I think you may be misinterpreting the series D funding. Down rounds are very rare, and it's very common to go to series E-F before IPO these days. A $50 million series D is surprisingly small, though. However, the whole field of "observability" is very hot these days, and is essentially about making tools to look through your logs and traces to make sure everything at your tech company is running correctly. This is only a hard problem because most companies these days buy thousands of SaaS products which are all fragile in their own ways.
Observability is a bit more than that, ideally observability also includes instrumenting your applications and collecting data from within the applications. This may include changing the source codes to the applications to inject data collecting points.
Anyway, it is HOT but it is also provided by default in the frameworks you use to build your applications to run in (any) cloud.
All cloud vendors have this built in to their frameworks and all the apis and services that you use in the cloud.
Honeycombs solution is much more primitive since it does not have the same deep integration to collect data as you get out-of-the-box in Google/Azure/AWS/... cloud, though I assume you can? deepen the integration and collect internal data from the apps, IFF you have the capability to modify and recompile the applications (==i.e. you only use open source)
But regardless, the main issue for Honeycomb is the market. Their product might be good (I have no idea if it is) but that is still moot because their product is redundant when it comes to the cloud. The cloud vendors have better and deeper observability for the cloud apis and services than honeycomb could ever provide. And it comes for free and out-of-the-box in the cloud frameworks.
The market for their product is largely someone that wants to run something cloud-like but on their own premises and their own datacentres.
Sure, that market exists but it is shrinking as all these things are migrated off premise and onto cloud.
That market is quickly evaporating to be replaced by the cloud.
To compare it to other older established markets. What honeycomb offers is like a product that solves certain problems for print-newspapers, problems that do not exist for online news-sites.