The CEO of Wiz, reportedly exploring a US$23bil acquisition with Alphabet, says cybersecurity consolidation is ‘truly in its infancy’

The chief executive of cloud security company Wiz, which is reportedly in advanced acquisition talks with Google-parent Alphabet, weighed in on July 15 about the consolidation he predicted is coming to the cybersecurity market.

While he declined to comment on whether his own company was in talks with Alphabet over a reported potential US$23bil (RM107.64bil) acquisition, Assaf Rappaport, Wiz CEO and cofounder, said that the industry was fragmented and that M&A was only just starting to ramp up.

“First and foremost, I think consolidation in the security market is truly a necessity,” Rappaport said in an on-stage interview at the Fortune Brainstorm Tech conference in Deer Valley, Utah. “It’s too fragmented, we’re going to see the consolidation,” Rappaport said of the cybersecurity market.

With cloud computing in particular, consolidating all security measures into one platform is actually safer for customers, Assaf said: “If you don’t have the right platform, and the platform is not consolidated you’re getting less of a value.”

In an on-stage interview alongside Wiz investor Philip Clark, of Thrive Capital, Rappaport discussed his startup’s rapid growth from its pandemic-era launch and provided plenty of fodder for those speculating about the company’s next move. The 41-year-old Rappaport said that the trends in the tech market had shifted – and that founders are increasingly open to alternatives to listing their companies on the public markets.

“If you asked any founder, definitely in the cyber space, two years ago, ‘Hey what’s your dream?'” Rappaport said, “I’m going to be unicorn, and then I’m going to become a public company,” would be the typical answer.

But today, he said, “the dream, a bit, has changed, and they’re seeing other options – and that pushes the market into consolidation.”

A ‘23 ton elephant’ in the room

The Wall Street Journal reported on Sunday that Alphabet’s Google Cloud business was in “advanced talks” to acquire the New York City-based cybersecurity startup for approximately US$23bil (RM107.64bil). Should the deal go through, it would be Alphabet’s largest acquisition ever, and would be one of just a few major M&A deals since 2022, when the change in interest rates shook up the market and the market for initial public offerings shrank significantly.

The deal reports have led to speculation that the cybersecurity market could be set to undergo a wave of M&A as businesses grapple with the constant threat of hacking and ransomware attacks. In March, Cisco completed its US$28bil (RM131.04bil) acquisition of cybersecurity company Splunk.

“This is not a zero sum game and the cloud cyber security space is ripe for consolidation,” Wedbush analyst Dan Ives wrote in a note to investors on Sunday regarding the reports of a Google-Wiz deal.

Rappaport cofounded Wiz in 2020 with three cofounders, all of whom served in the Israeli military’s famed Unit 8200 signals intelligence group. The four friends had already launched and sold a startup to Microsoft for US$320mil (RM1.49bil) a few years earlier. And Wiz, backed by big-name venture funds like Thrive Capital, Andreessen Horowitz, an Lightspeed Capital, was soon dubbed the world’s fastest growing startup. According to the Wall Street Journal, Wiz currently generates US$500mil (RM2.34bil) in annual recurring revenue and counts 40% of the Fortune 500 as customers.

Rappaport said that consolidation was the reason Wiz had raised its enormous US$1bil (RM4.68bil) funding round earlier this year, at a US$12bil (RM56.16bil) valuation, as the company prepared to go on the hunt for its own buying opportunities. And he credited his company’s growth to the Covid pandemic in 2020, and how companies moved their businesses online and to the cloud, offering a boon for companies that specialise in safeguarding data that is stored there. “It felt like the worst time to form a company,” he said. “In hindsight, it was not.”

But Rappaport also said that he prefers to be able to grow in a more controlled way. “It’s great to be fast. But I prefer to be predictable and knowing where we’re going,” Rappaport said.

Rappaport referred to reports of a deal with Google as the “23 ton elephant” in the room, but said he was unable to share anything other than to say that in his career as a second-time startup founder, “events” like IPOs and acquisitions are merely “milestones” in a longer journey.

“That’s kind of the mindset that we always have, being private, being public, and a startup.”

Clark, of Thrive Capital, said that every startup investment the venture firm makes is with the expectation of being long term holders. But “if we’re surprised to the upside in the interim,” he added, “no one is going to complain.” – Fortune.com/The New York Times