Neo Technology raises $20M, aims to cement its leadership as the graph databases era arives

By Michael Carney , written on January 15, 2015

From The News Desk

With big data exploding across the business landscape, it’s of little surprise that database technology and new frameworks for structuring and accessing this data have received increased attention. According to many experts, graph theory is the key to understanding big data. This makes Neo Technology (Neo), the company behind the popular Neo4J open source graph database platform, one of the hottest names in the industry today.

Neo has capitalized on that momentum, more than doubling both revenue and customers over the last year. This includes the addition of clients like Walmart, eBay, Cisco, Earthlink, Medium, Crunchbase, and Zephyr Health.

Today, Neo announcing $20 million in Series C financing in a round led by Creandum, with participation from new investor Dawn Capital and existing investors Fidelity Growth Partners Europe, Sunstone Capital, and Conor Venture Partners. The round brings Neo’s total capitalization to $44.1 million and sees Creandum’s Johan Brenner, a former MySQL investor, join the company’s board of directors.

The key to Neo’s recent success, according to CEO Emil Eifrem is combination of fortunate timing – graph databases are hot, having been popularized by household names like Facebook – and a relentless focus by his company on improving the usability of the Neo4J platform.

“Our community doubled in the first six months of the year following our Neo4J 2.0 release last December – which was an ease of use-focused release – and it took us four years to reach that point,” Eifrem says.

Neo will use the fresh infusion of capital to invest across all areas of its business, including building out is engineering team, expanding its salesforce globally, and investing more heavily in marketing to continue driving awareness. With the new funding, Eifrem, believes he’s positioned he’s bought himself at least 24 months worth of runway. It’s realistic that Neo reaches cashflow positive in that timeframe, the CEO says, but given the nature of the opportunity it’s a fair bet the company will opt to raise more in the future.

Graph databases are a popular choice for a wide variety of data problems, but there are a few that are a natural fit, according to Eifrem.

“The number one thing that crystalized for us in 2014 is that we’ve identified the top use cases for our platform,” he says. “The first use case is recommendations, which we see a lot in retail and finance. The second is master data management, which is a universal problem for all large companies. The third is network and IT operations, which is also common within banks and retailers.”

Forrester Research predicts that 25 percent of all enterprises will use graph databases by 2017, while Gartner says, “Graph analysis is possibly the single most effective competitive differentiator for organizations pursuing data-driven operations and decisions after the design of data capture.”

Neo’s journey to this point is an unlike most other top technology companies. The company was founded in Sweden in 2000 when the team’s founding members began the first graph database research. The research project became a company in 2007 and Neo raised its first institutional capital in 2009 in a $2.5 million Series A round. Eifrem eventually moved the company’s headquarters to Silicon Valley in 2011 right as the concept graph databases began shifting out of the shadows. Today the company is firing on all cylinders.

Technology giants like Facebook build their own proprietary graph databases in-house, but for the majority of companies that is either impossible or a highly inefficient strategy. Neo continues to make it easier and more beneficial for these businesses to look beyond more common relational databases, in part by offering a browser-like graphical interface and built-in visualization tools that make graph databases accessible.

For now, Neo4J is the only game in town when it comes to an off-the-shelf graph database platform. But that is unlikely to last much longer. With Neo already wins marquee clients worth hundreds of thousands of dollars per year away from database giants like Oracle, it’s looking like a foregone conclusion that it will face more competition in the near future. That makes the next 12 months a crucial time for Neo wherein the company will need to deploy this new capital to put as much distance between itself and this future competition as possible.

One challenge during this next phase will be to staff up considerably from its current level of just 80 employees. As Eifrem likes phrases it, “Larry Ellison can blink and direct 4,000 people to work on competing with us.” Neo’s advantage lays in its head start and its ability to move quickly. The more closely it can associate its brand with graph databases, the stronger its position.

“There’s a zillion data tools out there and that’s all fine and dandy, but no one knows when to apply all these different products,” Eifrem says. “That’s why these use cases are so important – we feel they’re the key to us being able to convey our value. Our goal is that whenever someone thinks ‘I have a recommendations problem,’ they say to themselves, ‘I should look at a graph database and Neo4J.’ The same whenever someone thinks, ‘I have a network and IT data problem,’ they should think of Neo4j.”

[Image via Meetup]