Wiz Walks Away from Google’s $23B Offer, Hypes IPO Play

Wiz has turned down Google’s $23 billion dollar acquisition offer, according to an internal memo that said the company would instead focus on an initial public offering (IPO).

The company’s founders and investors stood to gain a massive financial windfall with an offer nearly double the size of its most recent valuation of $12 billion. But an internal memo published by TechCrunch shows Wiz CEO Assaf Rappaport is focused instead on the company’s IPO plans and chasing $1 billion in annual recurring revenue (ARR).

“I know last week has been intense, with buzz about a potential acquisition,” Rappaport wrote in the memo on Monday night. “While we are flattered by offers we have received, we have chosen to continue on our path to building Wiz … Saying no to such humbling offers is tough, but with our exceptional team, I feel confident in making that choice.”

Wiz most recently raised $1 billion in venture capital and has shown a meteoric growth in revenue. In May, the company announced it had achieved ARR of $350 million. Recent reports have estimated the company’s current ARR is closer to $500 million. “Let me cut to the chase: our next milestones are $1 billion in ARR and an IPO,” Rappaport said in his memo to employees.

Google’s offer will likely only increase the company’s prospects. “The market validation we have experienced following this news only reinforces our goal -- creating a platform that both security and development teams love,” Rappaport said.

Related:Could Google’s $23B Wiz Deal Fuel M&A Boom, Refresh Israel Controversy?

Google’s largest acquisition was 2012’s deal to purchase Motorola Mobility for $12.5 billion, which it sold at a loss just a couple of years later. Google’s effort to buy Wiz at such a premium underscores the company’s ambition in the cloud space, where it faces stiff competition from market leaders Amazon Web Services and Microsoft Azure.

The Israel-founded company’s acquisition could have sent $2.5 billion or more into Israel’s coffers in taxes alone, according to Israel news agency Globes. Each of the four founders stood to make more than $2 billion in the proposed deal. The company will now pin its hopes on reaching a similar valuation with an IPO if it reaches its goal of $1 billion ARR.

Industry Impact

Chris Pierson, CEO of executive cybersecurity firm BlackCloak, says even though the deal fell through, it’s still a good sign for the space. “This is an interesting turn of events that bodes very well for the entire cybersecurity industry,” Pierson says in an email interview. “It means that Wiz sees a path forward in the public market, sees them being able to exist as a stand-alone entity, and wants to continue to grow their platform. At the end of the day, Wiz sees them making more money for shareholders in the public market than they do in this exit, and that is a great sign of a recovering economy.”

Pierson says the CrowdStrike update that caused a massive worldwide IT outage may have been a factor in the Wiz decision. “Wiz may be reading the tea leaves and deciding that consolidation risks could impact their ability to grow faster if CISOs are worried about the lack of cybersecurity diversity in the market.”

While Wiz may have turned down a massive payday, it did gain something precious: free publicity. As word leaked out about the potential deal last week, social media was buzzing with Google’s historic M&A move. “It created a lot of interest in (Wiz’s) business,” says Chris Stafford, an M&A expert at business and technology consultancy West Monroe. “There’s now a tremendous amount of public knowledge and interest in Wiz relative to two weeks ago. The challenge they have now is to keep up their potential and growth. Are the public markets going to have the same aggressive interest in a year as today?”

Pradeep Sanyal, artificial intelligence and machine learning leader at IT services firm Capgemini, tells InformationWeek the outcome may be a positive for Wiz, but could put a damper on Google’s cybersecurity ambitions.

“Wiz’s decision to walk away is indeed a bold move … it reflects their confidence in their growth potential and future prospects,” Sanyal says. “From Google’s perspective, this is definitely a setback in their efforts to expand their cloud security offerings. Google Cloud has been under a lot of pressure to grow.”

InformationWeek has reached out to Google and Wiz and will update with any response.