Cybersecurity startup Wiz walks away from a reported $23B deal to be acquired by Google-parent Alphabet and has chosen to pursue an initial public offering (IPO) as it initially planned, as per Wiz memo. If Wiz would not have rejected Google’s offer it would have been the search giant’s largest-ever deal.
“While we are flattered by offers we have received, we have chosen to continue on our path to building Wiz,” CEO Assaf Rappaport said in the memo, without naming Google.
Wiz Google offer refusal
“Saying no to such humbling offers is tough,” Wiz co-founder Assaf Rappaport said in a memo to the company’s worldwide employee base. A person familiar with the company’s thinking cited both antitrust and investor concerns as part of the motivation behind the decision to walk away.
Rappaport wrote that the company would focus on its next milestones: an initial public offering and $1 billion in annual recurring revenue, both targets which the company had been eyeing well before talks had been reported.
Wiz’s 23B deal with Google
The Wiz and Google deal would have nearly doubled the $12 billion valuation of the startup from its most recent round of funding. Wiz was founded in 2020, has grown at a rapid speed under Rappaport. He has been eyeing an IPO as recently as May.
Wiz’s cloud security products include prevention, active detection and response. This is the range that has appealed to large firms and would have helped Google compete with Microsoft which also sells security software.
Alphabet’s cloud segment
Alphabet’s cloud segment has been under pressure to grow amid competition from frontrunners Microsoft and Amazon, something the Wiz deal would have helped with. The cloud unit reached profitability in 2023 after years of hefty investment.
While Google Cloud has seen consistent growth in recent years, the company and its CEO Thomas Kurian faces pressure to continue growing in efforts to capture business during the AI boom.
Google did not immediately respond to requests for comment.
Effect of Wiz walking away from Google deal
Exits in technology have been rare this year, between startups waiting for more receptive markets before going public and cash-rich companies fearing they would not win regulatory clearance for transactions.
The no deal can be a downer for Index Ventures, Insight Partners, Lightspeed Venture Partners, Sequoia and other venture firms. All of them have stakes in Wiz that have raised multibillion-dollar funds in recent years. Purely with the intent of giving their startups enough to guarantee success.
Funds that run into the billions require exits of over $10 billion in order to pay off, and those events have been rare, said Brendan Burke, a senior analyst at PitchBook. Intuit bought Mailchimp for $12 billion in November 2021.
Wiz’s revenue
Wiz hit $100 million in annual recurring revenue after 18 months. It also achieved $350 million in annual recurring revenue in 2023. Wiz is backed by a roster of blue-chip firms. These include Israeli venture capitalist Cyberstarts, Index Ventures, Insight Partners and Sequoia Capital.
The startup was born in January 2020, and 11 months later, it announced a $100 million funding round.
“I think what was unique with Wiz in the early days was the amount of money raised from the get-go,” as per Sid Trivedi, an investor at Foundation Capital.
Other acquisitions by Google
Google successfully acquired cybersecurity firm Mandiant for $5.4 billion in 2022. Google’s largest deal is acquisition of Motorola in 2012 for $12.5B. Google ended up selling to Lenovo for $2.9B in 2014. As recently as last week, Google reportedly ended conversations to acquire sales software maker HubSpot.
