Wiz rejected a $23 billion acquisition offer from Google’s parent company, Alphabet Inc. The company plans to pursue an Initial Public Offering (IPO) instead. The deal, if completed would have been the largest acquisition in Google’s history.
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The acquisition offer valued Wiz at $23 billion, nearly double its $12 billion valuation from its funding round.
The company aims to achieve $1 billion in annual recurring revenue and sees an IPO as a more fitting strategy to maintain control and drive long-term growth.
The potential acquisition faced regulatory hurdles with antitrust scrutiny being a major concern. Given Google’s existing antitrust challenges, a deal of this magnitude would likely attract intense scrutiny from US and European regulators.
The company’s decision reflects a careful consideration of its investor base including influential venture backers like Index Ventures, Insight Partners, Lightspeed Venture Partners and Sequoia Capital.
Current market conditions favor IPOs particularly for high-growth companies like Wiz.
The company was founded in 2020 by a team of former engineers and entrepreneurs from Israel’s elite signals intelligence Unit 8200.
This team consisting of CEO Assaf Rappaport, VP of Product Yinon Costica, CTO Ami Luttwak and VP of R&D Roy Reznik previously built and sold another successful cybersecurity company, Adallom, to Microsoft for $320 million.
The company has shown growth reaching $100 million in annual recurring revenue within 18 months and surpassing $350 million last year.
The company provides cloud-based security solutions that cover prevention, active detection and response. Their offerings are attractive to large enterprises looking for cloud security measures.
By offering protection for applications and data across major public clouds (Amazon, Google, Microsoft, Oracle), Wiz has positioned itself as an important player in the cybersecurity industry.
Founded in 2020 by Assaf Rappaport and other former Israeli military officers, Wiz has quickly become a key player in the cybersecurity space.
The company focuses on cloud-based cybersecurity solutions that help enterprises identify and tackle risks on cloud platforms.
By 2023, Wiz had reached $350 million in annual recurring revenue (ARR).
Despite Google’s offer representing a premium over Wiz’s last valuation of $12 billion, the decision to remain independent was largely driven by Wiz’s confidence in its growth and desire to go public.
Assaf Rappaport, Wiz’s CEO addressed in a letter to employees that the company aims to reach $1 billion in ARR before pursuing an initial public offering (IPO).
Although antitrust concerns were not the main reason for rejecting the deal, they were a consideration. With increasing scrutiny on tech mergers both Wiz and Google were aware of potential regulatory hurdles.
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The Financial Times said that some board members were skeptical about the deal’s chances of passing regulatory approval under the watch of the US Federal Trade Commission.
Rappaport highlighted the support of Wiz’s investors and the strength of its team as critical factors in deciding to remain independent.
The founders each owning about 9% of Wiz along with major investors like Sequoia Capital, Index Ventures and Thrive Capital, were confident in the startup.
The company’s suite of products, which includes prevention, active detection and response to cloud-based threats would have been an addition to Google’s cloud services.
This acquisition could have helped Google compete more effectively with Microsoft, which has made inroads in cloud security.
The deal was seen as an opportunity to gain a competitive edge over rivals like Microsoft Azure and AWS.
With Microsoft Azure already surpassing AWS in growth and Google Cloud lagging behind, the addition of the company’s technology could have provided Google with a much-needed boost in the cybersecurity domain.
Although the company’s revenue of $350 million would have only added about 1% to Google Cloud’s existing $33.1 billion revenue.
Google’s previous acquisitions in cybersecurity including Mandiant for $5.4 billion and Siemplify for $500 million.
Google Cloud currently holds an 11% market share in the cloud computing sector trailing behind AWS’s 31% and Microsoft Azure’s 25%.
Google Cloud has shown growth with a 28% increase in revenue in the first quarter of 2024.
Google has forecasted that its Cloud revenue could reach $12.5 billion in the fourth quarter of 2024, implying a 36% growth rate.
This projection is based on the company’s strengths in AI, infrastructure, databases, analytics and cybersecurity.
The company has a history of successful acquisitions such as the $5.4 billion purchase of cybersecurity firm Mandiant in 2022 and should continue this strategy to fill gaps in its product portfolio.
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