Google Eyes Cybersecurity Business with $23B Wiz Acquisition

Alphabet, Google’s parent company, is in the process of acquiring New York-based cybersecurity startup, Wiz. According to the Wall Street Journal, the Google-Wiz acquisition deal will be valued at around $23 billion.

News of Google’s Wiz acquisition came days after Alphabet opted not to acquire HubSpot, a company whose market capitalization stands at over $24 billion.

The Wiz Advantage

Wiz was last valued at $12 billion. The cybersecurity startup partners with a range of cloud providers, including Amazon and Microsoft. Its clients include DocuSign and Morgan Stanley. The company has a workforce of 900 employees who work from the U.S, Asia, Europe, and Israel.

Should the Wiz Google acquisition deal go through, the cybersecurity startup will strengthen Google’s cloud-computing division significantly.

“There are two advantages of Google acquiring Wiz. One, cloud security is hot and allows Google to cut into AWS and Azure clients, and two, having Wiz would give them some consistently large workloads to monetize,” Constellation Research Founder and Principal Analyst, Ray Wang said.

Wedbush analysts agreed with these sentiments.

“For Google this would be a shot across the bow at Microsoft and Amazon, making a major bet on the cyber security space to complement its flagship GCP offering in the cloud. This would give Google an edge on a number of cloud deployments, and further monetize the cyber security cloud space with still less than 50% of the workloads not on the cloud globally.”

Boost to Google’s Portfolio

For decades now, Google’s main source of revenue has been online ads on YouTube, Google Search, and other platforms. The tech giant has been exploring additional services like security and cloud to generate more revenue.

“AI and Cybersecurity are the two biggest areas customers are investing their technology dollars. Google seeks to play in both areas. The bigger issue is that the IPO market has been really bad, this has created fewer new startups in enterprise, and makes existing companies with great revenue streams like Wiz attractive targets even at high valuations,” Wang added.

Cybersecurity is among the strategic, high-growth areas that attract tech giants like Microsoft and Google. With vulnerability to cyber attacks increasing among consumers, enterprises, businesses, and governments, demand for cybersecurity security has been on the rise. The Google-Wiz acquisition will enable Google to provide this service.

“This was the missing piece in Google’s portfolio and helps them provide cybersecurity as a service bundled with their cloud offerings. With AI it’s going to be a double-edged sword – enhancing cybersecurity but also possible to evade one. This is the big play and we shall see further M&A activity here between cloud, AI, and cybersecurity companies in the next two years,” Counterpart Research VP for Research and Partner, Neil Shah said.

Past Performance

Last year, Wiz posted $350 million in recurring revenue, up from $100 million it posted 18 months after its inception in 2020. Early this year, the startup raised $1 billion at a $12 billion valuation. If the acquisition deal is finalized, Google will be paying double the valuation. It will also be Google’s largest-ever acquisition.

The tech giant will pay close to $12 billion more than it paid to acquire Motorola Mobility in 2012. Wiz is among the rare non-AI startups to raise capital on a higher valuation this year. Most startups have suffered tech fatigue emanating from the low-interest rate environment.

In recent months, Google has acquired two other cybersecurity startups – Siemplify and Mandiant.