Join our daily and weekly newsletters for the latest updates and exclusive content on industry-leading AI coverage. Learn More<\/em><\/p>\n\n\n\n The importance of databases to modern enterprise AI operations cannot be overstated.<\/p>\n\n\n\n Data helps to train and ground AI, and multiple research reports show that without proper data, AI efforts tend to fail. With trends like\u00a0vibe coding\u00a0and agentic AI, it\u2019s also increasingly important to have database technology that can be spun up as needed in a serverless approach to modern development efforts<\/span>.<\/p>\n\n\n\n In that environment, it should come as no surprise that databases are a particularly valuable commodity.\u00a0<\/p>\n\n\n\n This week, that fact was on display with\u00a0Databricks\u2018 acquisition of privately held serverless PostgreSQL startup\u00a0Neon, which was\u00a0founded in<\/span> 2022. The deal is reportedly valued at a staggering $1 billion, which is shocking given that barely two years ago, the company raised $46 million in a series B round of funding.<\/p>\n\n\n\n What is also particularly interesting is that Databricks itself is a data vendor, with its\u00a0data lakehouse platform. At various points in the company\u2019s history, it has positioned itself as an alternative to traditional databases, providing a data lake structure where users can make queries. So what was missing, and why did Databricks need to\u00a0<\/span>spend a billion dollars? What does it mean and say about what enterprise AI really needs?<\/p>\n\n\n\n Functionally, it\u2019s all about meeting developers\u2019 needs to build agentic AI applications. According to Neon, over 80% of the databases created on its platform were created by AI agents.<\/p>\n\n\n\n While Neon is a startup, the core database technology that it\u2019s based on is not new.<\/p>\n\n\n\n PostgreSQL is one of the oldest and most established open-source database platforms, dating back to 1996. It\u2019s a relational database technology, meaning it has tables and rows alongside extremely stable features that organizations have trusted for decades. The core open-source PostgreSQL database is now updated in a yearly release cadence. The most recent stable update was\u00a0PostgreSQL 17,\u00a0which<\/span> debuted in Sept. 2024.<\/p>\n\n\n\n As an open-source technology, PostgreSQL has enjoyed broad adoption and contributions. At one point, it was often compared to other proprietary relational database options, including Oracle as an alternative option. In 2025, though, PostgreSQL stands on its own.<\/p>\n\n\n\n DB-Engines currently ranks PostgreSQL as the fourth most popular database in use today, behind Microsoft SQL Server, MySQL and Oracle. The state of PostgreSQL 2024 report from\u00a0Timescale\u00a0identifies the open-source database\u2019s rising prominence as the database of choice for AI applications. The database\u2019s well-established and understood nature and<\/span> broad availability are among the numerous factors that make it attractive.<\/p>\n\n\n\n PostgreSQL on its own is just the database, though. Running it as a serverless offering is an operational and deployment activity. The promise of any serverless database is ease of operations. Rather than requiring a dedicated database deployment that continually runs with dedicated resources, serverless is spun up on demand as needed. It\u2019s a deployment option that is particularly attractive to developers as a way to build applications quickly. AI-based development is even more appealing as databases can be built and deployed programmatically.<\/p>\n\n\n\n Every cloud hyperscaler has some form of PostgreSQL service and has for years.\u00a0<\/p>\n\n\n\n Google has multiple offerings, including\u00a0AlloyDB, Microsoft has Azure Database for PostgreSQL, while AWS has Amazon RDS for PostgreSQL and Amazon Aurora.<\/span> Each of them also has some flavor of serverless offering, that is, a database available on demand.<\/p>\n\n\n\n Numerous smaller vendors exist, including Timescale, EDB and NetApp Instaclustr. In fact, nearly two years ago, Databricks acquired serverless PostgreSQL vendor\u00a0bit.io,<\/span> which was also an early rival of Neon.<\/p>\n\n\n\n As it turns out, the goals and capabilities of bit.io are quite different from Neon.<\/p>\n\n\n\n \u201cTogether with the Neon team, we look forward to building the most developer and AI-agent-friendly database platform,\u201d Phil Shin, senior director of corporate development and ventures at Databricks, told VentureBeat. \u201cIn contrast, the bit.io acquisition was not actually about Postgres but targeting developer experiences, especially in the trials and self-service process.