Wiz has walked away from a $23 billion deal to be acquired by Google, citing antitrust and investor concerns as motivations for the decision. The co-founder of Wiz, Assaf Rappaport, announced the company’s plans to focus on its original goals of pursuing an initial public offering and reaching $1 billion in annual recurring revenue. Despite the potential for significant growth and increased competition with Microsoft in the cloud security sector, the deal would have nearly doubled the company’s $12 billion valuation from its most recent funding round.
Alphabet’s cloud segment, including Google Cloud, has faced pressure to grow amidst competition from Microsoft and Amazon. The acquisition of Wiz would have provided a boost to Google Cloud, which reached profitability in 2023 after years of heavy investment. Despite consistent growth in recent years, Google Cloud faces ongoing pressure to continue expanding and capturing business during the AI boom. The collapse of the acquisition deal is likely to be viewed as a disappointment by the venture capital firms that have invested in Wiz and were hoping for a successful exit.
The success of technology exits this year has been limited due to startups waiting for more receptive markets before going public and concerns about regulatory clearance for transactions. Given the scale of funds raised by venture capital firms like Index Ventures and Sequoia, exits of over $10 billion are necessary to pay off these investments and ensure the success of startups. Wiz, which reached $100 million in annual recurring revenue after 18 months and $350 million in 2023, has attracted significant investment from blue-chip firms and experienced rapid growth in a market shifted by the Covid-19 pandemic.
Founded by entrepreneurs who previously built and sold a security startup to Microsoft, Wiz has leveraged the growing demand for cloud-based software and infrastructure during the pandemic to accelerate its growth. The startup offers cloud security products that appeal to large organizations looking to protect their applications and data on public cloud platforms like Amazon, Google, Microsoft, and Oracle. With significant funding raised early on and rapid growth in revenue, Wiz has become an attractive investment opportunity for venture capital firms looking for high-value exits in the current market.
Google’s history of acquisitions includes successful deals like the acquisition of cybersecurity firm Mandiant in 2022, in addition to high-profile acquisitions like Motorola in 2012. While Google’s largest deal remains the acquisition of Motorola for $12.5 billion, the company’s acquisition talks with sales software maker HubSpot reportedly ended recently. Rappaport has expressed a desire to take Wiz public in the future, emphasizing the company’s commitment to its original IPO plans and continued growth in the competitive cloud security market. The decision to walk away from the acquisition deal with Google reflects Wiz’s confidence in its ability to achieve its milestones and navigate the challenges of the evolving technology sector.
