Alphabet Inc. CEO Sundar Pichai attends Stanford University’s 2024 Business, Government & Society Forum on April 3, 2024 in Stanford, California.
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Wiz has pulled out of a $23 billion acquisition bid by search giant Google that would have been the company’s biggest deal ever, but the company has told employees it will pursue an initial public offering as originally planned.
“It would be difficult to turn down such a humiliating offer,” Wizz co-founder Assaf Rapaport said in a memo to the company’s global employees obtained by CNBC. A person familiar with the company’s thinking cited both antitrust and investor concerns as reasons for the decision to pull the plug.
Rapaport wrote that the company is focused on its next milestones: an initial public offering and $1 billion in annual recurring revenue, both goals the company had been aiming for long before the talks were reported.
The deal nearly doubles the startup’s valuation from its most recent funding round to $12 billion. Founded in 2020, Wizz has grown rapidly under Rapaport, who had his sights set on an IPO as recently as May.
Wiz’s cloud security product, which includes prevention, active detection and response, was supposed to be attractive to large enterprises and help it compete with Microsoft and Google, which also sell security software.
The Wizz acquisition should help ease growth pressures for Alphabet’s cloud division, which is on track to be profitable in 2023 after years of heavy investment amid competition from leaders like Microsoft and Amazon.
Google Cloud has seen steady growth in recent years, but the company and its CEO, Thomas Kurian, are facing pressure to keep growing to win business amid the AI boom.
Google did not immediately respond to a request for comment.
Tech exits have been rare this year as startups wait for markets to warm up before going public and deep-pocketed companies worry they won’t get regulatory approval for their deals.
The collapse of the deal will be a disappointment for Index Ventures, Insight Partners, Lightspeed Venture Partners, Sequoia and other venture capital firms that have invested in Wizz, which has raised billions of dollars in recent years with the aim of providing startups with enough capital to ensure their success.
A multibillion-dollar fund would need an exit of more than $10 billion to recoup, and those are rare, said Brendan Burke, a senior analyst at PitchBook. Intuit acquired Mailchimp in November 2021 for $12 billion.
With Hit $100M in annual recurring revenue The company achieved $350M in annual recurring revenue after 18 months and is backed by top-tier Israeli venture capitalists Cyberstarts, Index Ventures, Insight Partners and Sequoia Capital.
The founders of Wizz previously founded security startup Adalom, which raised funding from Sequoia and Index and sold to Microsoft for $320 million in 2015. Former Sequoia leader Doug Leone was called Investing in Wiz early on was “a no-brainer”
Soon after it was founded, the coronavirus pandemic began to spread, and companies rushed to adopt cloud-based software and infrastructure to help employees work remotely, a shift that benefited Wizz, which can flag security issues with applications and data on public clouds from Amazon, Google, Microsoft and Oracle.
The startup was launched in January 2020 and announced a $100 million funding round 11 months later.
“I think what was unique about Wiz early on was the amount of money it raised to begin with,” Foundation Capital investor Sid Trivedi said in an interview with CNBC.
Google closed on its acquisition of cybersecurity company Mandiant for $5.4 billion in 2022. Google’s biggest deals were buying hardware maker Motorola for $12.5 billion in 2012 and selling it to Lenovo for $2.9 billion in 2014. Just last week, Google The conversation ended Acquires sales software maker HubSpot.
During an interview with CNBC’s Sarah Eisen and Carl Quintanilla at the New York Stock Exchange last year, Eisen asked Rapaport whether he would consider taking the startup public.
“Yeah, definitely,” he said with a laugh, “that’s why we’re here.”
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