Valuations have always been more about potential than about current state in startup world.
Wiz is 4 years old and already at $350M ARR, that's a meteoritic rise.
Likely offering a very large premium to offset the risk of antitrust holding up the deal.
The Activision-Blizzard sale was at a premium of around 60% from stock price ($56 per share trading the day before the announcement, compared to $95 per share offer). Wiz was offered a premium of almost 100% on latest valuation.
Both Wiz and Google know that the FTC will hold up the deal, and in that time, Wiz has to convince customers not to jump ship (Google will likely not support AWS forever), and risk that the deal falls through - in which case they've gone a year without momentum.
If they really believe they can make a strong IPO, and keep growing past IPO, their decision makes a lot of sense.
Look at their financials, CloudFlare might be popular among the HN crowd but the stock is massively overvalued. At the end of the day they are a commodity CDN that somehow can’t run a profitable business.
I did look at their financials - 77% gross margin with 30% revenue growth. Much higher than “commodity cdn” can command. If they cut marketing and r&d they’d be bagging half a b a year in profit but they are investing in growth as they should because it’s working
Yeah nah... they have great products and their primary business is allowing them to enter markets where other companies can't compete. The valuation is based on potential not the business as it stands today.
And to your point they are popular with the HN crowd which is usually a strong indicator.
Cloud flare has it, they are aiming for it. Definite income vs possible income cannot be priced in the same way, assuming the CF valuation is justified.
You raise an important point. To me, pre-IPO "valuation" is mostly VC bullshit. Remember WeWork's pre-IPO valuations??? Jan 2019: 47B USD! What really matters: Post-IPO market cap, as long as there is significant float. (See VinFast IPO with a ridiculously small float.)
Far more likely is Google was not willing to complete the deal and was pulling the plug after looking at internal data. Wiz, fearing the bad press of Google backing out rushes to tell journalists that THEY are walking away because they are worth more.
Wiz's valuation is insane. Most people havent even heard of them. I think it was a > 60x ARR multiple on this deal. Id actually be kinda pissed if I was a google shareholder and they went through with it.
Something very strange is going on with Wiz. My gut tells me if they ever IPO to go big on puts.
Yup the world is big and even though we think we have heard stuff, there are more things beyond that. For example, I know a dev who makes mobile apps and clears 500_000 / month in profit and yet their app isn't really "popular". It is crazy.
I hadn't heard of either Wiz or Crowdstrike before... while reading the article I was thinking "$23B? Probably AI! And called Wiz? Yeah, must be AI...". Turns out I was wrong after all...
This is exactly how I felt as a shareholder. There is no real reason to pay this much and it seems like Google is the one that walked away from the deal.
While I don't have any comment on this instance, in general I think it's easier to hype the public markets who have limited information than it is to type a bunch of people doing due diligence on an acquisition, even if ultimately the latter is still a case of public market valuation through the acquiring public company. This is particularly true in the current age of extremely hype driven retail investing.
On the one hand, even with the post-crash dip, CRWD has a $60.9 billion market cap, there's certainly marketshare to be taken from them. On the other hand, Wiz doesn't have an endpoint protection product (which is what failed for CRWD). They'd have to build one from scratch, which requires dedicated talent (engineers with kernel experience) that they might not have.
If anyone is going after CRWD it'll be one of their other competitors.
They’ve had some really nice writeups but I always thought they were your generic security firm doing some bug hunting. Recently I happened upon their domain submissions to HN and saw they raised $1b+ and was like wtf? What do they actually do? I mean what are their products that people pay for?
Maybe there are obvious answers to these questions, but if a company is worth $23bn I’d expect that as somebody in the industry, I could answer them without doing in depth research.
This is exactly the kind of gut feeling of “something’s off” that I’ve learned to pay attention to.
> Wiz combines a graph search for asset management with agentless vuln and malware scanning that clones EBS volumes and scans them on their infrastructure. That's a great combo for vuln management, but has some downsides like delays between scans and cloud costs. They have a sensor with solid detection rules, and are okay at a bunch of other stuff like cloud log threat detection and sensitive data detection. They've basically pushed what you can do without an agent to the limit.
> For Wiz, a $23 billion sale price was irresistible. Google would value the startup at 46 times the $500 million in annual recurring revenue it currently generates, a person familiar with the matter said.
> Far more likely is Google was not willing to complete the deal and was pulling the plug after looking at internal data
Wouldn't it be more likely that they would have lowered their offer after seeing the internal data - perhaps so much that Wiz would certainly walk away.
> [Cyberstarts] has a portfolio of only 22 companies whose combined value is $35 billion. Five of these companies are unicorns, first and foremost Wiz, which seems to be breaking all the rules of growth and success and setting new standards in the industry.. In all three of his funds, Ra'anan shows an internal rate of return of more than 100%, an unusual figure even for the best funds in the world.. The first sales come from the loyal CISOs who work with the fund.. The whole CISO advisory committee issue has gotten out of hand for corporate America.
It's not a kickback because Cyberstarts is providing 'points' which eventually equate to carry for them as advisors to the startups in the fund, to which they donate their time, expertise, and so on.
The implication, you could argue, is that that also includes purchases from the startups, but that isn't at all a requirement of the program, at least as far as anything legal is concerned, to my knowledge.
That said, it makes sense that if you're advising companies that are building products with your advice in mind, they're going to be solving problems you need solved, so you're more likely to buy from them. The fact that you have a good working relationship with them already is a bonus, of course.
That's the optimistic view.
The cynical view is that it's no different from drug companies paying doctors to shill their pills.
It's definitely not uncommon. Illegal? Should be, the question is how they got paid and for what. There are so many C-level shills these days, it's sickening.
