Alphabet, Google’s parent company, is reportedly in advanced negotiations to acquire Wiz, a cybersecurity startup, for $23 billion. This information comes from a person close to the company who shared details with TechCrunch. The potential deal was initially reported by The Wall Street Journal.
Rapid Growth and Strategic Appeal
Wiz, founded in 2020, has experienced phenomenal growth since its inception. The company was approached a few weeks ago by Thomas Kurian, the head of Google’s cloud division, according to the source. Following this initial approach, negotiations have moved swiftly, and the two parties have tentatively agreed on the purchase price.
Negotiation Challenges and Timeline
The source mentioned that a deal of this size faces numerous hurdles and details that need to be sorted out, although specifics were not provided. It is estimated that negotiations could take another week to 10 days, with a 50% chance that the deal might fall apart.
Wiz’s Financial Performance and Valuation
In May, Wiz achieved a private valuation of $12 billion after raising $1 billion in a Series E funding round. If the deal with Google goes through at $23 billion, it would more than double this valuation.
Below is a table summarizing Wiz’s financial milestones:
| Financial Metric | Value |
|---|---|
| Last Private Valuation | $12 billion |
| Series E Funding Raised | $1 billion |
| Current Annual Recurring Revenue (ARR) | $500 million |
| Projected ARR for Next Year | $1 billion |
| Offered Purchase Price | $23 billion |
| Valuation Multiple on Current ARR | 46 times |
| Valuation Multiple on Projected ARR | 23 times |
Wiz’s Impressive Growth Trajectory
- 18 Months Post-Launch: Reached $100 million in ARR, one of the fastest-growing startups.
- May Announcement: ARR was around $350 million.
- Current Performance: ARR stands at $500 million.
- Future Projections: Plans to hit $1 billion ARR next year.
Wiz’s exponential growth is a significant factor in Google’s interest. The startup has consistently outpaced its own growth targets, making it an attractive acquisition target. Despite its rapid growth, Wiz had planned to go public eventually, but not until after 2025. The company was not actively seeking a buyer when Google approached it.
Strategic Synergies with Google Cloud
The potential acquisition by Google Cloud is seen as beneficial for both parties. For Wiz, integrating with Google Cloud could provide substantial revenue synergies, potentially making it easier for Wiz to sell its products to Google’s vast customer base.
Industry Comparison
If the deal is finalized at $23 billion, Wiz would be valued at 46 times its current ARR and 23 times its projected 2025 ARR. For context, Wiz’s main competitor, Palo Alto Networks, is trading at just above 14 times its trailing 12 months revenue. Google appears willing to pay a nearly 300% premium compared to Wiz’s closest competitor.
Wiz’s Investors
Wiz has garnered substantial support from several high-profile investors, including:
- Andreessen Horowitz
- Cyberstarts
- Index Ventures
- Insight Partners
- Sequoia Capital
These investors have backed Wiz through its various funding rounds, contributing to its rapid growth and significant market valuation.
Potential Hurdles and Market Implications
While the proposed deal is promising, it’s important to note the complexities involved in closing a transaction of this magnitude. Regulatory approvals, integration challenges, and aligning strategic goals are just a few of the potential hurdles that could arise.
However, if successful, this acquisition would mark one of the largest deals in the cybersecurity sector. It would not only bolster Google Cloud’s security offerings but also position it strongly against competitors in the rapidly evolving cloud services market.
Summary of Key Points
- Deal Status: In advanced talks, with a tentative agreement on the purchase price.
- Negotiation Timeline: Expected to take another week to 10 days, with a 50% chance of falling apart.
- Growth Metrics: Wiz’s ARR grew from $100 million to $500 million in a short span, with projections to reach $1 billion next year.
- Valuation Comparison: Proposed deal values Wiz significantly higher than its competitors, reflecting its rapid growth and strategic fit for Google Cloud.
- Investor Backing: Supported by prominent venture capital firms, showcasing strong investor confidence.
As the discussions progress, industry observers will be closely watching how this potential acquisition unfolds and its impact on the cybersecurity landscape.
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