Does Grafdigger's Cage stop Collected Company from working?

Grafdigger's Cage states that creature cards can't enter the battlefield from libraries. Collected Company instructs you to look at the top six cards of your library and put up to two creature cards with mana value 3 or less onto the battlefield. Because the creatures would be entering the battlefield directly from your library, Grafdigger's Cage's replacement effect prevents them from doing so.

Under CR 614.1, replacement effects modify how events occur. Grafdigger's Cage creates a replacement effect that simply stops creatures from entering the battlefield from a library. When Collected Company tries to place creatures onto the battlefield from the library, that effect intervenes and the creatures never make it onto the battlefield.

The remaining cards looked at during Collected Company's resolution are still put on the bottom of your library in any order — only the 'put onto the battlefield' part is stopped. So Collected Company resolves, you look at six cards, find creatures you'd want, but cannot place any of them onto the battlefield. They all go to the bottom of your library instead.

Concrete example: You cast Collected Company while your opponent has Grafdigger's Cage in play. You reveal Elvish Mystic, Llanowar Elves, and four lands. Even though both creatures have mana value 1, neither can enter the battlefield due to the Cage. All six cards go to the bottom of your library, and Collected Company provides no creatures.

This interaction is well established in competitive play and is one of the primary reasons Grafdigger's Cage is used as a sideboard card against Collected Company strategies. See CR 614.1a for the general rule on replacement effects that modify how permanents enter the battlefield.