Wiz buys Israeli cybersecurity co Dazz for $450m

Cloud security company WizIsrael’s most valuable private company valued at $12 billion, announced today that it has acquired a consolidated Israeli security processing company. dazzlewhich was co-founded by CEO Merav Pahat, one of Wiz CEO Assaf Rappaport’s closest friends since they worked together at Microsoft. Both entrepreneurs, Rappaport and Bhatt, have invested in each other’s companies and share co-investors including Gili Raanan’s Cyberstarts, Insight Partners, and Index Ventures who are all gaining value from this deal.

No financial details about the size of the deal were revealed but sources believe Wiz will pay $450 million in cash and Wiz shares. That’s close to the valuation Dazz got when it raised $50 million in July from existing investors. Dazz has raised $110 million since its founding four years ago, so that’s a reasonable return for most investors in the company. It also shows that Dazz had to raise huge sums of money to fund its growth. In addition, the fact that the latest round was from existing investors suggests that the increase in the company’s valuation from $220 million in 2021 to $400 million this summer did not have to be approved by a new investor. Having a significant component of the deal in exchange for Wiz shares indicates that investors have confidence in Wiz’s continued growth, but also that Wiz needs the funds it has raised for further growth.

There’s also a lot of business logic behind the deal. The two companies share common clients such as Priceline and Blackstone, and serve the same security teams at the tech giants. While Wiz has built a platform that allows data security managers at companies to simply connect cloud applications — such as Salesforce, HubSpot, or Microsoft — and secure them, Dazz’s platform identifies security vulnerabilities in applications developed within those organizations and enables them to be secured.

Wiz recently raised $1 billion in acquisitions to become a platform offering a wide range of cybersecurity products for the cloud and to compete with larger competitors like Palo Alto Networks and CrowdStrike. To that end, it acquired two Israeli companies earlier this year: Raft for a seemingly small sum, and Game Security for $350 million. The two companies work together and have teams that collaborate with each other, though Dazz also works with competitor Palo Alto Networks, and will likely continue to do so, even after the acquisition. Last July, CEOs Bhatt and Rapaport hosted a dinner for the US cybersecurity industry in Salt Lake City.

Although the two companies are collaborating with each other, it is unclear whether due diligence was conducted as Wiz scanned the market for suitable companies to acquire in the sector in which Dazz operates, nor is it clear whether Dazz did the reverse process. . The companies did not respond to Globes regarding any due diligence procedures prior to the acquisition.

Dazz began sales in 2022, generating millions of dollars in revenue last year. The company’s annual rate of revenue (ARR) is believed to have crossed the $10 million mark earlier this year. Assuming an ARR of approximately $15 million, the acquisition is at a multiple of 30 times sales. Representatives for Wiz and Dazz declined to provide the Globes with financial details about the deal. Dazz declined to provide details about its sales and valuation.

The biggest beneficiaries of the deal are early investors Greylock and Cyberstarts, one of Wiz’s dominant investors, who invested $10 million in Dazz in its early stage, at a valuation of $16 million. Insight Partners also holds a similar stake after leading the company’s second round of funding in 2021. Insight Partners sold a significant stake in Wiz earlier this year as part of its efforts to raise its 13th fund, apparently after negotiations over its acquisition by Google for 23 $. A billion fell through.

Each of the three funds is estimated to own about 15% of Dazz, while other investors such as Index, and private investors such as Assaf Rappaport himself are estimated to own another 20%. Founders Bahat, along with Tomer Schwartz and Yuval Ofir, are expected to own about 20% of Dazz shares, and it is estimated that the 125 employees (50 of whom are in the US) will receive more than $60 million from the 15% they own. This means an average of $500,000 per employee.

Bahat does not come from the same background as most cybersecurity experts in Israel. She did not serve in 8200 or any of the elite intelligence units of the IDF. Bhat was born in Beersheba, and served in the Givati ​​Division of the Israel Defense Forces, before enrolling to study industrial engineering and management at the Technion. She has held senior product management positions at companies such as Comverse, and telecommunications company Flash Networks, where she was director of product.

The turning point in her career began when she became a product manager in Microsoft Israel’s Cloud Security group, where she worked alongside Rappaport, who was head of cybersecurity in Israel — a division created after Microsoft acquired Adallom, the startup he founded. Rappaport became general manager of Microsoft Israel R&D and Bhatt became his deputy with both reporting separately to managers of Microsoft’s U.S. cloud division, including Bharat Shah, who was then Microsoft’s vice president and head of its Azure cloud operation. Rapaport left his position in early 2020 to found Waze, while Bhatt stayed until the end of the year and then left to found Daz. Bhatt and Rapaport continued to maintain good relations even after Microsoft. Bhatt invested a modest amount in Wiz when it was founded, while Rappaport later invested in Dazz.

Wiz has pulled out of Google’s major acquisition, in order to proceed with an IPO. She claimed that she wanted to become a company with annual revenues of $1 billion. Meanwhile, Wiz remains a company without a senior and experienced CFO, executing deals that in the public trading world are called “party-in-interest,” simply because it shares a long list of co-investors. High-level sources in the cybersecurity industry say a company planning an IPO must operate more transparently toward the public and the media. Both companies were incorporated in Delaware in the United States and operate R&D offices in Israel.

Baht denies any criticism of the takeover. “The deal was born out of requests from mutual clients,” she told Globes. “Instead of dealing with two suppliers, from now on they will deal with one company. Of course, our investors, like Gilly Ranan, are aware of the details of the deal, but none of them “pushed” to complete it – the deal is good and will serve customers, investors and founders, and the relationship between Dazz and Wiz is professional Very appreciative of their team, which is exceptional.

Earlier, Bhatt said in a press release, “Managing and remediating exposure is a top priority for cybersecurity teams across the industry, from Fortune 500 companies to high-growth enterprises. Our team’s commitment to solving real customer needs, along with Unparalleled technology, to Dazz’s exponential growth over the years we have revolutionized the industry with innovations focused on prioritization, root cause analysis and AI remediation capabilities. Now, we are excited to join Wiz in pursuing the shared mission of Simplifying cloud processing, while building the world’s leading cybersecurity company together.”

“Wiz has long been committed to enabling organizations to truly improve their security posture – not just to report risks, but to prioritize and resolve them,” Rappaport said. “Dazz is a strong addition to Wiz’s mission, offering an industry-leading solution that has gained strong market traction from Through continuous innovation and AI-driven capabilities, the talented team at Dazz has already collaborated closely with Wiz, and we are excited to bring this unified offering to our customers, marking a new era in security and vulnerability management.”

Published by Globes, Israel Business News – en.globes.co.il – on November 21, 2024.

© Copyright Globes Publisher Itonut (1983) Ltd., 2024.