Databricks Inc. on Wednesday said it has agreed to acquire open-source database startup Neon for $1 billion in its latest move to appeal to businesses using artificial intelligence (AI) agents.
The data analytics company said the deal will combine Neon’s serverless relational database management system with Databricks’ data intelligence services to let customers deploy AI agents more efficiently — a task increasingly difficult as more AI agents write code and execute tasks.
“The era of AI-native, agent-driven applications is reshaping what a database must do,” Databricks CEO Ali Ghodsi said in a statement announcing the deal. “Neon proves it: four out of every five databases on their platform are spun up by code, not humans. By bringing Neon into Databricks, we’re giving developers a serverless Postgres that can keep up with agentic speed, pay-as-you-go economics and the openness of the Postgres community.”
Developers and AI bots use Neon’s cloud-based database platform, which is based on the popular open-source database PostgreSQL, to build apps and websites. Neon would presumably function as the underlying database for customers that create AI agents with data they store in Databricks’ platform.
When technologies from the two companies are integrated, they will prevent performance bottlenecks from thousands of concurrent agents, as well as simplify infrastructure and reduce costs, according to Databricks.
“In 2024, something shifted: AI-native apps started taking off. And we realized that our architecture was uniquely well-suited to power them,” Neon CEO Nikita Shamgunov said in a blog post Wednesday. “We leaned into agent-focused development, and within a few months, over 80% of databases were being created by AI agents rather than humans.”
The ultimate goal of the acquisition is to “build the best Postgres experience in the world,” and one of the most important pieces of the modern AI-native app stack, Shamgunov added.
“On the surface, this makes sense, given the growing popularity of fully managed instances of PostgreSQL-compatible databases from major cloud platform players that offer elastic scaling and instant-on (e.g., serverless) capabilities,” Brad Shimmin, vice president, practice lead for data management and analytics, at the Futurum Group, said in a message. “Developers love this kind of separation of storage and compute because they can instantiate database instances on a temporary basis without any IT overhead or long-running infrastructure costs. Given that, what’s unique about Databricks’ intention to acquire Neon’s serverless platform is that it doesn’t revolve around developers, per se, but rather around agentic processes simulating actual developers.”
“By investing in a fully-managed, serverless implementation of the world’s most popular database, Databricks is setting itself up nicely to capitalize on the growing demand for data tooling tailored to the unique needs of AI-driven applications in the enterprise,” Shimmin added.
The acquisition of Neon, expected to close by the summer, is Databricks’ third billion-dollar AI- and data-related purchase over the past two years. Last year, it paid nearly $2 billion for Tabular, a data-management startup. In 2023, it ponied up $1.3 billion for MosaicML, an open-source platform for training large language models (LLMs) and deploying AI tools.
Databricks is valued at $62 billion after landing a $10 billion funding round, one of the largest in Silicon Valley history, late last year.
Neon has raised $129.6 million, according to Crunchbase.
