Databricks in Advanced Talks to Acquire AI-Focused Database Startup Neon for Over $1 Billion

Databricks reportedly could acquire serverless database startup Neon for $1B+ - SiliconANGLE

Databricks reportedly could acquire serverless database startup Neon for $1B+ Databricks Inc. is reportedly seeking to buy Neon Inc., a startup that sells a commercial version of the open-source PostgreSQL database. Tech publication Upstarts Media today cited sources as saying that the acquisition talks are at an advanced stage. Some insiders reportedly describe the deal "as if it's done," while others cautioned that it may still fall through. It's believed the transaction could be worth more than $1 billion. San Francisco-based Neon has raised more than $130 million in funding from Microsoft Corp's M12 fund and other backers. Its PostgreSQL distribution's flagship feature is a serverless architecture that removes the need for customers to manage the underlying infrastructure. Neon automatically adds or removes hardware resources to database environments as workload requirements change. According to the company, the software can provision storage capacity separately from processing power and vice versa. In some legacy database environments, customers can only add both at once, which makes it more difficult to avoid unnecessary hardware spending. Before an application can retrieve information from a database, it has to establish a network connection to that database. The task consumes hardware resources that can slow down database performance. According to Neon, its PostgreSQL implementation mitigates the issue with a so-called connection pooling feature. The technology maintains a collection of standby connections that can be quickly assigned to applications when the need arises, which avoids the need to expend hardware resources on creating a new connection. PostgreSQL is a relational database, which means it stores information in rows and columns. Neon provides a cybersecurity tool that allows companies to regulate which users can access what data down to individual rows. If user error or a ransomware attack deletes a database's contents, administrators can roll it back to an earlier version. Databricks' reported interest in Neon may relate to the fact that the database lends itself to artificial intelligence use cases. Neon can store vectors, the mathematical structure in which AI models hold information. It's also capable of provisioning new database instances in one second, which Neon says is useful for AI coding assistants. The faster a coding assistant can launch a database when a developer asks it to, the better its prompt response times will be. Databricks has made multiple startup acquisitions over the past two years to bolster its AI capabilities.

Databricks in Talks to Acquire Database Startup Neon for $1 Billion | AIM

This deal intends to support customers in building AI agents to carry out multi-step tasks like planning trips and organising product returns. Databricks is in talks to acquire San Francisco-based database startup Neon, which rents access to a cloud database service designed for AI agents and applications, for around $1 billion, according to The Information. The acquisition aims to get users to build AI agents that can handle multi-step tasks, such as planning trips and organising product returns. While the potential deal is valued at $1 billion, the total amount could exceed this figure once employee retention packages are included, AIM Research reported. The deal appears to be finalised, but discussions are ongoing, and it may still fall through. Neon's services are based on open-source PostgreSQL software, which lets customers pay for short periods of database usage -- sometimes as short as several seconds. According to reports, this makes Neon one of the most cost-effective options for customers using AI agents in businesses to create new databases and use them for brief periods to carry out different tasks. In March this year, Databricks and Anthropic announced a five-year partnership to offer Anthropic models and services through the Databricks data intelligence platform. Within this partnership, the two companies would provide Claude AI models directly to their customers, highlighting an easier way for users to build AI agents. Similarly, Databricks acquired Fennel last month, an engineering platform, to support customers in iterating on features, improving model performance with reliable signals, and providing GenAI models with personalised and real-time context without any overhead and cost of managing complex infrastructure. Acquiring Neon would give Databricks direct possession of a contemporary, AI-focused transactional database and enhance its infrastructure layer even further.