Wiz CEO explains why he turned down a $23 billion deal

Assaf Rappaport, co-founder and CEO of cloud security startup Wiz, described rejecting a substantial $23 billion acquisition offer from Google as one of the most challenging decisions he has faced. Rappaport emphasized the company’s potential for growth, asserting that Wiz could become a $100 billion enterprise, reflecting his belief in the future significance of cloud security.

Rappaport articulated his conviction that the market for cloud security is poised to surpass other areas, such as endpoint and network security. He claimed that the organization capable of leading in cloud security will likely achieve a valuation exceeding $100 billion. While he acknowledged that Wiz may not definitively fulfill this role, he expressed optimism that success is feasible through effective execution and strategic choices.

The decision to decline the offer weighed heavily on Rappaport, who felt a strong responsibility to consider the interests of both Wiz’s investors and employees. He recounted feelings of nervousness regarding the decision but maintained that such significant choices ultimately rest with the founders of a company that enjoys a healthy relationship with its investors.

At the time of the offer from Alphabet, Google’s parent company, Wiz, had attained a private valuation of $12 billion and had secured $1 billion in funding from notable investors, including Andreessen Horowitz and Sequoia Capital. This milestone led the company to proudly label itself as “the world’s largest cybersecurity unicorn.”

In his communications with the company’s employees, Rappaport acknowledged the difficulty of refusing such a noteworthy acquisition, though he conveyed confidence in the decision, bolstered by a strong team. He hinted at receiving additional offers from other parties, but none matched the scale of Google’s proposal. While he refrained from naming companies, he commented that startups in Wiz’s position often find themselves engaging in various discussions.

Wiz has consistently demonstrated rapid growth, recently announcing the achievement of $500 million in annual recurring revenue. Company executives, including co-founder and VP Roy Reznik, aspire to double this figure to $1 billion by 2025, viewing this target as essential for an eventual initial public offering (IPO), a commitment made to employees when the Google offer was declined.

Addressing Wiz’s mergers and acquisitions strategy, Rappaport noted a cautious approach, despite the completion of two acquisitions in the previous year—Gem and Rafft. He underscored the importance of being judicious with acquisitions, citing cultural impacts on the organization as a significant factor in decision-making.

Rappaport reiterated that possessing financial resources does not necessitate a flurry of acquisition activity, suggesting that the company’s size—now comprising approximately 1,500 employees—intensifies the potential cultural ramifications of new additions. Overall, he conveyed a sense of deliberate growth amidst the dynamic landscape of the cybersecurity sector.