Alphabet, the parent company of Google, is currently in advanced negotiations to acquire cybersecurity startup Wiz for a staggering $23 billion, as per a report by the Wall Street Journal on Sunday. Sources from TechCrunch also confirmed similar discussions, suggesting that the deal could extend into the following week.
If successfully completed, this acquisition would mark Alphabet’s largest purchase to date and a significant milestone for Wiz, amid a landscape where M&A activity, particularly exits, has not seen the anticipated resurgence in 2024. The impact of this acquisition on the venture capital and startup ecosystem could be far-reaching, with ramifications that are both obvious and less apparent.
Angela Lee, a Columbia Business School professor and creator of the angel investor community 37 Angels, expressed optimism about the acquisition potentially reigniting the M&A market for startups. She emphasized the size of the deal as a catalyst, indicating a market readiness for such a substantial exit. Lee’s hope is that this acquisition would revitalize M&A activity among startups.
While the market has witnessed 356 startup acquisitions in the U.S. in H1 of 2024, signaling a trajectory similar to 2023 with 771 deals, Lee cautioned that despite any potential resurgence in M&A spurred by this acquisition, it may not alleviate the liquidity challenges faced by large late-stage startups.
I have reached out to both Wiz and Google for comments and will update this story accordingly.
Finding Fundraising Momentum
The completion of this deal could also have a positive influence on venture fundraising activities. U.S. venture firm fundraising is on course to fall below the $81.5 billion raised in 2023, which itself was a significant decline from the $191.3 billion raised in 2022, according to PitchBook data.
Brian Borton, a VC and growth equity partner at StepStone, highlighted the extended holding periods of VC funds and the hesitancy among LPs due to the current exit environment. The successful completion of this deal could potentially alleviate some of these reservations, especially given Wiz’s relatively young age.
Lee voiced the importance of this potential acquisition in reducing exit timelines and attracting LPs back into the market. The deal’s impact could potentially renew interest in VC fundraising and provide leverage for VCs in the current fundraising landscape.
Driving Deals
Should Wiz be acquired, Lee anticipates a resurgence in VC investments. The early-stage deal activity has seen growth, according to DocSend, but actual closures have yet to catch up. The youthfulness of Wiz as a company in the potential acquisition could prompt more significant interest and activity in the early-stage investment space.
While uncertainties surround the future of the deal, the possibility of it coming to fruition may serve as a much-needed catalyst for the venture capital landscape and could potentially kickstart a wave of new opportunities and movement in the market.
