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Wiz walked away from a $23 billion deal to be acquired by Google in what would have been the search giant’s largest-ever acquisition, telling employees it will proceed with its initial public offering (IPO) as originally planned.
“It’s hard to turn down such an inferior offer,” Wiz co-founder Assaf Rappaport said in a memo to the company’s global staff, as seen by CNBC. A person familiar with the company’s thinking said antitrust and investor concerns were part of the reason for their decision to walk away.
Rappaport wrote that the company will focus on its next milestones: an initial public offering and $1 billion in annual recurring revenue, both goals the company had been eyeing before reports of the talks.
The deal would nearly double the startup’s valuation of $12 billion in its most recent funding round. Founded in 2020, Wiz has grown rapidly under the leadership of Rappaport, who had been considering an IPO as early as May.
Wiz’s cloud security offerings include prevention, active detection and response — a suite of products that would be attractive to large companies and help Google compete with Microsoft, which also sells security software.
Alphabet’s cloud computing unit, which is on track to become profitable in 2023 after years of heavy investment, has been under pressure to grow amid competition from leaders such as Microsoft and Amazon, and the Wiz deal could help.
While Google Cloud has seen steady growth in recent years, the company and its CEO, Thomas Kurian, are under pressure to continue growing to capture business amid the artificial intelligence boom.
Google did not immediately respond to a request for comment.
Exits in the tech sector have been scarce this year as startups wait for a more receptive market before going public and well-funded companies worry about getting regulatory approval for deals.
The deal’s collapse will be a disappointment to Index Ventures, Insight Partners, Lightspeed Venture Partners, Sequoia Capital and other venture capital firms that have stakes in Wiz. These firms have raised billions of dollars in recent years with the intent of providing their startups with enough capital to ensure their success.
It’s rare for multibillion-dollar funds to need exits of more than $10 billion to pay off, said Brendan Burke, senior analyst at PitchBook. Intuit acquired Mailchimp for $12 billion in November 2021.
Wizards hit $100 million in annual recurring revenue After 18 months of work, the company has achieved $350 million in annual recurring revenue in 2023. The company is backed by a number of blue-chip companies, including Israeli venture capital firm Cyberstarts, Index Ventures, Insight Partners and Sequoia Capital.
Wiz’s founders previously founded security startup Adallom, raised funding from Sequoia and Index, and sold the startup to Microsoft for $320 million in 2015. Former Sequoia leader Doug Leone Already called Investing in Wiz in its early stages “was a smart move.”
Soon after its founding, the COVID-19 pandemic began to spread, prompting companies to adopt cloud-based software and infrastructure to help employees work remotely. This shift benefited Wiz, which can flag security issues for applications and data on public clouds from Amazon, Google, Microsoft, and Oracle.
The startup was founded in January 2020 and announced $100 million in funding 11 months later.
“I think what was unique about Wiz early on was the amount of money that was raised from the beginning,” Sid Trivedi, an investor at Foundation Capital, told CNBC.
Google successfully acquired cybersecurity company Mandiant for $5.4 billion in 2022. Google’s largest deal remains the acquisition of hardware manufacturer Motorola for $12.5 billion in 2012, which was eventually sold to Lenovo for $2.9 billion in 2014. Just last week, Google reportedly End the conversation Acquires sales software maker HubSpot.
Last year, during an interview with CNBC’s Sara Eisen and Carl Quintanilla at the New York Stock Exchange, Eisen asked Rappaport if he wanted to take the startup public.
“Yeah, sure,” he said. He smiled. “That’s why we’re here.”
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