Databricks plans to acquire the open-source database startup Neon for $1 billion

Databricks announced it plans to acquire Neon, an open-source database startup, for $1 billion to enhance AI deployment capabilities.

: Databricks has agreed to purchase Neon, a startup specializing in open-source databases, for approximately $1 billion. This acquisition aims to integrate Neon's serverless relational database management system with Databricks' data intelligence services, enabling more efficient AI agent deployment for their customers. Founded by Nikita Shamgunov, Heikki Linnakangas, and Stas Kelvich in 2021, Neon provides a cloud-based platform that supports database cloning, scaling, branching and offers point-in-time recovery. Neon's technological advantages align well with Databricks’ strategy to capitalize on the AI boom, which includes previous acquisitions like Tabular and MosaicML.

Databricks announced a strategic move to acquire Neon, an open-source database startup, at a valuation of approximately $1 billion. This acquisition is part of Databricks' effort to strengthen its portfolio of offerings and to integrate Neon's advanced serverless relational database management tools. Such integration is expected to significantly enhance the company's capability to assist clients in deploying AI agents more efficiently.

Founded in 2021 by Nikita Shamgunov, Heikki Linnakangas, and Stas Kelvich, Neon has quickly risen within the tech world by providing a robust, cloud-based platform that features both free and usage-based paid plans. The platform is praised for its abilities to clone databases, preview changes before production deployment, and automatically scale its infrastructure to meet dynamic demands for processor, memory, and storage. Neon further supports branching technology for testing and development and can conduct point-in-time recovery of data.

According to telemetry data cited by Databricks, 80% of databases on Neon are automatically created by AI agents, indicating its importance in the emerging era of agent-driven applications. This aligns with Ali Ghodsi, CEO of Databricks, who explained the acquisition: "Neon proves it: four out of every five databases on their platform are spun up by code, not humans." This indicates how crucial automation and AI are becoming to database management.

Databricks' ongoing investment strategy is heavily focused on the AI sector, as demonstrated by its previous acquisitions. The company has accumulated more than $19 billion in financing and recently closed a notable $15.3 billion financing round, positioning it with a $62 billion valuation. Previous acquisitions include Tabular for nearly $2 billion and MosaicML for $1.3 billion, helping to build a comprehensive suite of AI and data management tools.

Neon has secured $129.6 million in funding with support from major investors like Microsoft's venture arm M12, General Catalyst, Menlo Ventures, and Notable Capital. Its acquisition by Databricks signifies ongoing consolidation in the tech industry, where major platforms continue to harness new technologies to enhance AI capabilities.

Sources: Databricks, Neon, Crunchbase, Techcrunch