Venture Capitalists To Reap Big Gains From Googles $23bn Wiz Acquisition

Google’s parent, Alphabet, is poised to buy cyber security start-up Wiz for a record $23bn, marking a significant windfall for Silicon Valley venture capital firms. Early investors like Sequoia Capital, Index Ventures, and Insight Partners could see returns in the billions if the deal goes through, sources say.

This acquisition would be a rare positive outcome for venture capitalists, who have struggled in recent years to return funds to their backers. However, sources caution that the deal is not yet final and may still fall apart.

If successful, this would set a new record for the largest purchase of a venture capital-backed firm, according to PitchBook. The previous record was held by Meta’s $19bn acquisition of WhatsApp in 2014. Last year, Adobe’s $20bn bid for Figma, also backed by Sequoia and Index, was blocked by regulators.

Wiz, founded four years ago by former Israeli military personnel, helps companies secure cloud-based programs. As businesses increasingly move their data online, Wiz’s revenue has surged. One early investor noted, “Cybersecurity is a constant battle. Wiz capitalised on the shift to the cloud and developed tools to thwart threats there.”

Index Ventures holds the largest stake in Wiz at over 12%, valued at more than $2.7bn at the discussed price. Sequoia Capital and Insight Partners each hold around 10% and 9% stakes, translating to payouts of about $2.3bn and $2bn respectively.

Cyberstarts, another early investor from Israel, owns about 4% of Wiz after initially investing $6-7mn. Their potential gain is around $920mn, which could have been higher if they hadn’t reduced their original 10% stake.

Although these funds have larger stakes in other start-ups, the returns from Wiz are exceptionally high and achieved in a relatively short time. All four investors backed Wiz before it reached $1mn in annual revenue.

Since its launch in 2020, Wiz’s annualised revenue has soared to $100mn within 18 months and now approaches $500mn, sources reveal. The company raised $1bn in May from investors including Andreessen Horowitz, Lightspeed Venture Partners, and Thrive, at a $12bn valuation. This valuation is expected to double shortly.

Wiz’s CEO Assaf Rappaport and co-founders Ami Luttwak, Yinon Costica, and Roy Reznik also stand to gain substantially. Each holds about 10% of the company, potentially making them billionaires multiple times over if the deal closes.