Google deal falls through, Wiz considers IPO.

• Google has walked away from a deal with Wiz, which would have valued the company at $23 billion.
• As originally planned, the company will proceed with an IPO, announced CEO Assaf Rappaport to employees.

Google has lost out on a $23 billion deal to acquire Wiz, as the company has decided to pursue an initial public offering instead.

Assaf Rappaport, co-founder of Wiz, stated in a memo to the company's global workforce that rejecting humbling offers is challenging.

Rappaport stated that the company's focus would be on achieving its next milestones, including an initial public offering and $1 billion in annual recurring revenue, targets that the company had been aiming for prior to the reported talks.

The startup's valuation would have been nearly doubled to $24 billion if the deal had gone through, but Wiz, founded in 2020 and growing quickly under Rappaport, decided to walk away due to antitrust and investor concerns.

Google could have benefited from Wiz's cloud security products, which offer prevention, active detection and response, as they are popular among large firms and could have helped Google compete with Microsoft, which also sells security software.

Despite competition from Microsoft and Amazon, Alphabet's cloud segment has been under pressure to grow. The Wiz deal would have helped with this. The cloud unit finally reached profitability in 2023 after years of heavy investment.

Despite recent growth, Google Cloud and CEO Thomas Kurian face pressure to maintain momentum and secure market share during the AI industry's expansion.

Google did not immediately respond to requests for comment.

This year, there have been few exits in technology due to startups delaying going public and cash-rich companies being cautious about regulatory clearance for transactions.

The collapse of the transaction will be viewed as a disappointment by Index Ventures, Insight Partners, Lightspeed Venture Partners, Sequoia, and other venture firms that invested multibillion-dollar funds in Wiz with the goal of ensuring their startups' success.

According to Brendan Burke, a senior analyst at PitchBook, funds that exceed billions of dollars require exits of over $10 billion to pay off, and such events have been infrequent. Intuit acquired Mailchimp for $12 billion in November 2021.

Wiz surpassed $100 million in annual recurring revenue after 18 months and reached $350 million in annual recurring revenue in 2023. The company is backed by a portfolio of top-tier investors, 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."

As soon as Covid emerged, companies hastily adopted cloud-based software and infrastructure to enable remote work. This transition was advantageous for Wiz, which can detect security threats in applications and data on Amazon, Google, Microsoft, and Oracle public clouds.

In January 2020, the startup was launched and 11 months later, it secured a $100 million funding round.

According to Sid Trivedi, an investor at Foundation Capital, what distinguished Wiz in its early days was the substantial amount of money it raised from the outset.

In 2022, Google acquired cybersecurity firm Mandiant for $5.4 billion, which remains its largest deal to date. However, Google had previously sold Motorola, a hardware maker it acquired in 2012 for $12.5 billion, to Lenovo for $2.9 billion in 2014. Recent reports suggest that Google had recently ended conversations to acquire sales software maker HubSpot.

Last year, at the New York Stock Exchange, CNBC's Sara Eisen and Carl Quintanilla questioned Rappaport about his plans to take the startup public during an interview.

"Definitely," he replied, chuckling. "That's the purpose of our presence."

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