(Bloomberg) — Cybersecurity startup Wiz Inc. turned down an up to $23 billion takeover bid from Alphabet Inc., instead sticking with an initial public offering plan.
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The rejection will be a blow to Alphabet, which is trying to catch up with Microsoft Corp. and Amazon.com Inc. in an intensely competitive cloud services market. Alphabet, which bought cybersecurity company 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 humiliating offers is difficult, but with our exceptional team, I feel confident making this choice,” Wiz CEO Assaf Rappaport said in a memo to employees seen by Bloomberg News. “Let me get straight to the point,” Rappaport said. The company’s next milestones are reaching $1 billion in annual recurring revenue and an IPO, he said.
An acquisition target as large as Wiz would have been unusual for a major technology company like Alphabet and could have drawn more scrutiny from antitrust regulators. Google already faces several antitrust challenges, including a lawsuit filed by the US Department of Justice that accuses it of abusing its dominant position in search, and another over its digital advertising tools.
Google representatives did not immediately respond to requests for comment after regular hours. The Wall Street Journal first reported the rejection.
Google has sought to develop its cybersecurity capabilities as a key part of its strategy to gain share in cloud computing. It still lags behind Amazon and Microsoft in this market, but 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 space. At a conference in Las Vegas this year, Google presented how its Gemini AI model could be used to help customers 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 would otherwise be very manual investigative tasks” can be aided by AI, he said in an interview earlier this year.
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Wiz gained attention after Alphabet was in talks to buy it for nearly double its valuation just two months earlier. Before the acquisition talks, Wiz was expanding rapidly with its own acquisitions and was beginning to consider an initial public offering.
“The market validation we experienced following this news only reinforces our goal – to create a platform that both security and development teams love,” Rappaport said in the memo to employees.
The company, founded in 2020, was valued at $12 billion during a funding round in May that attracted investors including Andreessen Horowitz, Lightspeed Venture Partners and Thrive Capital.
Investors and analysts attribute Wiz’s meteoric rise to its early identification of cloud security as an underserved field with a rich and growing customer base. Wiz says that 40% of Fortune 100 companies are its customers and that it was bringing in $350 million in annual recurring revenue.
(Updates with industry context from second paragraph)
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