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Silicon Valley venture capital firms are in line for one of their biggest windfalls in years should Google’s parent Alphabet seal a record $23bn acquisition of cyber security start-up Wiz.
Some of Wiz’s earliest investors — Sequoia Capital, Index Ventures and Insight Partners — were each set to make billions of dollars should the deal close, 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 largely restricted in the past few years. However, the people cautioned that a deal was not finalised and could fall apart.
A deal would set a record for the largest acquisition of a venture capital-backed company, according to data provider PitchBook.
Meta — the owner of Facebook — set the all-time high with its $19bn acquisition of WhatsApp in 2014. Adobe’s $20bn purchase of Figma, a start-up also backed by Sequoia and Index, was scuttled last year after falling into the crosshairs of competition regulators.
Founded four years ago by veterans of the Israeli military who had previously sold a start-up to Microsoft, Wiz helps companies secure programs in the cloud. That has led to a surge in revenue as corporations move their software and data online.
“Cybersecruity for the enterprise is an evergreen sector where the bad guys are always figuring out new ways to attack and the game never ends,” said one early investor in the company. “Wiz took advantage of enterprises migrating to the cloud and built ways to prevent threats there.”
Index Ventures was Wiz’s biggest shareholder, with more than a 12 per cent stake, according to a person familiar with the matter. That stake would be worth more than $2.7bn at the current price under discussion.
Sequoia Capital and Insight Partners have stakes of about 10 per cent and 9 per cent in the four-year old company, respectively, according to two people familiar with the matter, which would lead to payouts of about $2.3bn and $2bn each.
Wiz’s other early investor, the Israel-based fund Cyberstarts, owns about 4 per cent of the company, after investing between $6mn and $7mn in its seed funding round, according to a person familiar with the matter.
Its potential windfall is about $920mn — which could have been bigger had it not previously sold down its initial stake of 10 per cent, according to the person.
While these funds have bigger stakes in other start-ups, the level of returns they stand to gain from Wiz stands out as remarkably high and comes within a relatively short period of investment.
All four investors bought into Wiz before it hit its first $1mn in annualised revenue.
The New York-based company’s annualised revenue surged to $100mn within 18 months of its 2020 launch — and had continued to grow rapidly to a current rate of about $500mn, according to a person familiar with the matter.
Wiz most recently raised $1bn in May from investors including Andreessen Horowitz, Lightspeed Venture Partners and Thrive, at a $12bn valuation. That price is set to double within just a couple months.
The company’s chief executive Assaf Rappaport and co-founders Ami Luttwak, Yinon Costica and Roy Reznik are also in line for bumper payouts.
Each owns about 10 per cent of the company, according to a person familiar with the matter, which would make each billionaires a couple times over should a deal close.
Representatives for Wiz and Index, Sequoia, Insight and Cyberstarts declined to comment. The Information previously reported on the potential returns.
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