‘Ruthless’: Google’s record-breaking deal makes 41-year-old a billionaire

Last year, investors persuaded the founders of cyber firm Wiz to reject Google's $US23 billion ($36.2 billion) purchase bid.  They feared that the US government would prevent the transaction and argued that Wiz would be better off as an independent firm.

On Tuesday, the founders of Wiz announced they had changed their minds.

It didn't hurt that Google parent Alphabet upped the offer to $US32 billion ($50 billion) in cash, a hefty sum for a startup that only started up shop in Tel Aviv five years ago.  The corporations, who expect the transaction to finalize next year, are banking on a more favorable regulatory climate under President Donald Trump, while obstacles remain.

Wiz will be integrated into Google Cloud, which might help the search engine giant acquire market share in the very competitive cloud security industry.

The agreement came together swiftly, with the initial meeting taking place in New York a week and a half ago, according to a person familiar with the situation.  The terms are built upon the basis laid last year.

Wiz considered whether to accept Google's bid or proceed with a planned investment round this year for around $US1 billion, at a valuation of almost $US25 billion.  However, the business chose to proceed due to the larger offer, a shift in the regulatory landscape under Trump, and the opportunity to expedite efforts to develop the world's largest cybersecurity company, according to the individual.  Microsoft is currently the largest.

Wiz was founded by four Israeli military veterans, including 41-year-old CEO Assaf Rappaport, at a time when the COVID-19 outbreak forced many enterprises to migrate their networks to the cloud.  Wiz pioneered new approaches to detect, prioritize, and resolve threats and issues, outperforming established players who frequently struggled to adapt to a more complicated computing environment.

Wiz's quick growth has made its four co-founders the newest members of Israel's small billionaire club.  According to a person acquainted with the company's structure, each owns 9.3 percent of the company and has requested anonymity because the information is secret.  Based on the sale price, each founder owns a share worth over $3 billion.

Wiz employees can earn an additional $US1 billion in retention bonuses if they stay at Google, according to a person familiar with the deal, who did not specify the time frame.

Rappaport has previously dismissed questions about financial perks, stating last year that he has been renting the same Tel Aviv residence for more than a decade.

According to many who know him, behind his unassuming demeanor and T-shirt-khakis-and-sneakers attire, Rappaport is a savvy dealmaker with occasionally sharp elbows.

"He can be extremely charming, personal, and warm," says Gili Raanan, the founder of Israeli venture capital firm Cyberstarts and one of Wiz's early investors.  "And he can be quite decisive, data-driven, analytical, and unforgiving.  "Those two sides exist."

The founders - Rappaport, Yinon Costica, Ami Luttwak, and Roy Reznik met at Talpiot, a renowned military academy.  Talpiot not only exposes recruits to all aspects of the armed forces, but also teaches them science, math, and computer skills.  Rappaport said that he drove a tank, parachuted from a plane, got intelligence training, and "blew up things."

The four pals relocated from Talpiot to Unit 8200, Israel's equivalent of the US National Security Agency.  Aside from their technological skill, Unit 8200 alumni have founded successful cybersecurity companies such as Palo Alto Networks, Check Point Software Technologies, and Armis.

In 2012, the quartet founded Adallom, which is an acronym for a Hebrew phrase meaning "up to here" or "last line of defense."  According to Neil MacDonald, a vice president and analyst at Gartner, a technology research and consulting firm, the startup helped companies protect cloud-based services used by employees, which was a blind spot at the time.

"Organizations lacked visibility.  "None," he replied.  "Adallom helped at that time to solve that problem."

Three years after Adallom's establishment, Microsoft purchased the startup for $US320 million, and the founders joined the tech behemoth to assist build its cloud security division.  Rappaport stated that they had initially planned to stay for two years.

They stayed for five years, producing large-scale cybersecurity solutions and gaining access to money and people, before departing to create a new company.

At first, the team, which was then working from a two-room office in Tel Aviv, considered starting a network security company called Beyond Networks.  Then they interviewed over 100 potential consumers and cybersecurity professionals, discovering that there was an unmet demand for cloud security.  Yes, there were existing technologies, but they produced too much labor and did not effectively address the difficulties.

Focusing on cloud security was problematic because many organizations were doing similar things, and Rappaport described the decision as a "suicide plan."

The newly formed Wiz targeted a different and bigger portion of the cloud security market than Adallom, providing a tool that operated across several platforms and could identify and prioritize hazards in more complex computing environments.

"Every service has configurations.  "Every service has an identity and permissions," MacDonald explained.  "There's just this enormous complexity in the configuration of cloud infrastructure that, without a tool, a human can't understand."

 

According to MacDonald, Wiz's software was simple to deploy and could identify and prioritize possible issues in a matter of hours, giving cybersecurity pros unprecedented visibility.

The pandemic-driven movement to the cloud fueled Wiz's expansion.  The new startup also had an all-star team of financial supporters, including Sequoia Capital, Insight Partners, Index Ventures, and Cyberstarts, some of which had previously invested in Adallom.

Overall, Wiz has attracted more than $US1.9 billion from investors such as SoftBank Vision Fund, Andreessen Horowitz, Blackstone Group, LVMH CEO Bernard Arnault, and former Starbucks CEO Howard Schultz.

"Wiz felt like the first opportunity to build a security platform in a long time, basically since CrowdStrike," Thrive Capital's Philip Clark said in an interview last October, referring to CrowdStrike Holdings, a cybersecurity powerhouse.  Clark, like several other investors, believes the combined talents of Wiz's four founders were critical to the company's success.

When Google expressed interest in Wiz last year, Rappaport recognized its culture as a natural fit and became increasingly excited in July as they discussed how the relationship may look.  Google also stepped up their charm offensive, including creating a mock job contract for his pet dog, Mika.

Nonetheless, on the day Wiz had set as a deadline, Rappaport pulled the plug at 4 a.m., emailing the news to his concerned staff, many of whom had remained in the Tel Aviv headquarters overnight.

In an interview last October, he admitted, "I can't believe I'm going to say no to a $US23 billion acquisition."But at the time, he didn't want to pass up a "once-in-a-lifetime opportunity to become the world's largest cyber company."

Wiz hired a chief financial officer in January, after years of conjecture about when it and other cyber firms will go public.  Rappaport insisted he wasn't in a hurry.  Companies like OpenAI and Databricks have demonstrated a "huge advantage" to remaining private longer, he said at the time, adding, "I'm here for the long journey."

That portion of the journey, at least, concluded on Tuesday.