Why Wiz and Next Insurance walked away from the $100 billion dream
Two Israeli unicorns sell for $32 billion and $2.6 billion, but their founders dream of much more—could they have reached $100 billion?
What do Wiz and Next Insurance have in common, aside from the fact that they are both Israeli unicorns that were sold in the same week? The founders of both companies—one in cybersecurity and the other in insurtech—have repeatedly stated that there is no reason they couldn't have reached a valuation of $100 billion. After going public on Wall Street, of course.
It is difficult, if not impossible, to remain indifferent to the impressive exits of the past week. Much has been said about Wiz's $32 billion deal, but the sale of Next Insurance to German insurance giant Munich Re for $2.6 billion also ranks among the ten largest exits in Israeli tech history. And yet, we must acknowledge the loss of two more companies that could have become major public firms, employing hundreds or even thousands more workers in Israel—not just contributing to the economy in a one-time windfall, but propelling the country to a different economic trajectory over the long term.
As Nir Zuk, founder of cybersecurity giant Palo Alto Networks—the only company with Israeli ties to surpass the $100 billion valuation mark—told Calcalist: “It’s almost impossible to say no to $32 billion, but for the people of Israel, it would have been better if Wiz had held out a little longer and gone public in New York.”
The decision to sell now for $32 billion or to hold off in hopes of a future IPO is among the most complex dilemmas an entrepreneur can face. If Professor Daniel Kahneman were still alive, Wiz CEO Assaf Rappaport and his partners might have sought his advice, as this scenario perfectly illustrates one of the core questions in the Nobel laureate’s economic theories: "Is it better to take $32 billion in cash today or wait for the possibility of $100 billion in a few years?" The difficulty in confidently rejecting such an offer is precisely what led to Kahneman and his research partner Amos Tversky receiving their prestigious prize.
Wiz’s IPO might have been successful, but likely not in the coming year—and almost certainly not at an initial valuation of $32 billion. At this price, Google is factoring in Wiz’s strategic value in the most optimistic scenario. Wall Street investors, however, would have scrutinized the numbers and discovered that while Wiz is growing rapidly—almost phenomenally—it is also paying a price on the profitability front. Even if the IPO had been successful, what were the actual chances of Wiz eventually reaching a $100 billion valuation? Of all cybersecurity companies, only Palo Alto Networks has crossed that threshold and managed to stay above it.
In the case of Next Insurance, the offer was less unusual in terms of valuation, but the path to an IPO and a potential $100 billion valuation was even more complex. Wiz, for example, sells its cybersecurity solution to any organization moving to the cloud, and it has built one of the strongest brands in the market today. While it competes with larger and more mature cybersecurity firms, those rivals are not deeply entrenched. Next Insurance, on the other hand, sells policies to small and medium-sized businesses and must contend with 100-year-old insurance giants—not to mention customers who remain hesitant to buy insurance from a startup. This is one of the reasons why Next not only brought Munich Re on board as an investor but, as revealed when the deal was announced, had already seen the insurance giant increase its stake to nearly a third of the company.
The founders of Next look around and see companies like Lemonade and Hippo, Israeli insurtech firms that went public in 2021 at the height of the market hype, at valuations of $1.6 billion and $5 billion, respectively. Today, Lemonade trades at roughly the same valuation as Next’s acquisition price, while Hippo struggles to climb out of a $600 million market cap. Do these companies still have a chance of reaching $100 billion? It’s possible, but many stars would have to align for that to happen.
Here, we must address the elephant in the room: the investors. If we could be a fly on the wall in boardrooms where decisions about selling or staying independent are made, we would likely find that founders often want to remain independent—but they are outnumbered by venture capital funds that must deliver returns to their limited partners (LPs). Even the most prominent funds backing companies like Wiz and Next are facing one of their toughest periods following the investment frenzy of 2021, which left their portfolios filled with startups at inflated valuations.
Many investors had expected that with Donald Trump’s possible return to the White House, the stock market would surge, as it did in his first term, and that the IPO window would reopen. But Trump’s unexpected impact on the markets has instead delayed IPO activity further. At the same time, leadership changes at the top of the U.S. antitrust authority are creating momentum for mergers and acquisitions. Given this backdrop, the funds—who hold the majority stake in most startups, even in Wiz, where the founders still own about 40%—ultimately make the calls.
Even a deal like Next’s, done at a lower valuation than its 2021 funding round, still generates an enormous return for early and long-term investors. Some of them may even see a higher return than Wiz’s investors, who had to buy in at a very high valuation from the start. This is why, in the coming months, we are likely to see more acquisitions of Israeli unicorns—transactions that will make us proud but also leave us with a lingering sense of disappointment: Why did we give in again?
Yet, the broader story is an optimistic one. With every journey like Wiz and Next, another layer of experience and knowledge is built. Twenty years ago, it was difficult for an Israeli entrepreneur to turn down an offer of a few hundred million dollars. A decade ago, the threshold rose to a billion dollars. Today, we are talking about multi-billion-dollar deals.
Perhaps the most important common denominator between Wiz and Next is that these were not their founders’ first companies. The founders of Wiz previously built Adallom, which they sold to Microsoft for $320 million in 2015. The founders of Next previously built Check, which was acquired by Intuit for $360 million in 2014. These entrepreneurs were already financially secure after their first exits, yet they were driven by the passion to build something bigger.
Even if the founders of Wiz and Next don’t embark on another venture, they have already paved the way for the next generation, who will say: “We’ve seen that it’s possible to build an Israeli startup worth $32 billion—let’s aim even higher.” If Israel’s democratic foundations remain intact and do not derail the high-tech locomotive that is driving its economy, then the country will not only see a $100 billion startup in the future but perhaps even its first trillion-dollar company.
