Wiz investor breaks down Google’s $32 billion acquisition

Google completed its $32 billion acquisition of cybersecurity company Wiz this week, the largest acquisition in Google’s history, as well as the largest acquisition ever by a venture-backed startup.

In the latest episode of TechCrunch’s Equity podcast, I’m joined by Rebecca Bellan, Sean O’Kane, Shardul Shah, partner at Index Ventures, the largest shareholders in Wiz. We walked us through Shah through his history with Wiz, which extends back before Wiz itself — he previously backed Adallom, the startup previously founded by Wiz’s Assaf Rappaport, Ami Luttwak, and Roy Reznik.

We also asked Shah why he thought the company was an attractive takeover target, and how he responded when Wiz backed out of Google’s previous takeover bid.

“It’s no surprise that this is Wes,” Shah said. “Wiz is at the heart of three tailwinds: AI, cloud, and security spending.”

Read an excerpt of our conversation, edited for length and clarity, below. Shah started things off by pointing out, half-jokingly, that we were probably selling things at lower prices by calling the acquisition one of our deals of the week.

Shardul Shah: I think this should be considered the deal of the year or the decade, not just the deal of the week. Can we change that? Thank you.

But it’s really important to the industry. This is the largest venture-backed acquisition in history.

Rebecca Bellan: Yes, we will work on that in the mail[-production].

Shardul: More importantly, it’s no surprise that this is Wiz. Wiz is at the heart of three tailwinds: AI, cloud, and security spending. These are essential today in the age of artificial intelligence, where every workload must be secured. So we are very proud that we were the largest shareholder in the company. And yes, I think it is at least [the] Deal of the month.

Rebecca: So how much time has passed? When did you initially invest in Wiz? Because this is the kind of exit that I’m sure investors dream of.

Shardul: Is it six years or 16, a question for us internally. About 10 years ago, I joined the board of Assaf, Roy and Amy’s first company, Adlum. So we got a front row seat to how they make decisions, how they develop trust and how it has evolved over time.

Assaf called me on my birthday when he started Waze. And the seed round was when I joined the board.

Anthony Ha: So, we’ve talked about this deal a few times before on the show, but since Wiz is not a consumer-facing company, I think some of our readers are familiar with it, and some are not. Can you talk a little bit more about what it was – other than just sitting at the intersection of these really important sectors – that you think made Wiz an attractive investment and then ultimately an attractive acquisition target?

Shardul: At Index, the core of our business is people-centric. I really believe that the core of the acquisition was the people. Assaf is this amazing leader who can make quality judgements. He has a great intuition about people and markets. Two of its founders, Ami and Wenon [Costica]almost always in conflict – Ami lives in the future, [Yinon] He is very present, and Assaf has the ability to decide which voice might lead the way at what moment. Roy is an execution machine.

So, together they created this environment and culture of trust that allowed them to build a platform from the beginning and engage with an existing category at an unparalleled speed.

Sean O’Kane: There’s this fun history – interesting for us, especially because we had to push them into it at Disrupt a couple of years ago, where Google approached the company and [Assaf] In fact, walk away from the deal. In that moment, does that ring true to you, as someone who feels like you’ve identified someone that you really believe in and is willing to make a move that I think a lot of people would be afraid to take, faced with such a big departure at that time? Maybe not as big as it is now, but pretty close.

Shardul: Not real. Maybe part of it is because I’m disrespectful and outside validation doesn’t matter, despite my insecurity about you calling this the deal of the week.

I told the founders at one point, I think I believe in them more than I believe in themselves. The first blog I wrote for Index was called “Learning to Say No,” and it was actually directed at the founders of Audible. […] When founders choose and make decisions, you trust inputs, such as how they made the decisions. You don’t really focus on the output and luck affects whether it’s validated or not.

Rebecca: How important was this in the acquisition of Wiz? Basically, they get what they can from Google – money, and access [Google’s] Cloud, more resources, but still able to maintain its sense of command?

Shardul: So, to your point, and maybe for the audience, Wiz aims to secure cloud infrastructure and code in production. Most of their clients are part of the so-called zero-importance club, and they have the context to know what to prioritize and what to act on. Google’s resources, infrastructure, and AI talent allow Wiz to expand this recognition while maintaining a culture of trust and camaraderie.

Anthony: When we think about significant acquisitions, they can be significant in many different ways. It can be transformative for the acquiring company. It can also be transformative for the startup ecosystem because there are a lot of people who will make a lot of money from this. And then that will potentially give rise to entirely new industries, entirely new startups.

So when you think about this as a big acquisition, what do you think will be the biggest impacts over the next few years?

Shardul: I think it starts with inspiration. I believe there is a new imagination of what could be possible for entrepreneurs around the world. This is amazing, isn’t it?

I’m really proud that there are a lot of people whose lives will change as a result of this investment, and that’s really rewarding and fulfilling. But I think what is most important is the talent, skills and aspirations of the entrepreneurs. So we can’t wait to see what the limits are for the next generation.