What Is Wiz, the Startup Walking Away From Google’s Largest Ever Aquisition?

Google offered to pay nearly twice Wiz's last private-market valuation.

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Cloud security software company Wiz has reportedly backed out of a deal with Google (GOOGL) that would have valued the company at $23 billion and been Google’s largest acquisition to date. Instead, the just four-year-old startup is focusing on reaching $1 billion in annual recurring revenue and pursuing an initial public offering.

Over a decade ago, in 2012, Google acquired the hardware company Motorola for $12 billion, which remains its largest acquisition to date. Wiz was most recently valued just as much after raising $1 billion from Andreessen Horowitz, Lightspeed Venture Partners and Thrive Capital. Google offered almost twice its private-market valuation, or 60 times its annual revenue. 

“Saying no to such humbling offers is tough,” Wiz co-founder and CEO Assaf Rappaport reportedly wrote in a memo to company employees, CNBC reported. 

In 2022, Wiz reported $100 million in annual recurring revenue in 18 months, a number that swelled to $350 million by early 2024. “The average deal size in cybersecurity has been around 10 times revenue. Google [being willing to pay] 60 times hints at its realization that, with more and more players in the cloud space and with almost everyone doing a generally horrible job at cybersecurity, it could offer them a strategic competitive advantage,” Wayne Jackson, CEO at the software supply chain management platform Sonatype, told Observer.

Wiz offers a robust cloud security platform that targets healthcare, life sciences, government and financial services industries. Its capabilities include vulnerability management, compliance, A.I. security posture management, Infrastructure as Code (IaC) scanning, least privilege management and more.

Cloud security is the most pressing security discipline, above identity and A.I./ML engineering, according to the 2024 Cloud Security Study from Thales Group. In the survey, 44 percent of respondents said they had experienced a cloud data breach, and an average of 47 percent of cloud data is sensitive.

This may explain why major companies, including Morgan Stanley, Slack, and Colgate-Palmolive, employ Wiz for cloud security purposes. The company’s website says it’s used by 40 percent of Fortune 100 companies. 

Wiz’s withdrawal from the Google deal raises important questions about market dynamics and the regulatory environment. “As cloud security becomes increasingly critical, major acquisitions by dominant players like Google can lead to fears of reduced competition and innovation,” Ganesh Pai, CEO and co-founder of the cloud security company Uptycs, told Observer. Pai said moving towards an IPO would set a benchmark for other companies in the space, potentially validating and sparking more investments and advancements across the cloud security industry.

The news comes at a fragile moment for cloud security. Days after the CrowdStrike outage hit 8.5 million computers running on Windows systems — resulting in thousands of delayed flights, tech outages at hospitals and digital banking going temporarily offline — Wiz is taking the opportunity to solidify its place as a trusted source in cloud security. Crowdstrike stock lost nearly a quarter of its value in a single weekend following the incident.

Founded by Rappaport, Ami Luttwak, Roy Reznik and Yinon Costic in 2020, Wiz seems to seek greener pastures, not those within the Google campus. All four co-founders are former employees of Microsoft’s research and development and cloud security departments.