AI Data Shakeup: Next-Gen Data Platform

Today on the podcast, we're gonna 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 uh databases for AI agents and using AI agents and code to spin up databases. I'll get into all of that in Explain why, but before we do, I wanted to mention that my AI startup, AIBox, has officially launched its beta. Our very first product is called the AI Box.

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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. Um and so Databricks said that they're just pretty much excited to buy this because um it lets the it lets them combine that startups 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 the price and the sale of this is crazy. Um, I'll go into like some of the AI stuff that this this database company is doing because I actually do think it's impressive. And do not get me wrong.

I'm gonna like put a big caveat on the 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 um combined cash up until this point.

A ton of money. They've raised$129 million. Um, and that's come from massive investors. So we have Microsoft's Venture Arm, which is M twelve, General Catalyst, Menlo Ventures, Notable Capital. Huge people, right? Um and they most recently uh had raised a ton in financing. So

I will break down all of that. But the fur but before we get into that, I want to say neon, right? They've raised$1299 million. They're getting sold for um less than 10x the cash that they have raised total, a billion dollars. Some would call that good, some would call that bad. Data bricks, um The one that is actually buying them has raised nineteen billion dollars. Uh and they've done that mostly in financing. So

Uh in January they closed a fifteen point three billion dollar uh round, which gave them a sixty two billion dollar valuation, right? So they can go if they get a sixty two billion dollar valuation, they can go and acquire companies for um 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

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. Uh they bought that for about two billion dollars is kind of reports we don't have, you know.

specific numbers on it. In two thousand and three they bought Mosaic ML. Um I remember reporting on this and they bought that for one point three billion dollars. So Databricks is known for making these multi-billion dollar or billion dollar acquisitions. Um, I personally think it's a great outcome for Neon to be acquired for billion dollars. Some people would say, oh, they've raised a hundred million.

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

It I don't know. It might it might be a down round. I'm not a hundred percent 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 twenty twenty one so Uh 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 gonna let it 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. Um, and then it automatically scales processors, memory, and storage according to whatever um 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 um 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

Uh I I'm gonna buy like X amount of 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. Um, 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, kinda need supervision and they you have to control for errors. So because of all of this, Databricks uh

essentially cited, which was kind of interesting, that eighty percent of the databases that were quote provisioned on NEON were created by um automatically by AI agents rather than humans. So Uh five four out of five databases that were spun up over on Neon were actually done by AI agents or AI uh running. So this is uh essentially I think why they were so excited and why they decided to go in and buy this.

Um, and here's the quote that they specifically said. This is Ali Godsky, 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, uh proves it. Four out of five day of every database 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 uh it it's got a ton of contribution, uh people that have kind of contributed and helped build this. It's an alternative to an Amazon product, an AWS product.

um AWS Aurora Postgres. So this is, I think, a major competitor in the space. I'm really curious to see uh if Databricks can continue just this really solid growth we've seen um as they continue to acquire companies. uh they've, you know, been able to take on a ton of debt and f uh financing and by buying companies that are obviously successful and doing quite well.

Um Databricks seems to continue to grow its footprint. So I think the acquisition play is a great one for uh 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 AIBox, my startup. Um, at aibox.ai, you can get access to all the top models.

And for twenty dollars a month, you don't have to pay subscriptions to anthropic, claude, uh, XAI, Meta, Google, and everything else. You just get it all on one platform, um, AIBox.ai. Thanks so much for tuning in today and I will catch you