\u201d<\/p>\n\n\n\n Shin added that the bit.io acquisition had a big impact on Databricks\u2019 seamless signup experience.\u00a0<\/p>\n\n\n\n While Neon has only been around for a few years with its serverless PostgreSQL implementation, commercial vendor EDB has been in business since 2004. EDB has a series of its own commercially supported PostgreSQL offerings.<\/p>\n\n\n\n Matt Yonkovit, VP of Product for EDB, told VentureBeat that the acquisition of Neon is\u00a0a strong vote of confidence in Postgres as a foundational technology for AI and analytics.\u00a0<\/p>\n\n\n\n \u201cIt reinforces what we\u2019ve long believed: Postgres is increasingly central to modern data stacks,\u201d\u00a0 Yonkovit said. \u201cServerless is a great fit for dev\/test environments and for quickly jumpstarting AI projects\u2014but as those use cases scale, enterprises need the performance, compliance, and control of a sovereign platform.\u201d<\/p>\n\n\n\n Yonkovit noted that serverless is well-suited for short bursts and smaller workloads. It can\u00a0scale up and down quickly or shut off entirely when idle, which significantly reduces costs associated with compute, power and storage. However, in his view, there are tradeoffs.<\/p>\n\n\n\n \u201cA significant challenge with serverless is that sovereign data management can become messy because you can\u2019t control where the data is processed unless you have a well-restricted pool of resources,\u201d Yonkovit said. <\/p>\n\n\n\n Neon\u2019s serverless PostgreSQL approach separates storage and compute, making it developer-friendly and AI-native. It also enables automated scaling as well as branching in an approach that is similar to how the Git version control system works for code.<\/p>\n\n\n\n Amalgam Insights CEO and Chief Analyst Hyoun Park noted that Databricks has been a pioneer in deploying and scaling AI projects.\u00a0<\/p>\n\n\n\n \u201cOne of the big challenges in AI is managing the storage and compute associated with the data,\u201d Park told VentureBeat. \u201cEach of these needs will be increasingly hard to predict in an agentic world where end-user prompts and requests may quickly lead to unexpected demands in storage or compute to solve the problem.<\/p>\n\n\n\n Park explained that Neon\u2019s serverless autoscaling approach to PostgreSQL is important for AI because it allows agents and AI projects to grow as needed without artificially coupling storage and compute needs together. He added that for Databricks, this is useful both for agentic use cases and for supporting the custom models they have built over the last couple of years after its Mosaic AI acquisition.\u00a0<\/p>\n\n\n\n For enterprises looking to lead the way in AI, this acquisition signals a shift in infrastructure requirements for successful AI implementation.<\/p>\n\n\n\n Data is critical for AI; that\u2019s not a surprise. What is particularly insightful, though, is that the ability to rapidly spin up databases is essential for agentic AI success. The deal validates that even advanced data companies need specialized serverless database capabilities to support AI agents that create and manage databases programmatically.\u00a0<\/p>\n\n\n\n Organizations should recognize that traditional database approaches may limit their AI initiatives, while flexible, instantly scalable serverless solutions enable the dynamic resource allocation that modern AI applications demand.\u00a0<\/p>\n\n\n\n For companies still planning their AI roadmap, this acquisition signals that database infrastructure decisions should prioritize serverless capabilities that can adapt quickly to unpredictable AI workloads. This would transform database strategy from a technical consideration to a competitive advantage in delivering responsive, efficient AI solutions.<\/p>\n Daily insights on business use cases with VB Daily<\/strong><\/p>\n If you want to impress your boss, VB Daily has you covered. We give you the inside scoop on what companies are doing with generative AI, from regulatory shifts to practical deployments, so you can share insights for maximum ROI.<\/p>\n \n\t\t\t\t\tThanks for subscribing. Check out more VB newsletters here.\n\t\t\t\t<\/p>\n An error occured.<\/p>\n<\/p><\/div>\n
\n<\/div>What is serverless PostgreSQL and why does it matter?<\/h2>\n\n\n\n
The serverless PostgreSQL landscape has a lot of vendors<\/strong><\/h2>\n\n\n\n
How serverless PostgreSQL fits into the enterprise database landscape<\/h2>\n\n\n\n
The power of serverless PostgreSQL for agentic AI<\/h2>\n\n\n\n
What it means for enterprise AI leaders<\/h2>\n\n\n\n
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