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Emil Eifrem, CEO of Neo4j
Creating a credible competitor to database behemoths Oracle and IBM is one of the most difficult business problems I’ve ever encountered. Emil Eifrem seemed to be on the right track after 18 years. His firm, Neo4j, a graph database platform supplier based in San Mateo, Calif., just secured $325 million at a valuation of more than $2 billion, paving the way for a prospective public offering.
What do you mean by that? Eifrem told me in a June 22 interview that his company has addressed two difficult difficulties since launching its product in 2007: “R&D and Go-to-Market.”
If you own Oracle or MongoDB stock, you should keep an eye on what they’re doing to stay ahead of Neo4j.
Neo4j raised $325 million in Series F fundraising on June 17, the largest in the history of a private database company, pushing its valuation to over $2 billion and total funding to over $500 billion. Eurazeo led the round, with GV [Google Ventures] contributing as well.
In comparison to its competitors, Neo4j has raised a lot of money. MongoDB raised $311 million in total, according to VentureBeat. The company went public in October 2017 and has since climbed at a 91 percent average annual pace to a $22.5 billion market cap. In the meantime, according to VentureBeat, “Cockroach Labs raised $355 million in fundraising, including a $160 million round earlier in 2021 at a similar $2 billion valuation.”
A graph database differs from relational databases, which are made up of tables that store words and numbers in rows and columns and have been widely used for decades. Since then, data has evolved, and the graph helps to store and retrieve today’s more prevalent unstructured data.
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Individual data points (such as key-value pairs or documents) as well as data relationships between them are stored in the graph database. According to TechRepublic, “these relationships make a graph database easily a million times faster than a relational database” for applications like fraud detection.
Neo4j is aiming for a massive market with massive entry hurdles. According to TechRepublic, corporations will spend $50 billion on databases in 2020, with that figure likely to rise at a 15% annual rate to $100 billion by 2025.
Neo4j’s database type — graphs — represents a smaller market with a significantly quicker growth rate. According to VentureBeat, the graph database market will grow at a 24 percent compound annual rate from $822 million to $2.4 billion by 2023.
“Enterprise graph processing and graph databases will increase at a 100 percent annual rate through 2022, helping decision-making in 30% of enterprises by 2023,” according to Gartner.
Neo4j has developed significantly since it first began selling its software in 2007. According to Eifrem, the company employed 300 people in March 2020 and expects to employ 600 by the end of 2021. (Unfortunately, he did not disclose the company’s revenue or growth rate.)
Neo4j had “more than 3 million downloads as of November 2018 and [had] over 300 enterprise subscription users,” according to VentureBeat. Lyft, Walmart, eBay, Adobe, Orange, Monsanto, IBM, Microsoft, Cisco, Medium, Airbnb, NASA, and the United States Army are among the company’s current and former customers.”
To get to where it is now, Neo4j has to tackle two really difficult difficulties. “Making our product effective meant addressing a difficult R&D problem and a difficult Go-To-Market problem,” he explained. Databases are the backbone of any application. In the 1970s, 1980s, 1990s, and 2000s, SQL and Relational Database Management Systems (RDMS) prevailed, storing data in rows and columns. Oracle, IBM DB2, Informix, and Sybase were all essentially the same product while I was growing up.”
Eifrem was well aware that replacing RDMS with anything better would be difficult. “There was an opportunity to create a new database.” However, it would be subjected to intense examination and friction throughout adoption. Even if you could solve the technological issues, the Go-To-Market would be costly and difficult to execute. It would be vast and last decades if it was successful. Creating a new operating or Enterprise Resource Planning (ERP) system is the only solution that comes close to solving this problem. It is a massive market. The prize is excellent if you achieve.”
Eifrem’s idea for the company, to his credit, was sparked by an issue he had that no existing database companies could solve. Most of the businesses I researched for my book, Hungry Start-Up Strategy, were founded by people looking for a solution to a personal problem. They looked for a company that was already dealing with the issue. They founded their business because the issue was too critical to ignore.
