Wiz walked away from a $23 billion deal to be acquired by Google, in what would have been the search giant’s biggest deal ever, telling employees it would pursue an initial public offering as it had originally planned.
“Saying no to such humble offers is difficult,” Wiz co-founder Assaf Rappaport said in a memo obtained by CNBC to the company’s global 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 exit.
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 eyed long before the talks were reported.
The deal would have nearly doubled the startup’s $12 billion valuation from its most recent funding round. Founded in 2020, Wiz has grown rapidly under Rappaport, who was considering an IPO as recently as May.
Wiz’s cloud security products include prevention, active detection and response — a line aimed at large companies that would help Google compete with Microsoft, which also sells security software.
Alphabet’s cloud division is under pressure to grow amid competition from incumbents Microsoft and Amazon, something the Wiz deal would help. The cloud unit reached profitability in 2023 after years of massive investment.
While Google Cloud has seen steady growth in recent years, the company and CEO Thomas Kurian are under pressure to keep growing in efforts to capture business during the artificial intelligence boom.
Google did not immediately respond to requests for comment.
Tech exits have been rare this year, among startups waiting for more receptive markets before going public and cash-rich companies fearing they won’t win regulatory approval to trade.
The collapse of the deal will be seen as a disappointment by Index Ventures, Insight Partners, Lightspeed Venture Partners, Sequoia and other venture firms with stakes in Wiz that have raised multibillion-dollar funds in recent years, intent on giving their startups enough to guarantee success.
Funds in the billions require exits of more than $10 billion to repay, and those events have been rare, said Brendan Burke, senior analyst at PitchBook. Intuit bought Mailchimp for $12 billion in November 2021.
Wiz achieved $100 million in annual recurring revenue after 18 months and has achieved $350 million in annual recurring revenue by 2023. It is backed by a list of blue chip companies, including Israeli venture capital firms Cyberstarts, Index Ventures, Insight Partners and Sequoia Capital.
Wiz’s founders previously built security startup Adallom, raised money from Sequoia and Index, and sold the startup to Microsoft for $320 million in 2015. Former Sequoia leader Doug Leone has called investing in Wiz in her early “unacceptable” days.
Soon after its inception, Covid began to spread and companies rushed to adopt cloud-based software and infrastructure to help employees work remotely. The change benefited Wiz, which can highlight security issues for applications and data in Amazon, Google, Microsoft and Oracle public clouds.
The startup was born in January 2020 and 11 months later announced a $100 million funding round.
“I think what was unique about Wiz in the early days was the amount of money that was raised from the beginning,” Sid Trivedi, an investor at Foundation Capital, told CNBC in an interview.
Google successfully acquired cybersecurity firm Mandiant for $5.4 billion in 2022. Google’s biggest deal remains its acquisition of hardware maker Motorola in 2012 for $12.5 billion, which it eventually sold to Lenovo for $2.9 billion in 2014. Just last week, Google reportedly ended talks to acquire sales software maker HubSpot.
In an interview with CNBC’s Sara Eisen and Carl Quintanilla at the New York Stock Exchange last year, Eisen asked Rappaport if he wanted to take the startup public.
“Yeah, sure,” he said. He laughed. “That’s why we’re here.”
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