What’s left to say about Wiz, the fastest growing company in Israel, the largest financing round in Israel, and the highest valued privately-held company in Israel - $12 billion, even before the acquisition offer? Wiz was - and still is - a favorite for an IPO. If not it , then who?
The Israeli cybersecurity company grew thanks to a "fire and forget" sort of product. Data security managers loved the immediate connection to every possible enterprise system, without long implementation processes. You install the system in a minute, press a button, and forget about it. The ease of use led to rapid adoption and to one of the fastest growth stories in the history of Israel’s technology industry. According to a press release from the beginning of this year, Wiz’s ARR (annual recurring revenue) rate at the time was $350 million, from which a lower accounting figure for revenue can be inferred, probably half to a third of that figure.
1. Wiz could have embarked on a flotation and been the biggest in its field, but it preferred an acquisition offer. Even if it isn’t Google, and some other company comes along, such as Microsoft or Amazon, the company has signaled that it’s for sale. It has thus buried one of the largest Israeli flotations there could have been, such as would have turned it into a Palo Alto Networks or a Check Point. Underwriters indicated to Wiz that a flotation was possible, but some way off, at least two years away. This is because of the fact that to make an IPO in New York you need genuine revenue, not ARR, of 300, 400, even 500 million dollars annually. Who could guarantee to Wiz’s management that the opportunity on Nasdaq would be there in two years’ time? The four founders apparently decided to accept a bird in the hand now rather than two in the bush.
2. Eleven years ago, Google bought another Israeli company with a similar name, navigation app Waze, for a much smaller sum - just $1 billion - the largest sum ever paid for an Israeli-developed mobile telephone app. Google wasn’t the first suitor. A least three companies competed to buy Waze: Apple, Facebook, and Google, and each of their offers appeared as a newspaper headline. Waze seemed to benefit from the publicity, and its price rose accordingly. It could be that the leak to "The Wall Street Journal" about Google’s offer for Wiz should be treated with caution, and should be interpreted as the start of negotiations. Now, when it is clear that Wiz is for sale, the real race starts to buy it, and there is no major cloud player that wouldn’t want to lay hands on it.
3. In early 2023, at the start of the judicial overhaul legislation and the protests against it, Wiz, under Assaf Rappaport, was one of the leaders of the protest mounted by technology companies. Rappaport, together with some of the venture capital firms invested in the company, Insight Partners and Index Ventures, expressed their dismay at the government’s efforts to upset the balance between the legal system and business. Rappaport even declared that the company would transfer its cash to foreign banks.
The largest ever acquisition deal in Israel will, if it materializes, be a huge economic event. About 40% of the shareholders will pay tax in Israel, pouring billions of shekels into the state’s coffers.
It will be interesting to see how Minister of Finance Bezalel Smotrich greets the protest leaders, and whether Prime Minister Benjamin Netanyahu calls Wiz’s founders to congratulate them. If the deal makes it possible to cancel the planned rise in the rate of VAT, why not?
Published by Globes, Israel business news - en.globes.co.il - on July 15, 2024.
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