In a major shot in the arm for the graph database industry, market leader Neo4j Inc. today announced it has raised $325 million in what it says is the largest-ever venture capital round for a private database company.

The Series F venture capital round brings its total funding to $515 million and bestows upon it a market capitalization of more than $2 billion.

The 14-year-old company, which sells enterprise and cloud versions of an open-source project by the same name, dwelt in relative obscurity until a few years ago when graph databases began to capture the attention of businesses for the unique ability to navigate relationships between data elements and discover linkages that are difficult or impossible to define with conventional SQL queries and relational data stores. Interest has intensified with the rapid shift of analytics and business intelligence processing to the cloud.

Gartner Inc. has forecast that graph technologies will be used in 80% of data and analytics projects by 2025, up from just 10% this year. Forrester Research Inc. estimates that 38% of enterprises have adopted graph technology and that the number is likely to double by 2026, said Noel Yuhanna, a  Forrester vice president and principal analyst. The new funding “will put to rest criticism that standalone graph database market will not survive,” he said.

“This is a powerful show of support from the U.S. investment sector,” said Carl Olofson, research vice president for data management software at International Data Corp. “I think we’re just at the beginning. The amount of business [graph database companies] are doing is nothing compared to the potential.”

800 enterprise customers

Founded in Sweden with offices in the San Francisco Bay area, Neo4j has quietly built an impressive roster of customers that it says now includes more than 800 enterprises and 75% of the Fortune 100. The company touts its architecture, which scales both horizontally and vertically, as supporting very large databases.

It said it will show off that capability today at its user conference with a demonstration of real-time queries running against a graph composed of over 200 billion nodes and more than a trillion relationships across 1,000 machines. The technology behind the demonstration, called Neo4j Fabric, enables data sets to be broken up and scaled horizontally without limits, the company said.

Neo4j didn’t need the money said, Chief Marketing Officer Lance Walter. “We were a pretty well-funded company with a healthy business,” he said, “but if you look at the market attention on data and graphs you see an opportunity to go even faster. There are a lot of green lights around graph.”

Walter wouldn’t comment on the company’s annual revenues but said Crunchbase Inc.’s estimate of between $10 million and $50 million “needs updating.”

The investment continues a feeding frenzy in funding for database startups that kicked off following Snowflake Inc.’s record initial public offering last September that gave the cloud data warehousing company a market capitalization of $70 billion. In just the last few months, Neo4j rival TigerGraph Inc. raised $105 million and graph newcomer Katana Graph Inc. reeled in $28.5 million.

Other database companies outside of the graph sphere also closed massive funding rounds, led by Databricks Inc.’s $1 billion infusion in February, a $110 million late-stage round raised by Redis Labs Inc. in April,  $70 million in funding for real-time data analytics startup Imply Inc. and $75 million for data discovery vendor Explorium Ltd.

Breaking out

The growth of graph database technology has been held back by market confusion about its unique architecture as well as its incompatibility with the ubiquitous SQL standard. A common perception has been the graphs have few applications outside of fraud detection and recommendation engines, but “there are many uses that are applicable to most businesses,” said IDC’s’ Olofson.

“You can use them for inventory management, supply chain tracking and all manner of pattern analysis to understand where to find efficiencies in business processes,” he said. “They can scan databases and discover relationships that aren’t defined in the schema, which enables you to perfect that database. I think we’re just scratching the surface of what graph databases can do.”

The technology has also benefited from the 2019 decision by the International Organization for Standardization to bless the Graph Query Language as a new database query language, a move that validated years of collaboration by numerous database vendors, including ardent competitors.

Graph databases have also ridden the surging interest in artificial intelligence applications. About half of Gartner client inquiries related to AI involve discussions of graph technology, the research firm recently wrote.

Neo4j’s Walter said the company intends to use the funds to invest in the product portfolio and expand the managed cloud service it launched in January. While most installations are in on-premises data centers, he said, “the cloud side is where the fastest growth is.”

Plenty of rivals

The new funding doesn’t cement Neo4j’s dominance in a market with plenty of competitors, including Amazon Web Services Inc.’s Neptune, Microsoft Corp.’s Azure Cosmos DB and Oracle Corp., which has been building graph features into its flagship Autonomous Database.

Although Walter said Oracle’s approach is “doomed to fail, it means something that Oracle has taken graphs relatively seriously from some time,” he said. “They see an opportunity here.”

And not everyone sees the market entering hypergrowth. “I’m not down on graph databases, but I’ve seen no evidence that the market is growing any faster than the database platform market in general,” said James Kobielus, senior research director for data management at training and research firm TDWI.

Neo4j has effectively communicated the message that graph databases are the next big thing but “I’m not inclined to inflate graph into a paradigm-buster,” he said. “Multiplatform data architectures that combine a bit of columnar, relational, graph and object storage are a dominant trend and graph is part of that. This is a testament to [Neo4j’s] longevity, their stable growth over a long period of time and their ability to scratch a lot of itches.”

Funding was led by Eurazeo SE with participation from GV Management Co LLC along with existing investors One Peak Partners, Creandum AB and Greenbridge Partners LLC. New investors are Deutsche Telekom Capital Partners Management GmbH and Lightrock LLP.

The participation of GV, which is the venture capital arm of Google LLC, won’t affect Neo4j’s latitude to work with other cloud providers, Walter said. “We have a partnership with Google Cloud Platform under their initiative to work with the best of the best for various database applications,” he said. “They’re a reseller of Neo4j.”

Image: Simple Rules Co./Harmony