800 million last year and forecast to more than double this year—can get a little fuzzy. Several overlapping technologies offer similar analytics capabilities that are focused on specific functions such as application and network performance monitoring and configuration management. Players here include New Relic, App Dynamics, Fluke Networks, and Evolven. Analytics capabilities are also increasingly included in centralized operations platforms from large software vendors like HP, IBM, and VMware, says Gartner IT operations management research director Colin Fletcher.

“We expect [IT operations analytics] to remain a key investment area for enterprise IT and one of the most significant and interesting areas of innovation within the IT operations management space for some time to come,” Fletcher says via e-mail.

Mukerji says ExtraHop differentiates itself by offering a customizable platform that can be configured for business analytics, as in the examples above, as well as IT operations. He sees direct competition from the likes of Riverbed.

ExtraHop may sound similar to Splunk, but Mukerji says the San Francisco company’s machine data analysis technology—which parses the log files, clickstreams, configuration files, and other data fingerprints of IT infrastructure and applications—is complementary rather than competitive to ExtraHop. “In a way, what we’re doing for wire data is what Splunk did for machine data,” he says.

ExtraHop has about 140 employees and aims to double its staff over the next year. The company declined to disclose revenue or profit numbers, other than to say it grew bookings 150 percent last year.

ExtraHop is part of a triumvirate of handsomely funded Seattle technology companies built and staffed by people from F5 and Isilon. Other examples include Igneous Systems, which just raised a $23.6 million Series A for its datacenter management technologies from investors including Madrona and Patel, and Qumulo, backed in 2012 to the tune of $24.5 million by Madrona and others to tackle enterprise data storage.

“We’re really excited about the talent [Isilon and F5] have attracted that is now spinning off to start or join the next generation of tech companies here in Seattle,” said Madrona managing director Matt McIlwain when I spoke to him earlier this month about Igneous. McIlwain is on the board of all three companies.

The investment in ExtraHop by Technology Crossover Ventures, which also led the largest venture round so far this year in the Northwest—a $42 million investment in Beaverton, OR-based online marketing company Act-On Software—could be read as a harbinger of an initial public offering, given TCV’s track record. It boasts of having helped facilitate more than 50 of them.

Mukerji dodged when I asked him if that’s part of the plan for ExtraHop.

“We’re focusing on building a viable, long-standing business,” he says, adding, “An IPO or whatever financial exit, we’ll let that take care of itself.”

Benjamin Romano is editor of Xconomy Seattle. Email him at bromano [at] xconomy.com. Follow @bromano

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