Wiz has walked away from a $23 billion deal to be acquired by Google, in what would have been the search giant’s largest-ever deal, telling employees it would pursue an initial public offering as it initially planned.
“Saying no to such humbling offers is tough,” Wiz co-founder Assaf Rappaport said in a memo obtained by CNBC to the company’s worldwide employee base. A person familiar with the company’s thinking cited both antitrust and investor concerns as part of the motivation behind the decision to walk away.
Rappaport wrote that the company would focus on its next milestones: an initial public offering and $1 billion in annual recurring revenue, both targets which the company had been eyeing well before talks had been reported.
The deal would have nearly doubled the $12 billion valuation of the startup from its most recent round of funding. Wiz was founded in 2020 and has grown at a rapid speed under Rappaport, who had been eyeing an IPO as recently as May.
Wiz’s cloud security products include prevention, active detection and response — a range that has appealed to large firms and would have helped Google compete with Microsoft which also sells security software.
Alphabet’s cloud segment has been under pressure to grow amid competition from frontrunners Microsoft and Amazon, something the Wiz deal would have helped with. The cloud unit reached profitability in 2023 after years of hefty investment.
While Google Cloud has seen consistent growth in recent years, the company and its CEO Thomas Kurian faces pressure to continue growing in efforts to capture business during the AI boom.
Google did not immediately respond to requests for comment.
Exits in technology have been rare this year, between startups waiting for more receptive markets before going public and cash-rich companies fearing they wouldn’t win regulatory clearance for transactions.
The collapse of the transaction will be seen as a disappointment by Index Ventures, Insight Partners, Lightspeed Venture Partners, Sequoia and other venture firms with stakes in Wiz that have raised multibillion-dollar funds in recent years, with the intent of giving their startups enough to guarantee success.
Funds that run into the billions require exits of over $10 billion in order to pay off, and those events have been rare, said Brendan Burke, a senior analyst at PitchBook. Intuit bought Mailchimp for $12 billion in November 2021.
Wiz hit $100 million in annual recurring revenue after 18 months, and achieved $350 million in annual recurring revenue in 2023. It’s backed by a roster of blue-chip firms, including Israeli venture capitalist Cyberstarts, Index Ventures, Insight Partners and Sequoia Capital.
Wiz’s founders previously built security startup Adallom, raised money from Sequoia and Index and sold the startup to Microsoft for $320 million in 2015. Former Sequoia leader Doug Leone has called investing in Wiz in its earliest days “a no-brainer.”
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