Deal between Google and Wiz falls apart, company set to proceed with Initial Public Offering
The agreement between Wiz and Google has crumbled, with Wiz opting out of a $23 billion acquisition by the tech giant. The decision comes in the wake of concerns over antitrust and investor issues, prompting Wiz to announce plans for an initial public offering, as originally intended.
Wiz co-founder Assaf Rappaport conveyed the difficulty of turning down such a generous offer in a memo addressed to the company’s global workforce. The company’s focus will now shift towards achieving its initial milestones of securing an IPO and reaching $1 billion in annual recurring revenue, objectives that had been on Wiz’s radar long before acquisition talks surfaced.
The proposed acquisition would have almost doubled Wiz’s valuation from its previous funding round of $12 billion. Established in 2020, Wiz experienced rapid growth under Rappaport’s leadership, who had expressed intentions for an IPO as recently as May.
Wiz specializes in cloud security solutions encompassing prevention, active detection, and response services. These offerings attracted significant interest from major corporations and could have bolstered Google’s competitiveness against rivals like Microsoft, a major player in the security software market.
Alphabet’s cloud division has faced mounting pressure to expand amid stiff competition from industry leaders like Microsoft and Amazon. The failed Wiz deal was anticipated to provide a much-needed boost to Google’s cloud segment, which achieved profitability in 2023 after years of substantial investments.
Despite Google Cloud’s consistent growth in recent years, the company under the leadership of CEO Thomas Kurian is under pressure to sustain this momentum and secure a stronger foothold in the burgeoning AI landscape.
The technology sector has witnessed scarce exits this year, with startups holding out for more favorable market conditions before going public and financially stable firms hesitating over concerns of regulatory hurdles obstructing potential transactions.
The collapse of the Google-Wiz deal will likely disappoint major venture capital firms such as Index Ventures, Insight Partners, Lightspeed Venture Partners, and Sequoia, which had substantial investments in Wiz with hopes of securing substantial returns.
Wiz attained a milestone of $100 million in annual recurring revenue within 18 months of its inception, further progressing to reach $350 million in annual recurring revenue by 2023. Noteworthy backers of Wiz include prominent investors such as Israeli venture capital firm Cyberstarts, Index Ventures, Insight Partners, and Sequoia Capital.
Wiz’s founders, previously behind the security startup Adallom, attracted funding from Sequoia and Index before selling the startup to Microsoft for $320 million in 2015. Industry experts like former Sequoia executive Doug Leone regarded early-stage investment in Wiz as an obvious choice.
Established in early 2020 amidst the onset of the Covid pandemic, Wiz benefitted from the surge in companies transitioning to cloud-based solutions to facilitate remote work arrangements. This shift worked in Wiz’s favor, enabling it to identify security vulnerabilities across applications and data hosted on major public cloud platforms like Amazon, Google, Microsoft, and Oracle.
Google’s acquisition history includes successful purchases like cybersecurity firm Mandiant for $5.4 billion in 2022. The company’s largest acquisition to date remains the buyout of hardware manufacturer Motorola for $12.5 billion in 2012, later selling it to Lenovo for $2.9 billion in 2014. Recent reports indicated Google backing out of negotiations to acquire sales software provider HubSpot.
In a previous interview with good’s Sara Eisen and Carl Quintanilla at the New York Stock Exchange, Rappaport confirmed the company’s aspirations to go public, stating, “Yeah, definitely. That’s why we’re here.”
This is a developing story. Stay updated for further developments.