I was like "how the f* is a website builder possibly worth $23B" and then I realized Wiz is not Wix. And then I realized Wix has a market capitalization of $9B, and I'm still WTF.
Wix has over $1.5B annual recurring revenue, so a market cap of $9B makes sense. You and I might not use them, but it is a real business, not just a hype bubble.
I think there's some behind the scenes drama. It takes a LOT of time and investment from both sides to build up to a $23B offer. I wonder if there was something some Alphabet exec did to piss off the founders. Or Wiz was stringing Alphabet along to hype up the IPO.
Most likely reason is FTC. Wiz integrates with big 4 cloud providers. No way FTC is allowing Google to take control. JD Vance's nomination and support for current FTC chair(Lina Khan) doesn't help.
Current FTC is good(personal opinion) from anti trust point of view but maybe bad for startup exits[0].
Wiz has tons of competitors, and Microsoft is one of them, so are Palo Alto Networks, Tenable, Crowstrike, SentinelOne, etc... Wiz is definately a leader but are in no way a monopoly, so I do not see this as an FTC play to stop the deal.
A $23B offer is not humbling (on my planet at least). Humbling would be turning this offer down and then failing to get enough interest to generate an ipo.
You might be right. On the other hand, Rappaport might be humbled thinking about how fortunate circumstances and others' hard work has led to this offer. He could be thinking "gosh, I do not feel I deserve that".
I was confused when I read that. 23B is a ginormous number, especially considering the CEO's previous exist. 23B is a flattering number, it's not humbling
Lina Khan is our modern day superhero. She may be losing most of her lawsuits against big tech, but she has clearly struck fear in stakeholders on both sides of every tech acquisition.
Readit News
CloudFlare is worth $26B and had ~$1.3B revenue last year. Something's fishy here.
https://techcrunch.com/2024/05/07/wiz-raises-1b-at-12b-valua...
The Activision-Blizzard sale was at a premium of around 60% from stock price ($56 per share trading the day before the announcement, compared to $95 per share offer). Wiz was offered a premium of almost 100% on latest valuation.
Both Wiz and Google know that the FTC will hold up the deal, and in that time, Wiz has to convince customers not to jump ship (Google will likely not support AWS forever), and risk that the deal falls through - in which case they've gone a year without momentum.
If they really believe they can make a strong IPO, and keep growing past IPO, their decision makes a lot of sense.
And to your point they are popular with the HN crowd which is usually a strong indicator.
Wiz's valuation is insane. Most people havent even heard of them. I think it was a > 60x ARR multiple on this deal. Id actually be kinda pissed if I was a google shareholder and they went through with it.
Something very strange is going on with Wiz. My gut tells me if they ever IPO to go big on puts.
Do you know of Active Directory? Most have no idea, even though it is a Windows Server feature from 2000.
Some will live a life and even work not knowing.
Deleted Comment
yup, overvalued
I bet those people rarely get promoted for preventing an acquisition, though. Probably that is why we see so many crazy acquisitions, in general.
If anyone is going after CRWD it'll be one of their other competitors.
Maybe there are obvious answers to these questions, but if a company is worth $23bn I’d expect that as somebody in the industry, I could answer them without doing in depth research.
This is exactly the kind of gut feeling of “something’s off” that I’ve learned to pay attention to.
> Wiz combines a graph search for asset management with agentless vuln and malware scanning that clones EBS volumes and scans them on their infrastructure. That's a great combo for vuln management, but has some downsides like delays between scans and cloud costs. They have a sensor with solid detection rules, and are okay at a bunch of other stuff like cloud log threat detection and sensitive data detection. They've basically pushed what you can do without an agent to the limit.
> For Wiz, a $23 billion sale price was irresistible. Google would value the startup at 46 times the $500 million in annual recurring revenue it currently generates, a person familiar with the matter said.
https://www.wsj.com/tech/how-startup-wiz-went-from-zero-to-a...
I'm very curious about what due diligence found, but we aren't likely to get more info until we see their s-1
Deleted Comment
Wouldn't it be more likely that they would have lowered their offer after seeing the internal data - perhaps so much that Wiz would certainly walk away.
Deleted Comment
> [Cyberstarts] has a portfolio of only 22 companies whose combined value is $35 billion. Five of these companies are unicorns, first and foremost Wiz, which seems to be breaking all the rules of growth and success and setting new standards in the industry.. In all three of his funds, Ra'anan shows an internal rate of return of more than 100%, an unusual figure even for the best funds in the world.. The first sales come from the loyal CISOs who work with the fund.. The whole CISO advisory committee issue has gotten out of hand for corporate America.
https://www.calcalistech.com/ctechnews/article/hjpwti2dr
> Wiz announced two months ago that it had raised $1 billion at a $12 billion valuation, bringing the company’s total funding to $1.9 billion.
The implication, you could argue, is that that also includes purchases from the startups, but that isn't at all a requirement of the program, at least as far as anything legal is concerned, to my knowledge.
That said, it makes sense that if you're advising companies that are building products with your advice in mind, they're going to be solving problems you need solved, so you're more likely to buy from them. The fact that you have a good working relationship with them already is a bonus, of course.
That's the optimistic view.
The cynical view is that it's no different from drug companies paying doctors to shill their pills.
But wiz? There are reading like Mossad/Unit 8200. And who wants to have them in their backend? Worse than Cloudstrike, which sounds like CIA to me.
Deleted Comment
Deleted Comment
Current FTC is good(personal opinion) from anti trust point of view but maybe bad for startup exits[0].
[0] https://x.com/ID_AA_Carmack/status/1812978264484552987
Minor pet peeve: misuse of the word "humbling".
A $23B offer is not humbling (on my planet at least). Humbling would be turning this offer down and then failing to get enough interest to generate an ipo.