Source: Elastic agrees to buy CRV-backed DeductiveAI for up to $85M

DeductiveAI, a startup that uses AI to find and fix bugs in software, has agreed to be sold to software company Elastic for up to $85 million, according to a person with knowledge of the deal.

Deductive, founded in 2023, came out stealth last November when it became a $7.5 million seed round led by CRV with participation from Databricks Ventures, Thomvest Ventures and PrimeSet. The investment valued the startup at $33 million, according to PitchBook.

Elastic and Deductive did not respond to multiple requests for comment. TechCrunch will update this article if either company responds.

The sale marks a quick exit for Deductive, which operates in a fast-growing sector known as AI Site Reliability Engineering (AI SRE). Building AI-powered SRE tools has become an important area, driven by the massive influx of AI-written code. By replacing manual debugging with AI, human SREs can shift their focus from constantly troubleshooting glitches and other issues to spending more time assisting with product development.

The acquisition reflects a broader trend in which established technology incumbents are looking to acquire AI-native startups to integrate agentic technologies into their existing product suites, the source told TechCrunch.

Elastic, which went public in 2018, is best known for Elasticsearch, the search and analytics engine that allows organizations to store, search, analyze and monitor large amounts of data in near real-time.

The company’s observability software — essentially tools that allow engineers to monitor software systems and detect security threats — could benefit from Deductive’s technology. According to the source, the integration of Deduction’s AI technology into Elastic will enhance the observability platform by giving customers tools to automatically monitor performance and resolve system errors in real time.

Deductive was co-founded by Rakesh Kothari, previously VP of engineering at Lightspeed-backed business analytics startup ThoughtSpot, and Sameer Agarwal, who previously worked at Apache Software Foundation and Meta. Agrawal was one of the founders of Databricks.

While Deductive achieved about $1 million in annual recurring revenue (ARR), according to the source, the startup’s growth lagged behind Resolve AI, one of the industry’s early winners. The two-year-old Resolve was co-founded by former Splunk director Spiros Xanthos and Mayank Agarwal. The Greylock and Lightspeed-backed startup was last valued at $1.5 billion when it raised a $40 million Series A extension in April.