Databricks to Acquire Neon for $1 Billion - Data Engineering News

Databricks to Acquire Neon for $1 Billion

Databricks, a leading data analytics platform, announced on Wednesday an agreement to acquire Neon, a startup focused on developing an open-source alternative to AWS Aurora Postgres. The acquisition is valued at approximately $1 billion.

Enhancing AI Agent Deployment

According to Databricks, integrating Neon’s technology will enable a combination of the startup’s serverless relational database management system with its own data intelligence services. This integration is designed to facilitate more efficient deployment of AI agents for its customer base.

About Neon

Established in 2021 by Nikita Shamgunov, Heikki Linnakangas, and Stas Kelvich, Neon provides a managed, cloud-based database platform.

The platform offers both free and usage-based paid plans, allowing developers to clone databases and preview changes prior to production implementation.

Key Features of the Neon Platform

• Automatic scaling of processor, memory, and storage based on usage demands.
• Support for branching – creating isolated database instances for testing and development purposes.
• Point-in-time recovery capabilities.

AI Agent Workloads and Neon's Capabilities

Databricks highlights that Neon’s features are particularly well-suited for workloads driven by AI agents. These agents often operate at a faster pace than human developers but necessitate oversight to mitigate potential errors.

Recent data from the company indicates that 80% of databases provisioned on Neon were created automatically by AI agents, rather than through direct human intervention.

Databricks' Vision for the Future

“The emergence of AI-native, agent-driven applications is fundamentally changing the requirements for database functionality,” stated Ali Ghodsi, co-founder and CEO of Databricks.

“Neon demonstrates this shift: a remarkable four out of five databases on their platform are initiated by code, not people. Integrating Neon into Databricks will provide developers with a serverless Postgres solution capable of handling agentic speed, offering pay-as-you-go pricing, and maintaining the openness of the Postgres community.”

Funding and Investment

Neon has secured $129.6 million in funding, as reported by Crunchbase. Its investors include M12 (Microsoft’s venture arm), General Catalyst, Menlo Ventures, and Notable Capital.

Databricks itself has amassed over $19 billion in financing, most recently closing a $15.3 billion round in January, resulting in a $62 billion valuation.

Strategic Acquisitions to Capitalize on the AI Boom

Databricks has been actively investing to leverage the growing AI market and establish itself as a leading provider for building, testing, and deploying AI models and agents.

Last June, the company acquired data management firm Tabular for a reported $2 billion. In 2023, it also purchased MosaicML, an open-source platform for training large language models and deploying AI tools, for $1.3 billion.