Israeli Firm Wiz Abandons $23 Billion Google Deal, Opts for IPO Instead

NEW YORK – Wiz has opted out of a $23 billion acquisition deal with Google, which would have been the largest in Google’s history. Instead, the company will pursue an initial public offering (IPO) as originally planned.

“Declining such significant offers is challenging,” Wiz co-founder Assaf Rappaport mentioned in a memo to employees, according to CNBC. A source close to the company indicated that concerns about antitrust issues and investor interests influenced the decision to forgo the acquisition.

Rappaport stated that Wiz will now concentrate on its upcoming goals: launching an IPO and reaching $1 billion in annual recurring revenue, objectives the company aimed for well before acquisition talks began.

The proposed deal would have nearly doubled Wiz’s valuation from its latest funding round, boosting it to $12 billion. Founded in 2020, Wiz has experienced rapid growth under Rappaport, who had been considering an IPO as recently as May.

Wiz’s cloud security solutions, which include prevention, active detection, and response, have attracted large corporations. This product range would have strengthened Google’s competitive position against Microsoft, which also offers security software.

Google’s cloud division has faced pressure to expand amidst competition from Microsoft and Amazon, and the Wiz acquisition would have supported this growth. Google’s cloud unit achieved profitability in 2023 after substantial investments.

Despite steady growth in recent years, Google Cloud and its CEO Thomas Kurian are under pressure to continue expanding, especially during the AI boom.

Google did not immediately comment on the matter.

Tech industry exits have been scarce this year, as startups await more favorable market conditions for going public, and companies with ample cash worry about gaining regulatory approval for deals.

The termination of the Wiz deal is likely disappointing for venture firms such as Index Ventures, Insight Partners, Lightspeed Venture Partners, and Sequoia, which have invested heavily in Wiz. These firms have raised multibillion-dollar funds aimed at ensuring their startups’ success.

Large funds need exits exceeding $10 billion to be profitable, a rarity according to Brendan Burke, a senior analyst at PitchBook. An example of such a rare exit is Intuit’s $12 billion acquisition of Mailchimp in November 2021.

Wiz achieved $100 million in annual recurring revenue within 18 months and reached $350 million in 2023. It is backed by prominent firms including Israeli venture capitalist Cyberstarts, Index Ventures, Insight Partners, and Sequoia Capital.

Wiz’s founders previously created the security startup Adallom, which raised funds from Sequoia and Index before being sold to Microsoft for $320 million in 2015. Doug Leone, a former Sequoia leader, described early investment in Wiz as “a no-brainer.”

Wiz benefited from the surge in demand for cloud-based software and infrastructure due to the COVID-19 pandemic, which necessitated remote work. The company can identify security issues for applications and data on public clouds operated by Amazon, Google, Microsoft, and Oracle.

Founded in January 2020, Wiz announced a $100 million funding round 11 months later.

“What was unique about Wiz in its early days was the significant amount of money raised initially,” Sid Trivedi, an investor at Foundation Capital, told CNBC.

Google previously acquired cybersecurity firm Mandiant for $5.4 billion in 2022. Google’s largest acquisition to date remains the $12.5 billion purchase of hardware maker Motorola in 2012, which it later sold to Lenovo for $2.9 billion in 2014. Google also recently ended talks to acquire sales software maker HubSpot.

In a CNBC interview at the New York Stock Exchange last year, Rappaport confirmed his intention to take Wiz public. “Yeah, definitely,” he said, laughing. “That’s why we’re here.”