Wiz wheels and deals its way to cybersecurity success

Driving the news: This week Wiz announced $1 billion in new venture funding at a $12 billion valuation, which included a small secondary transaction for early employees and investors.

Catch up quick: The company was founded in 2020 by Assaf Rappaport, Yinon Costica, Ami Luttwak and Roy Reznik after leaving Microsoft. The four had landed at the tech giant in 2015 after it acquired their prior startup, Adallom, for $320 million.

• Wiz quickly set about winning over large enterprises as customers, achieving $100 million in annual recurring revenue in 18 months (it hit $350 million this year).
• It previously raised $900 million in funding from blue chip investors like Index Ventures, Sequoia Capital and Insight Partners.

The big picture: Although Rappaport says he doesn't feel pressure from his investors to make any further acquisitions, M&A is a big reason for the large pile of cash his company just raised.

• It's already acquired two companies — Rafft and Gem — spending about $400 million, per reports.

What they're saying: "I saw in my previous work, and we see it in the market … some companies who cannot innovate, you know, outsource their innovation through acquisitions," Rappaport tells Axios.

• "That's the PE approach … take an existing technology, put it in an existing machine, and like the 'one plus one equals three' ... we'll try to squeeze the lemon as much as we can.
• "When you're acquiring a company, you're not looking for a good deal, you're looking for a great company.… And it typically comes with a premium price. So that's one thing that is not very PE, because they're much more sensitive about the pricing."

Inside the room: Wiz is also very intentional about its post-acquisition approach. "What we're doing is we're almost sunsetting the existing product in order to rebuild it into the Wiz technology stack to make sure that everything is coherent," Rappaport says.

Yes, but: Inevitably, some prospective deals have not come to fruition, notably Sutter Hill-backed Lacework and publicly traded SentinelOne.

• Lacework has raised $1.8 billion in funding and was last valued at $8.3 billion. Wiz ultimately made an initial offer of about $160 million before revising it down to less than $100 million, following a few weeks of diligence, according to a source familiar with the discussions.

As for SentinelOne, Wiz considered a bid but walked away after details leaked to the press, according to the source. SentinelOne told Axios there was never a deal, or any discussions of a deal, between the parties.

What's next: The company wants to build out an actual corporate development team to focus on M&A and investments, and start checking things off the list for an eventual IPO, like hiring a CFO — and hitting $1 billion in ARR.

• "We're a 4-year-old toddler as an organization," says Rappaport.

The bottom line: An M&A market that's still rebounding, a stable of companies with pandemic-era valuations, and venture capitalists eager to see some portfolio exits could create some opportunities for Wiz.

Editor's note: This story has been updated with comment from SentinelOne, and corrected by removing a reference to SentinelOne hiring bankers to explore a potential sale last summer and by stating that Wiz's consideration of a bid for SentinelOne ended after details were reported by the press.