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Silicon Valley venture capital firms are in line for one of their biggest investment windfalls in years if Google parent Alphabet closes on a record $23 billion acquisition of cybersecurity startup Wiz.
Some of Wiz’s early investors — Sequoia Capital, Index Ventures and Insight Partners — were poised to make billions of dollars if the deal closed, according to people familiar with the matter.
The acquisition would mark a rare bright spot for venture capitalists, whose regular avenues for returning money to their investors have been severely limited in the past few years. But the people warned that the deal was not complete and could fall apart.
The deal would set a record for the largest acquisition by a venture capital-backed company, according to data provider PitchBook.
Meta – the owner of Facebook – reached its all-time high with the acquisition of WhatsApp in 2014 for $19 billion. The $20 billion purchase of Figma, a startup also backed by Sequoia and Index, was scuttled last year after it came under fire. competition regulators.
Founded four years ago by Israeli army veterans who previously sold the startup to Microsoft, Wiz helps companies secure programs in the cloud. This has led to an increase in revenue as companies move their software and data online.
“Enterprise cyber security is an evergreen sector where bad guys are always inventing new ways to attack and the game is never over,” said one of the company’s early investors. “Wiz has taken advantage of the migration of businesses to the cloud and created ways to prevent threats there.”
Index Ventures was Wiz’s largest shareholder, with a stake of more than 12 percent, according to a person familiar with the matter. That stake would be worth more than $2.7 billion at the current price being discussed.
Sequoia Capital and Insight Partners have stakes of about 10 percent and 9 percent in the four-year-old company, according to two people familiar with the matter, which would result in payouts of about $2.3 billion and $2 billion each.
Another early Wiz investor, Israeli fund Cyberstarts, owns about 4 percent of the company after investing $6 million to $7 million in a seed round of funding, according to a person familiar with the matter.
Its potential windfall is about $920 million — which could have been bigger had it not sold its initial 10 percent stake first, according to the person.
While these funds have larger stakes in other startups, the level of return they can get from Wiz is remarkably high and comes in a relatively short period of investment.
All four investors bought Wiz before it hit its first annual revenue of $1 million.
The New York-based company’s annualized revenue rose to $100 million within 18 months of its launch in 2020 — and has continued to grow rapidly to its current level of about $500 million, according to a person familiar with the matter.
Wiz recently raised $1 billion in May from investors including Andreessen Horowitz, Lightspeed Venture Partners and Thrive at a $12 billion valuation. This price is set to double within a few months.
CEO Assaf Rappaport and co-founders Ami Luttwak, Yinon Costica and Roy Reznik are also in line for bumper payouts.
They each own about 10 percent of the company, according to a person familiar with the matter, which would make each a billionaire several times over if the deal closes.
Representatives for Wiz and Index, Sequoia, Insight and Cyberstarts declined to comment. Information previously reported on potential returns.