Nexo is buying Vauld, marking more DeFi consolidation

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Datadog

Power Score: 52.48

Momentum Score: 55.0 (2)

HQ: New York, NY

CEO: Olivier Pomel

On Power

Coming off a huge IPO in 2019 , Datadog is in a good place financially, trailing only Splunk in our economic strength category. Like Splunk, Datadog has deep relationships with the biggest cloud vendors, including a recent partnership with Azure that allows for native integration, and that puts the company within striking distance of the top of the list. Datadog falls short in its penetration of the lucrative public sector, though with its recent FedRAMP authorization and a growing emphasis on government affairs the company is clearly hoping to make strides in the space in the coming years.

Datadog has seemingly put all that post-IPO capital to good use. Its engineering team is just over 1,000 employees strong, having grown 50% in the past year. It also spent $211 million on R&D over the past year, which was among the highest of the competitors.

Datadog has a $31.9 billion market cap, which is higher than any other competitor on this Power Index. All of that said, there are still three competitors with $10+ billion market caps that are growing at a faster rate than Datadog. This is less an indictment of Datadog than it is a testament to the overall growth and VC interest in the observability space.

On Disruption

While Datadog's growth is impressive on its own, what sets it apart is its ability to launch new products and upsell existing customers to products like its Compliance Monitoring tool, which helps clients reduce the complexity associated with abiding by regulatory requirements across multiple cloud environments. To that end, Datadog revealed that in June 2021 , 75% of its customer base used two or more products, while 28% used four or more of its products. That customer base is also growing at a steady, impressive clip: Datadog announced during its Q2 2021 earnings call in June 2021 that it accrued 1,610 customers with annual recurring revenue above $100,000 that quarter, up from 1,015 a year prior.

And it's worth noting that the two companies on this list that outspent Datadog on R&D — Splunk and Micro Focus — aren't as narrowly focused on observability. That puts Datadog in a position to be a leading innovator in the observability space, as it looks to build on recent momentum.

Tea Leaves

Datadog is betting on neither build nor buy alone, but both. Acquisitions have been critical to Datadog's growth-through-product-expansion strategy. Integrating acquired companies is no easy task, and Datadog is coming off a year in which it made three sizable acquisitions. We'll be watching closely to see whether Datadog continues its acquisition spree (it certainly has the capital to do so), or whether it might take more time to ensure smooth post-acquisition transitions before going back for more.

They Said It

"When it comes to working with the cloud providers — and [at] the end of the day we cooperate with them while we compete with them because we accelerate the move to the cloud, which is where they make money in the end — they want us in their deals. Their customers are most successful when they're using us." — CEO Olivier Pomel in a November 2020 interview with Protocol (edited for brevity and clarity)