It’s hard to be disappointed by the hypothetical $23 billion that Google’s parent company Alphabet is reportedly willing to pay for four-year-old Israeli company Wiz. However, some have expressed surprising discontent. The sentiment is “very good, but not great.” The conversation revolves around the missed opportunity of an IPO and the loss of an Israeli giant that will no longer grow locally. Moreover, had the successful cyber company been registered in Israel, the deal would have generated higher revenues for the state treasury.
Despite these concerns, Israel could not have asked for a more joyous and seminal event for its high-tech economy than the launch of Wiz. Even though Wiz’s intellectual property is registered in the United States, and even though the company will no longer issue shares and will be marketed outside Israel as an American company, Wiz remains a phenomenal Israeli success story.
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Wiz CEO Assaf Rappapot and COO Dali Rajic.
(Photo: Ohad Kav)
The price Google is willing to pay for Wiz sets a new standard for revenue multipliers. This can be seen by comparing the multiplier levels at which Israeli cyber giants like Check Point and Palo Alto are trading. Such a sale also puts Israel back on the map, signaling that there are not just unicorns on paper but real giants. It will strengthen Google’s presence and commitment to Israel and, in the future, will also produce a new generation of entrepreneurs who will leave Wiz to create the next wave of startups. Plus, there is an immediate financial benefit. While the amount could have been larger, the deal is expected to generate at least $2 billion from the tax payments by Wiz’s Israeli founders and employees for the sale of their shares to Google.
The four founders each own about 10 percent of Wiz’s stock, according to estimates, with hundreds of Israeli employees holding a few more percent. It also sends a message to the state of Israel, which has recently begun losing startups to the United States: If it wants to benefit from more exits, it must make an effort to keep tech companies here.
Ironically, Wiz’s founders represent everything the current government abhors: young liberals from the center of the country who fiercely opposed judicial reform and were not afraid to voice their opposition. They played important roles in the Israeli military, although not in combat, and are essentially left-wing activists. CEO Assaf Rappaport, CTO Ami Luttwak, VP of Products Yinon Costica, and VP of Research and Development Roy Reznik are four 40-year-old “nerds” who met more than 20 years ago during their military service in the IDF’s technology units. They founded Adallom, which was sold to Microsoft for $320 million and formed the basis of Microsoft’s cyber division. Armed with their experience and the trust of the world’s largest and most respected investors, they then created Wiz, embodying “Startup Nation” on steroids – everything goes fast and everything goes big.
Today, the exit is happening very quickly and for a sum that is not typically associated with early-stage companies with revenues in the hundreds of millions of dollars. At Wiz, the team didn’t dream of this type of exit, as the talk of an IPO was often the case. Rappaport and his partners look to entrepreneurs like Gil Shwed, CEO and co-founder of Check Point, and Nir Zuk, founder of Palo Alto Networks, as role models.
Digging a little deeper, it becomes clear who came up with the current deal and who is likely pushing for it, partly through the leak to the Wall Street Journal that revealed the contacts between Google and Wiz on Sunday night. These are the funds invested in Wiz. Figures close to Silicon Valley and Wall Street point to Andreessen Horowitz’s surprise entry into the latest investment round, valued at $12 billion just two months ago. Andreessen Horowitz, one of the world’s largest and most successful venture capital funds, led the round in which the Israeli company raised nearly $1 billion, with the aim of giving it breathing room and the means to implement its expansion strategy.
This was an unusual investment for Andreessen Horowitz on two counts: It was the first in Israel and one of the few made at this stage of the company’s life. The fund typically likes to invest in companies at a much earlier stage. When it invests $12 billion, you expect a quick and significant return. Two months ago, an IPO was hard to imagine, and the question now is what the fund knew or what course of action it had in mind when it decided to invest in Wiz. It is possible that the leak to the Wall Street Journal was intended to pressure the Wiz founders to accept the sale to Google now rather than insist on a future offer. This is where Rappaport and his partners were the first to discover the other side of the coin: With big and famous investors, they set the tone. In Wiz’s case, these are some of the largest and most powerful funds in the world: Sequoia Capital, Index Ventures, Lightspeed, Insight Partners and Blackstone.
Why don’t funds want to wait for the IPO? They understand, thanks to their wealth of experience, what the founders of Wiz, despite their genius, understand less: how things work on Wall Street. Silicon Valley can take companies far, but it is on Wall Street that the first encounter with real money takes place. This is the money of the American public investing directly, unlike the usual “Other People’s Money” (OPM) on the West Coast. Even if institutional investors are involved, their control of investments is much stricter. Think back to WeWork’s failed IPO attempt to understand the gap between these two types of money.
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Marc Andréessen.
(Photo: Bloomberg/David Paul Morris)
Of course, Wiz is not WeWork. The company has a great product, a strong brand, and no debt, but it is still far from being ready for an IPO. To reach the valuation that Google currently assigns it, it would have to wait a few more years. Wiz has understood this well, hence the series of publications on the attempts to acquire relatively large companies like SentinelOne or Lacework. The idea was to improve the technological solution and create opportunities in other areas. In the end, Wiz has been content with small acquisitions, starting with the Israeli Gem Security for $350 million a few months ago.
According to published data, Wiz is growing very fast and will reach an annual revenue rate (ARR) of about $350 million this year, although this is not revenue by accounting standards and the real figures are much lower. In the cyber market, it is known that Wiz loses about $2 for every $1 of sales, which is reasonable for a young company that conquers market share with penetration pricing. Competitors note that Wiz offers rock-bottom prices with discounts of up to 97%, almost for free. For an IPO on Wall Street, especially in today’s era when money is no longer free, this gap between revenue and lack of profitability is too big. Wiz understands this and wants to improve profitability, but it is a complex task. Interestingly, the company does not yet have a CFO position.
Despite Wiz’s high valuation under the apparent Google deal, the company has only been selling its products for about two years. It is now reaching the stage of contract renewals for the first time and is looking to raise prices. For this task, Dali Rajic was hired earlier this year as president and COO, having previously held the same role at Zscaler, a successful American cybersecurity company. Zscaler, a model for Wiz, is a cloud computing company that went public in 2018 and peaked at a valuation of $50 billion in 2021. However, it has since fallen and is now trading at a valuation of $30 billion, which is not far from the valuation Wiz receives under the Google deal.
Another weight on Wiz’s head is the lawsuit filed by its Israeli rival Orca, founded by Check Point veterans. Orca claimed in a complaint filed about a year ago that Wiz copied its technology. Wiz tried to dismiss the complaint, but the U.S. court refused and announced a month ago that the case would go to a jury trial starting December 7, 2025. Such lawsuits are undesirable in IPO prospectuses, but manageable for a giant like Google.