In a surprising twist, cloud security startup Wiz has decided to forgo a $23 billion acquisition offer from Google, opting instead to pursue its initial plan of going public. This move marks what would have been Google’s largest-ever acquisition.
Wiz’s co-founder, Assaf Rappaport, informed employees of the decision in a memo. “Saying no to such humbling offers is tough,” he wrote, emphasizing the company’s commitment to its original goals of an initial public offering (IPO) and reaching $1 billion in annual recurring revenue. Concerns over antitrust issues and investor sentiments played a significant role in the decision to walk away from the potential deal.
Founded in 2020, Wiz has experienced rapid growth under Rappaport’s leadership. The company hit $100 million in annual recurring revenue within 18 months and reached $350 million last year. Wiz’s cloud security products, which include prevention, active detection, and response, have attracted large firms, making it a valuable asset for Google in its competition with Microsoft in the security software market.
Google Cloud, led by CEO Thomas Kurian, has faced increasing competition from Microsoft and Amazon. The cloud unit achieved profitability in 2023 after years of significant investment, but it remains under pressure to continue growing, especially during the ongoing AI boom. The acquisition of Wiz would have been a strategic move to bolster Google’s cloud security offerings.
The decision to remain independent and pursue an IPO highlights the current market conditions for technology exits. Many startups are delaying going public, waiting for more favorable market conditions, while the regulatory environment for acquisitions remains challenging.
The collapse of the deal is likely a disappointment for Wiz’s venture backers, including Index Ventures, Insight Partners, Lightspeed Venture Partners, and Sequoia, who have raised multibillion-dollar funds and are looking for significant returns. Exits of over $10 billion are rare, making substantial returns elusive in the current market.
Wiz’s founders have a history of successful exits. Their previous security startup, Adallom, was sold to Microsoft for $320 million in 2015. Investing in Wiz was seen as a “no-brainer” by early supporters like former Sequoia leader Doug Leone.
The Covid-19 pandemic accelerated the shift to cloud-based software and infrastructure, benefiting companies like Wiz that provide security for applications and data across major public clouds. This shift contributed to Wiz’s rapid growth and early fundraising success, including a $100 million funding round less than a year after its founding.
Google’s acquisition of Wiz would have nearly doubled its largest previous deal, the $12.5 billion purchase of Motorola in 2012. Other significant acquisitions include the $5.4 billion purchase of cybersecurity company Mandiant in 2022 and recent talks with sales software maker HubSpot, which ended without a deal.
(Source: Bloomberg | CNBC)
