Wiz has decided to walk away from a lucrative $23 billion acquisition deal with Google in order to pursue its initial plan of going public. This decision was communicated to the company’s employees through a memo from co-founder Assaf Rappaport, who stated that it was a tough choice to turn down such a tempting offer.
The motivation behind Wiz’s decision to decline Google’s acquisition offer was based on both antitrust issues and investor concerns. The company has decided to focus on achieving its next milestones, which include preparing for an initial public offering and reaching $1 billion in annual recurring revenue. These were targets that Wiz had set for itself even before the acquisition talks began.
Wiz’s Growth and Product Range
Wiz, founded in 2020, has experienced rapid growth under Rappaport’s leadership. The company offers cloud security products that encompass prevention, active detection, and response capabilities. This comprehensive range of security solutions has attracted the interest of large firms, positioning Wiz as a strong competitor to companies like Microsoft in the security software market.
Alphabet’s Cloud Segment and Competition
Google’s cloud segment has been under pressure to expand, particularly in the face of tough competition from industry leaders like Microsoft and Amazon. The potential acquisition of Wiz by Google was seen as a strategic move to bolster its cloud offerings and enhance its competitive position in the market. However, the collapse of the deal has left Google looking for other avenues to strengthen its cloud business.
Investor Disappointment and Exits
The failure of the acquisition deal has disappointed venture firms like Index Ventures, Insight Partners, Lightspeed Venture Partners, and Sequoia, which hold stakes in Wiz. These firms had high expectations for a successful exit from their investment in Wiz, especially given the significant amount of funding poured into the company. Brendan Burke from PitchBook noted that exits exceeding $10 billion are essential for funds that run into the billions to pay off, making such events rare in the current market.
Wiz’s Rapid Revenue Growth
Despite the setback with the failed acquisition deal, Wiz has experienced rapid revenue growth, reaching $100 million in annual recurring revenue within 18 months of its founding and achieving $350 million in 2023. The company is backed by prominent venture capitalists including Cyberstarts, Index Ventures, Insight Partners, and Sequoia Capital.
The company’s inception in January 2020 coincided with the onset of the COVID-19 pandemic, sparking a surge in cloud adoption by businesses looking to facilitate remote work. This shift to cloud-based solutions benefited Wiz, as its security offerings became essential for safeguarding applications and data across major public cloud providers like Amazon, Google, Microsoft, and Oracle.
Google’s Acquisition History
Google’s history of acquisitions in the cybersecurity space includes the successful purchase of Mandiant for $5.4 billion in 2022. While the failed Wiz deal would have been Google’s largest acquisition to date, the company’s acquisition of hardware maker Motorola for $12.5 billion in 2012 remains its biggest deal. Google’s ongoing efforts to expand its portfolio through strategic acquisitions indicate its commitment to staying competitive in the tech industry.