Microsoft’s $25.6 Million Bet on Neon Could Transform AI and Postgres Integration

Neon, a San Francisco, CA-based provider of a serverless Postgres database built for developers, has raised $25.6 million in funding. The round, which brought the total amount to $130.6 million, was led by M12, Microsoft's Venture Fund, with participation from Abstract Ventures, General Catalyst, Menlo Ventures, and Notable Capital.

According to Neon's CEO, Nikita Shamgunov, the company intends to use the funds to expand its development efforts and business reach, accelerating the next generation of AI applications built on Azure. Neon helps developers and teams ship faster with Postgres by delivering it as a serverless cloud platform. By separating the compute and storage components without breaking away from core Postgres, it brings the database into the modern developer workflow, making it more automated, easier to manage, and AI-ready.

"Today, more than 3000 projects are created on Neon daily, empowering everything from startups building the next wave of AI tools, to large platforms like Vercel, Replit and Retool," Shamgunov said.

The strategic investment from Microsoft's venture arm, M12, is a sign that big tech companies are ready and willing to shell out cash for database technology. "Postgres is quickly becoming the database of choice for developers, and we are investing heavily in that ecosystem," said M12 managing partner Andrew Smyth. "Neon is a leading Postgres platform, and this strategic investment emphasizes our commitment to deeply integrate Neon into Azure."