Data analytics company Databricks announced on Wednesday that it has entered an agreement to acquire Neon, a startup providing an open-source alternative to AWS Aurora Postgres, for approximately $1 billion.
According to Databricks, the acquisition will allow it to integrate Neon’s innovative serverless relational database management technology into its own data intelligence services. This integration aims to enhance the efficient deployment of AI-driven applications by Databricks’ customers.
Neon, founded in 2021 by CEO Nikita Shamgunov along with software engineers Heikki Linnakangas and Stas Kelvich, has built a cloud-based managed database platform designed for developers. The platform offers free as well as usage-based paid subscriptions, enabling developers to clone databases and preview software changes safely before moving them into a production environment. Neon’s product also features automatic scaling of compute, memory, and storage capacities based on actual usage, database branching for creating isolated instances during testing and development, and capabilities for point-in-time recovery.
These functions are particularly useful in scenarios involving AI applications, Databricks noted, because AI agents typically require the creation and management of databases at significantly higher speeds than human developers, creating a greater demand for rapid, transparent, and reliable deployment tools. In fact, Databricks pointed out that recent data revealed around 80% of the databases created on Neon’s platform had been automatically generated by AI agents.
Ali Ghodsi, Databricks co-founder and CEO, explained that the acquisition is driven by the evolution in requirements for databases intended for AI-centric workloads. “The era of AI-native, agent-driven applications is reshaping what a database must do,” Ghodsi said in a statement. “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.”
Neon has raised roughly $129.5 million to date, with major investors including Microsoft’s venture arm M12, General Catalyst, Menlo Ventures, and Notable Capital. Databricks itself has secured over $19 billion in total financing, including a $15.3 billion round earlier this year that valued the company at approximately $62 billion.
This acquisition marks another significant step by Databricks as it positions itself strategically within the growing AI market. Prior acquisitions include data management firm Tabular for nearly $2 billion in June 2024, and MosaicML, an open-source platform for AI applications training and deployment, for $1.3 billion in 2023.
