Cybersecurity startup Wiz Inc. has turned down a takeover bid of as much as $23 billion from Alphabet Inc.’s Google, sticking instead with a plan for an initial public offering.
The rejection will come as a blow to Google, which is trying to catch up with Microsoft Corp. and Amazon.com Inc. in an intensely competitive cloud services market. Google, which bought cybersecurity firm Mandiant for $5.4 billion just two years ago in its second-largest acquisition, could have used Wiz to round out its security offerings. The New York-based startup connects to cloud storage providers such as Amazon Web Services and Microsoft Azure, and scans data stored there for security risks.
“Saying no to such humbling offers is tough, but with our exceptional team, I feel confident in making that choice,” Wiz Chief Executive Officer Assaf Rappaport said in a memo to employees seen by Bloomberg News. The company’s next milestones are reaching $1 billion in annual recurring revenue and an IPO, he said.
Wiz decided it could ultimately be worth more as a public company, and concerns about the potential for a protracted regulatory approval process also encouraged it to stay independent, people with knowledge of the matter said, asking not to be identified because the talks were private. Alphabet also recently shelved its pursuit of HubSpot Inc., a customer relationship management software maker, Bloomberg reported previously. That deal could have also attracted regulatory scrutiny if it had gone ahead.
An acquisition target as large as Wiz would have been unusual for a big tech company like Alphabet, and Google already faces several challenges from regulators. Those include a lawsuit by the US Justice Department accusing it of abusing its dominant position in search, and another one regarding its digital advertising tools.
A representative for Wiz declined to comment on the antitrust concerns. Representatives for Google didn’t immediately respond to requests for comment. The Wall Street Journal first reported the rejection.
Google has sought to build up its capabilities in cybersecurity as a key prong of its strategy to gain market share in cloud computing where it still trails Amazon and Microsoft. Still, the search giant has been gaining ground and that unit reported a profit for the first time last year.
The Mandiant deal boosted the tech giant’s credibility in the space. At a conference in Las Vegas this year, Google showcased how its Gemini AI model could be used to help clients analyze threats and address potential vulnerabilities.
Eric Doerr, vice president of cloud security engineering, framed AI as a tool to help companies be more proactive in cybersecurity. “What otherwise would be very manual research tasks” can be aided by AI, he said in an interview earlier this year.
The Alphabet offer valued Wiz at nearly twice the valuation from its last fundraising. That May round, which drew investors such as Andreessen Horowitz, Lightspeed Venture Partners and Thrive Capital, valued the four-year-old company at $12 billion.
“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 in the memo to employees.
Investors and analysts credit Wiz’s meteoric rise to its early identification of cloud security as an uncrowded field with a rich and growing customer base. Wiz says 40% of Fortune 100 companies are its customers, and that it was pulling in $350 million in annual recurring revenue.
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