Inside Databricks’ $1B Deal for Next-Gen Data Platform
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Today on the podcast, we're going to be talking about Databricks and a recent acquisition, $1 billion for a database startup called Neon that is working heavily with AI, doing a bunch of things, enabling databases for AI agents and using AI agents and code to spin up databases. I'll get into all of that and explain why. But before we do, I wanted to mention that my AI startup, AI Box, has officially launched its beta. Our very first

product is called the AI Box Playground. And I would love for you to try it out. Essentially, we allow you to access all of the top AI models, audio, text, image, all inside of one platform for $20 a month. So you don't need subscriptions to all of the different platforms. And in addition to that, we have real-time

way more features and some really cool tools. Some of my favorites are the fact that you can generate audio with it. So 11 Labs is integrated if you need an audio for something, whether you're creating a voiceover or whatever. And you essentially can go and compare side by side the audio tracked from different platforms

tools. So if you generate, you know, if you get open AI to generate something and you get 11 labs to generate something, you can, you can get them side by side. You can listen to a comparison of what each of them sound like. And one of the cool things is inside of the platform, we have the ability for you to

switch the AI model mid chat. So I might be chatting. I might've used open AI to generate a piece of audio. I could switch it over to 11 labs and I could go and check out all of the different voices in 11 labs. I can regenerate the same thing with a whole bunch of different voices, stick them all side by side, listen to all of them and compare which I like best. So a ton of really cool features. My, one of my favorite is the side-by-side comparison of different model outputs. You do that with audio, you can do that with image and you can do that with text. You, you get a response from chat GP. You're like, eh, I don't really like it. You can get

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So one of the big, I think, shockers in this whole story is that we, of course, have a huge outcome, right? This is a neon. It's selling for a billion dollars. That's a massive price tag. Essentially, it is a startup that's building an open source alternative to AWS's Aurora Postgres. And so Databricks said that they're just pretty much excited to buy this because it lets the

It lets them combine that startup's serverless relational database management system with their own data intelligence services. Okay. Sounds like a lot, but pretty much what it's doing is it's letting customers deploy AI agents more efficiently to spin up databases.

Okay, then the price and the sale of this is crazy. I'll go into like some of the AI stuff that this database company is doing because I actually do think it's impressive. And do not get me wrong. I'm going to like put a big caveat on the financial side here really quick. But don't get me wrong. This is a very fascinating company. I think it's doing some really interesting things. Like it's getting sold for a billion dollars. Obviously, that's amazing. It's doing a great job. But the crazy thing is that they actually have raised...

combined cash up until this point, a ton of money. They've raised $129 million. And that's come from massive investors. So we have Microsoft's venture arm, which is M12, General Catalyst, Menlo Ventures, Notable Capital, huge people, right? And they most recently

uh had raised a ton in financing so i will break down all of that but before we get into that i want to say neon right they've raised 129 million dollars they're getting sold for um less than 10x the cash that they have raised total a billion dollars someone called that good someone called that bad databricks um

The one that is actually buying them has raised $19 billion. And they've done that mostly in financing. So in January, they closed a $15.3 billion round, which gave them a $62 billion valuation, right? So they can go, if they get a $62 billion valuation, they can go and acquire companies for $1 billion.

a billion dollars. And what's interesting is they this isn't the first massive acquisition that Databricks has made. So I think Databricks is playing a game, there comes a point when you get to a certain size, you're kind of in a certain market, you see other big players. And if you've raised enough money, like Databricks has done, you're able to actually go and acquire them. So they recently acquired in June, a data management company called tabular,

They bought that for about $2 billion. It's kind of reports. We don't have specific numbers on it. In 2003, they bought Mosaic ML. I remember reporting on this and they bought that for $1.3 billion. So Databricks is known for making these multi-billion dollar or billion dollar acquisitions. I personally think it's a great outcome for Neon to be acquired for a billion dollars. Some people would say, oh, they've raised $100 million.

Getting sold for a billion is, you know, it should have returned 100x on money. I don't know. In my opinion, this is a little bit less. It's probably like a 7.5x if my math off the top of my head is correct. So 7.5x on the money from the latest or from whatever their latest rounds or I guess the total cash raised isn't horrible. I'd be curious whatever their latest valuation was. I feel like it was probably less than...

I don't know. It might be a down round. I'm not 100% sure. This is what they said specifically about the company, though. Like, what is this actually capable of doing? So, what I found interesting was the fact that this was founded back in 2021. So,

A lot of the companies at the time, peak Zerp era, went bankrupt, really struggled. But they essentially had a free usage-based plan that I think really helped them grow a ton. This was a managed cloud-based database platform. Essentially, it was going to let developers clone a database, and then they could look at all the changes that were made before it would actually go into production. So it was very useful, able to really quickly spin up clone databases,

And then it automatically scales processors, memory, and storage according to whatever the usage was needed. So they had isolated database instances for testing and development, as well as point in time recovery. So this is impressive because it kind of is automatically determining how much data

storage it needed, how much memory it needed, what type of processors it needed. And these are really expensive things. Like a lot of times what happens is you'll just say, hey, I want like, I'm going to buy like X amount of capability for my server. And you just get charged for the whole thing, even if you're not using it. So this is kind of cool that they allowed you to scale it. And I think that's what a lot of people are excited about.

Databricks evidently was also very excited about acquiring this because they said that this is, you know, ideally suited to workloads that are run by AI agents. This is what Databricks is pushing heavily into is AI right now. And so when they see kind of this technology, they're like, Hey, this is pretty much exactly what we need to run AI agents because they operate much faster than human developers, which, you know, kind of need supervision and you have to control for errors. So because of all of this Databricks, uh,

essentially cited, which was kind of interesting, that 80% of the databases that were, quote, provisioned on Neon were created automatically by AI agents rather than humans. So four out of five databases that were spun up over on Neon were actually done by AI agents or AI running. So this is essentially, I think, why they were so excited and why they decided to go in and buy this. And here's the quote that they specifically said. This is Ali Godeski, the co-founder and CEO of Databricks. They said, quote,

The era of AI native agent driven applications is reshaping what a database must do. Neon provides it, proves it. Four out of five of every 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. I think at the end of the day, what's cool is that this is kind of like an open source project.

or open source tool or has those capabilities. So it's got a ton of contribution, people that have kind of contributed and helped build this. It's an alternative to an Amazon product, an AWS product, AWS Aurora Postgres. So this is, I think, a major competitor in the space. I'm really curious to see if Databricks can continue just this really solid growth we've seen as they continue to acquire companies.

They've been able to take on a ton of debt and financing and by buying companies that are obviously successful and doing quite well.

Databricks seems to continue to grow its footprint. So I think the acquisition play is a great one for Databricks. You can see a clear path to success here. So I'm really excited and looking forward to see what they do. Again, make sure if you haven't tried it already, go check out AI Box, my startup at AIbox.ai. You can get access to all the top models. And for $20 a month, you don't have to pay subscriptions to Anthropic, Claude,

XAI, Meta, Google, and everything else. You just get it all on one platform, AIbox.ai. Thanks so much for tuning in today, and I will catch you next time.