Linked media – Associated media
Wiz has decided to forgo a $23 billion acquisition by Google, a deal that would have marked Google’s largest acquisition to date. Instead, the cloud security startup will pursue an initial public offering (IPO) as originally intended, according to an internal memo from co-founder Assaf Rappaport.
“Turning down such offers is challenging,” Rappaport noted in his message to employees, which was obtained by CNBC. He emphasized the company’s focus on achieving its next goals: an IPO and reaching $1 billion in annual recurring revenue, milestones that had been in sight well before the acquisition talks began.
The acquisition would have nearly doubled Wiz’s valuation from its last funding round, which stood at $12 billion. Founded in 2020, Wiz has grown rapidly under Rappaport’s leadership, with an IPO target set as recently as May. A source familiar with the company’s strategy cited concerns over antitrust issues and investor apprehensions as reasons for exiting the deal.
Wiz’s suite of cloud security products, which includes prevention, active detection, and response capabilities, has attracted large enterprises and could have bolstered Google’s competitive stance against Microsoft in the security software market.
Google’s cloud division, Alphabet, has been striving to grow amidst stiff competition from market leaders Microsoft and Amazon. The potential Wiz acquisition was seen as a strategic move to enhance Google’s cloud offerings. The cloud unit achieved profitability in 2023 after significant investments.
Despite steady growth, Google Cloud and its CEO Thomas Kurian remain under pressure to continue expanding, especially as the demand for artificial intelligence solutions surges. Google did not immediately respond to requests for comment.
Tech company exits have been infrequent this year, with startups waiting for more favorable market conditions to go public and cash-rich companies wary of regulatory hurdles for mergers and acquisitions.
The failed deal is likely a disappointment for venture capital firms such as Index Ventures, Insight Partners, Lightspeed Venture Partners, and Sequoia Capital, which have substantial investments in Wiz. These firms have raised multibillion-dollar funds aimed at supporting their startups’ success.
According to PitchBook analyst Brendan Burke, funds that exceed $10 billion in outflows are rare. Notable exits like Intuit’s $12 billion acquisition of Mailchimp in November 2021 are exceptions.
Wiz achieved $100 million in annual recurring revenue within 18 months and is projected to reach $350 million by the end of 2023. The company is backed by prominent investors, including Israeli venture capitalist Cyberstarts, Index Ventures, Insight Partners, and Sequoia Capital.
Wiz’s founders previously established the security startup Adallom, which was funded by Sequoia and Index and sold to Microsoft for $320 million in 2015. Doug Leone, a former Sequoia leader, described investing in Wiz during its early stages as a “no-brainer.”
Launched in January 2020, Wiz quickly raised $100 million in a funding round announced just 11 months later, benefiting from the rapid shift to cloud-based software and infrastructure driven by the Covid-19 pandemic.
Sid Trivedi, an investor at Foundation Capital, remarked in an interview with CNBC, “Wiz’s early days were unique due to the significant amount of capital it raised right from the start.”
Google has a history of successful acquisitions, including the $5.4 billion purchase of cybersecurity firm Mandiant in 2022. Its largest acquisition remains the $12.5 billion purchase of Motorola in 2012, which was later sold to Lenovo for $2.9 billion in 2014. Recently, Google concluded talks to acquire sales software maker HubSpot.
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