New York-based cybersecurity start-up Wiz has informed staff that it would pursue an IPO under its original plans after walking away from a USD 23 billion deal to be acquired by Google, which would have been the search engine giant’s largest-ever acquisition.
The company turned down a possible deal due in part to investor and antitrust concerns. The company would concentrate on achieving its next goals, according to co-founder Assaf Rappaport: an IPO and USD 1 billion in recurring revenue annually. The business had its sights set on both targets long before rumours of talks with Google circulated.
The start-up’s USD 12 billion valuation from its most recent funding round would have almost doubled as a result of the deal. Established in 2020, Wiz has experienced significant growth under Assaf Rappaport, who had been aiming for an IPO as late as May. The company’s annual recurring revenue reached USD 100 million, and last year it hit USD 350 million, after 18 months.
The development has also come as a blow to Google parent Alphabet, which is trying to catch up with Microsoft’s Azure and Amazon Web Services (AWS) in an intensely competitive cloud services market. Experts believe that since Wiz provides security scans for data stored with major cloud providers like AWS and Azure, could have been an attractive target and placed Google in a better position to compete with rivals. Wiz products mostly include cybersecurity-related solutions like threat prevention, active detection, and response.
Amazon and Microsoft, the industry leaders, have upped their game against Alphabet in the cloud space. After years of significant investment, the cloud unit turned a profit in 2023.
Thomas Kurian, the CEO of Google Cloud, faces pressure to keep growing the company in order to win business during the AI boom, despite steady growth in recent years.
This year has seen a dearth of technology exits as a result of start-ups holding off on going public until more markets are ready and a difficult regulatory landscape that hinders acquisitions.
Index Ventures, Insight Partners, Lightspeed Venture Partners, Sequoia, and other venture backers who have raised multibillion-dollar funds in recent years will be disappointed by the transaction’s collapse.
According to Brendan Burke, a senior analyst at PitchBook, funds with assets valued in the billions must make exits totalling more than USD 10 billion to produce substantial returns for their limited partners. However, such events are not common.
AWS currently holds the top spot in cloud computing, with a 31% share of the global market as of the first quarter of 2024. Microsoft follows closely behind with a 25% share, while Google Cloud holds an 11% share, despite being profitable in Q1 2024, as per industry reports.
Considering Google’s mishap with the Australian pension fund UniSuper’s cloud subscription deletion, impacting over 600,000 members and resulting in them being unable to access their accounts for a week, there was pressure for improved internal security measures.
Kashyap Kompella, industry analyst and CEO of RPA2AI Research, told Techcircle that the Wiz acquisition would have enhanced Google’s security capabilities significantly and suggests that incidents like this could have been prevented in the future.
“Founded in 2020 by Assaf Rappaport, Ami Luttwak, Yinon Costica, and Roy Reznik, the start-up consists of former leaders from Microsoft’s Cloud Security Group, Wiz offers a software platform that helps companies detect vulnerabilities and malicious activity in their cloud set-up across network, identity, compute, application and secrets. It presents all the information in one place at any scale to deliver quicker insights and informed decision-making. The platform supports AWS, Azure, Google Cloud Platform, and Kubernetes APIs,” Techcircle described the Wiz in the mentioned words.
Although Google’s deal with American cybersecurity firm Mandiant, concluded in 2022, boosted the tech giant’s credibility in the data security space, with the tech giant recently showcasing how its Gemini AI model could be used to help clients analyse threats and address potential vulnerabilities, it could have used Wiz to round out its security offerings, believe industry analysts.
According to Gartner VP and analyst Charlie Winkless, Google’s competitors have already made bigger investments in various areas of enterprise security.
“The acquisition would position Google to emulate some of Microsoft’s model. Microsoft alone claims to have over 30 billion in security revenues and is a major player in the CSPM market. Google has mainly focused on security within their GCP cloud, even though this year they have expanded coverage to AWS,” he said further.
“Wiz itself is a strong brand with a leading CSPM, surpassing Cisco in cloud security and rivalling Microsoft. AWS continues to focus on security tools within their platform, rather than addressing the broader multi-cloud strategy that many enterprises adopt. The space is further crowded with vendors like Fortinet, Crowdstrike and SentinelOne (acquired by PingSafe), vulnerability management vendors including Tenable, Rapid7, and Qualys, and specialised companies like Orca Security,” Techcircle noted further.
Analyst Brad Zelnick from Deutsche Bank believes that acquiring Wiz would have demonstrated Google Cloud Platform’s commitment to multi-cloud and cybersecurity, potentially leading to increased market share.