Cloud security startup Wizz has reportedly pulled out of talks to be acquired by Google parent Alphabet for $23 billion, a deal that would have been the search giant’s largest acquisition to date.
Wizz CEO Assaf Rapaport told employees the company would instead pursue an initial public offering, as it had said last year.
“It would be difficult to turn down such a humiliating offer,” Rapaport wrote. The employee memo, obtained by CNBC,.
As the Department of Justice files two antitrust lawsuits against Google, anonymous sources told CNBC that the successful startup cited antitrust and investor concerns as reasons for abandoning the ongoing deal.
The deal would nearly double the startup’s valuation from $12 billion, which soared shortly after Rapaport and a few colleagues founded Wizz in 2020.
According to the Wall Street Journal, the security startup expects to reach $100 million in annual recurring revenue in 18 months and $350 million by 2023.
According to CNBC, Wiz has welcomed investment from leading venture backers including Index Ventures, Insight Partners, Lightspeed Venture Partners and Sequoia.
The acquisition was meant to help bolster Alphabet’s cloud security offering as it seeks to better compete with rival Microsoft.
According to CNBC, Alphabet’s cloud division is set to achieve profitability in 2023 after years of financial investment.
The company’s cloud computing service, Google Cloud, has continued to grow in recent years as companies race to keep up with the AI boom.
Cloud software company Wizz, meanwhile, has grown rapidly since it was founded just before the pandemic, when demand for cloud security soared as businesses pivoted to widespread remote work.
The startup has been raking in the cash, announcing a $100 million funding round less than a year after it was founded, according to CNBC.
Adalom, a security company previously started by Wizz’s founders, was backed by Sequoia and Index and was acquired by Microsoft in 2015 for $320 million.
Alphabet has been taking a conservative approach to acquisitions even before its attempt to acquire Wizz reportedly fell through.
Its largest acquisition was Motorola Mobility for $12.5 billion in 2012. Its second largest was security company Mandiant for $5.4 billion two years ago.
The company acquired Fitbit for $2.1 billion in 2021 and has completed deals with YouTube, DoubleClick, Looker and Waze over the years.
Google is currently awaiting a ruling in an antitrust lawsuit brought by the Department of Justice that alleges the company maintained an illegal monopoly on the search market.
The Justice Department filed a second antitrust lawsuit last year, which has yet to go to trial, alleging that Google has a monopoly on digital advertising technology.
