From Waze to Wiz: Google writing new chapter in Israeli tech history
From Waze to Wiz: Google writing new chapter in Israeli tech history
A small step for Google is a giant leap for Wiz and especially for the Israeli tech industry, which has been struggling to preserve its prestige and reputation in what has been the most challenging year and a half it has known.
In June 2013, Google wrote a chapter in Israeli economic history when it purchased Waze for $1.1 billion, thereby creating the first domestic unicorn. In retrospect, the purchase was also among the causes of the big tech boom that carried the Israeli high-tech industry, and the economy as a whole, over the last decade. Now, if the transaction for the purchase of Wiz by Google for an astonishing $23 billion goes ahead, a new chapter will be written in the history of Israeli high-tech, precisely during one of its lowest moments.
Beyond the fact that it will be Google's largest acquisition ever, it is also the largest acquisition of an Israeli company, surpassing the record currently held by Mobileye, which was sold to Intel for $15 billion in 2017. Since its inception, Wiz has broken almost every possible record: it became the fastest-growing company in value, reached a sales rate of $100 million the fastest, became the private cyber company with the highest valuation, and is, of course, the Israeli company with the highest valuation. In the latest fundraising round, completed just a few months ago, the cyber giant received a valuation of $12 billion.
Google's interest in Wiz is clear in light of the cyber fever that has been ongoing for the past year. Palo Alto Networks, which announced its "platformization," has already become a company worth more than $100 billion in terms of market capitalization. Microsoft purchased the previous startup of Assaf Rappaport and his partners, Adallom for $320 million, establishing its cyber division, which has already become a business worth more than a billion dollars. Meanwhile, companies like CrowdStrike and its competitors are starting to swallow up other firms, leaving Google behind. In such a situation, $23 billion—almost double Wiz's last valuation, and after a 60% jump in Google's stock over the past year to a value of $2.3 trillion—is not a big story.
But a small step for Google is a big step for Wiz and especially for the Israeli tech industry, which is struggling to preserve its prestige and reputation in what has been the most challenging year and a half it has known. It began with political turmoil and continued into one of the most difficult wars Israel has ever faced. Even though Wiz is not completely identified with the Israel ecosystem outside of Tel Aviv's high-tech hub, and CEO Assaf Rappaport has become associated with the high-tech protest against the political upheaval, this is a dramatic event for the Israeli economy. Wiz is indeed registered as an American company, but it has quite a few Israeli shareholders and employs 950 people, most of whom are based in the USA. Rappaport is known as a CEO who invests in his employees, and Wiz is known as a very generous company in terms of conditions. A sale of this magnitude is expected to create a new surge of innovation. Ironically, Rappaport, an openly gay man who does not hide either his sexual orientation or his principled opposition to the current government, is expected to be the one contributing to reducing the deficit created by the irresponsible conduct of the current government and Prime Minister Benjamin Netanyahu. A deal of this magnitude will have more long-term consequences.
The four founders still hold relatively large shares in the company—beyond the employees—because, despite its size, Wiz is a young company, established only four years ago. Rappaport, CTO Ami Luttwak, VP Product Yinon Costica, and VP R&D Roy Reznik—all four are Israelis and are expected to receive shares worth billions of dollars before tax.
The Israeli cyber industry is already a household name globally and, in fact, the second-largest hub after the U.S. in terms of concentration of companies and talent in the field. But there is always room for more growth. If we recall previous formative deals such as Waze or Mobileye, they gave impetus to the creation of another wave of innovation. Former employees of companies that are sold for such sums tend to retire and start independent ventures when they are less concerned about their financial future. Exits of this kind tend not to just lead to a modest increase but to a significant leap, impacting the relevant industry immediately and for many years. Google's trust in an Israeli company at a time like this may turn the tide and bring back the investors who hesitated over the past year, understandably so.
Google has been trying to boost its cyber solutions and cloud protection for some time. As part of this plan, two years ago it acquired the American Mandiant (called FireEye), which also had operations in Israel, in a cash deal valued at $5.4 billion. However, it was not a sufficiently dramatic and reality-changing move as the Wiz deal could be, and this is because of the strong brand that the Israeli company enjoys when it comes to cyber defense in the cloud, as it was one of the first companies in the world to be called cloud native, that is, one whose products were designed in advance for the cloud environment and not those that were adapted to the cloud era.
Google's expression of confidence will of course also expand its development center in Israel and this after quite a few doubts arose about the continuation of the expansion plans of the international giants in Israel since the war and many Israeli workers being called up for reserves and being less available and less efficient.
Of course, the ultimate dream for both Wiz and Israel is an IPO on Wall Street. The company has talked about and aspired to this—to remain an independent company and become another Israeli giant. However, history shows that even when the IPO dream comes true, it doesn't always lead the company and its founders to their desired outcome. For instance, in the current transaction, Wiz will be valued higher than Check Point, a company that is synonymous with Israeli success and can be said to have founded the cyber world. Additionally, looking at companies such as Nice, Wix, or SolarEdge, which were once the biggest Israeli stars and aspired to the valuation Wiz is expected to receive in the deal with Google, it is clear they are now far from achieving that status, and it remains uncertain if or how they will return to it. Needless to say, all these companies are much better known than Wiz today.
If the Israeli and global realities were different, with less geopolitical and economic uncertainty, Wiz's shareholders might have waited for an IPO window on Wall Street to open. But even then, it's doubtful the company would have achieved a valuation exceeding $15-18 billion. There is also the perspective of the entrepreneurs and managers at Wiz. This is a young and cohesive group, and it's possible that Wiz, not being their first venture, will not be their last either. Very few talented entrepreneurs succeed in becoming excellent managers of public companies. For many, the Sisyphean task of meeting quarterly targets is simply too tedious. In the case of Wiz, it seems that even a sale to Google for $23 billion will not be the end of the story but merely a stepping stone to their next groundbreaking startup.