Neo4j followed the same path. “I got the idea for a new database after running into an issue myself.” During the first IT bubble, I was using SQL as a chief technology officer in my early twenties. The standard stack was in place: The database was layer one, business logic was layer two, and presentation was layer three. The SQL database was working against us for some reason. We had a total of 20 individuals in the department, with ten of them battling the database. The database was an accelerator in all of our prior ventures. “It solved a lot of difficult computer science problems including disk storage, query, and backup,” Eifrem explained.
He came up with a vital SQL insight. “I pondered why the database was conspiring against me. It was because the data’s shape and SQL’s building blocks were at odds. The structure of the table was rigid. When it was first created, it made sense because individuals were entering data into a computer. However, we were in the midst of a data explosion that was both untidy and interconnected. “What if we had databases that were nodes connected by relationships, like a social graph?” I wondered.
He approached this problem with confidence, aided by his ignorance of having never attempted it before. “I was young and naive enough to think we could create it,” he explained. We began searching the internet but were unable to locate anything. ‘Let’s create it,’ we determined. ‘How difficult can it be?’ We know it’s difficult after 15 years and $100 million. But we decided it was worthwhile because we had a tailwind: the globe was becoming more connected, data was becoming more connected, and more projects would require it in the future. We were clients. We were confident that others would be as well.”
Neo4j noticed that the most successful database users have the same issue. “We needed to construct and test it in the first company to get started.” The leap was attempting to establish it as a separate entity. When we looked at what people were doing with data in 2007, we found that Google, Facebook, Yahoo, and eBay all used an RDMS. They had no choice but to create their own [graph database]. We recognized that the company would have to deal with this issue the next day. They were all interested in how web pages are linked together. What we created would aid Global 2000 corporations in competing with their rivals.”
Eifrem wanted to work with early adopters to develop its product. “We found our first customer by looking for early adopters in various industries. They are those who aspire to be at the forefront of their field. They recognize promise and may be found in any industry. You check to see if it’s a vitamin (e.g., it’s beneficial for you), a medicine (like tylenol), or penicillin that’s causing the pain (without out it, you die). “We looked for use cases where early adopter personalities were mission crucial,” he said.
He decided to collaborate with UBS to create a more efficient way to enroll traders. “An early example is banking entitlements. Which assets do you provide a new trader access to when they’re onboarded? The answer is contingent on where you’re hiring and their prior network. You set everything up on the internet. UBS adopted Neo4j as the backbone for their entitlement systems in 2010. We were a million times faster than our competitors in connecting data — we were the LeBron James [of entitlements processing].”
Neo4j was able to get its foot in the door because to this industry-leading skill and develop in other areas where it was lacking. “We were deficient in every other way.” It was similar to Google Docs, which made it much easier for individuals to share documents and saved them time. All of the other tedious tasks, such as online backups and compliance, had to be improved. Meanwhile, the platform evolved: “There was a shift from tapes to disks, and the quantity of random access memory (RAM) available for storage affected how data was accessed,” he added.
While Neo4j’s magic power stayed the same for diverse customer applications (far quicker data transfers than competitors), the commercial impact was variable but significant. “The CFO’s business benefit on entitlements was that we were able to reduce the time it takes to onboard new traders from weeks to seconds.” This allows banks to treat new staff like royalty.”
Fraud detection was another application. “We could see how fraud rings were connected,” Eifrem added, “and we enabled Morgan Stanley’s CFO to discover 3% to 4% more fraud — producing a significant return on investment.” Our solution improved the performance of recommendation engines in retail, resulting in a 5% increase in sales. A retail CFO with $2 billion in e-commerce revenue can calculate the ROI on a 5% increase in sales with our technology.”
Neo4j wants to make its first customer in an industry into a passionate promoter so that it may develop a larger footing among its peers. “Industry marketing is what we do.” We add others in the industry after our first early adopter buys an antibiotic. From UBS, we moved on to Goldman Sachs, the Royal Bank of Canada, and the Royal Bank of Scotland. We also develop new categories, which competitors are invited to assist create during conferences. We also have adoptions that are led by professionals. We offered a completely free open source version to developers.”
Neo4j will have more opportunities in the future. “We now have a narrow slice of the Global 2000 in North America and Europe, which accounts for 80 percent of Oracle’s database sales,” Eifrem says. We’re making progress./nRead More

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