Wiz walked away from a $23 billion acquisition of Google that would have been the search giant’s largest ever deal, telling employees it would proceed with its initial public offering as originally planned.
“It’s difficult to say no to such a mean offer,” Wiz co-founder Assaf Rappaport said in a memo sent to the company’s employees around the world and obtained by CNBC. A person familiar with the company said Antitrust and investor concerns were part of the motivation behind the company’s decision to exit, people who thought of it said.
Rappaport wrote that the company will focus on its next milestones: an initial public offering and $1 billion in annual recurring revenue, two goals it has been eyeing even before negotiating the report.
The deal would nearly double the startup’s valuation of $12 billion from 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-based security products include prevention, proactive detection and response, a suite of products that has attracted big companies and helped Google compete with Microsoft, which also sells security software.
Alphabet’s cloud business has been under pressure to grow amid competition from leaders Microsoft and Amazon, and the Wiz deal would have helped address that issue. After years of heavy investment, the cloud unit will be profitable in 2023.
While Google Cloud has continued to grow in recent years, the company and its chief executive, Thomas Kurian, have faced pressure to continue trying 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 rare this year, with startups waiting for a more receptive market before going public and cash-rich companies worried they won’t get regulatory approval to trade.
The failure of the deal will be viewed as disappointing by Index Ventures, Insight Partners, Lightspeed Venture Partners, Sequoia Capital and other venture capital firms with stakes in Wiz, which have raised billions of dollars in recent years in an effort to Provide your own startup with enough funding to ensure success.
Multibillion-dollar funds would need to exit more than $10 billion to make a return, which is rare, said Brendan Burke, senior analyst at PitchBook. Intuit acquired Mailchimp in November 2021 for $12 billion.
Wizards hit Annual recurring revenue of $100 million Eighteen months later, $350 million in annual recurring revenue was achieved by 2023.
Wiz’s founders previously founded security startup Adallom, which raised funding from Sequoia Capital and Index and sold the startup to Microsoft in 2015 for $320 million. Called When Wiz was first established, investing in Wiz was “a no-brainer.”
Shortly after the outbreak, the coronavirus began to spread, and companies adopted cloud-based software and infrastructure to help employees work remotely. The shift benefits Wiz, which can flag security issues with applications and data on Amazon, Google, Microsoft and Oracle public clouds.
This new startup was born in January 2020, and 11 months later, it announced the completion of US$100 million in financing.
Sid Trivedi, an investor at Foundation Capital, told CNBC: “I think what was unique about Wiz early on was that it raised a lot of money from the beginning.”
Google successfully acquired the cybersecurity company Mandiant in 2022 for US$5.4 billion.Just last week, it was reported that Google end conversation Acquired sales software maker HubSpot.
Last year, in an interview with CNBC’s Sara Eisen and Carl Quintanilla at the New York Stock Exchange, Eisen asked Rappaport if he would be willing to take the startup public.
“Yes, of course,” he said. He smiled. “That’s why we’re here.”
This is breaking news. Please check back for updates.
