Consolidation is happening rapidly in the security world. Lacework, a cloud security startup whose previous funding round had a post-money valuation of $8.3 billion, is in talks to be acquired by another security company, Wiz, for just $150 million to $200 million, according to sources. It is said that
A person close to the negotiations said the two companies have already signed letters of intent and that the status of negotiations is “somewhere in the middle.” That means the acquisition is not yet complete and the deal could still fall through. While both companies are working on the broader field of cloud security, sources said there is relatively little competitive overlap between the two companies, and the deal is likely to revolve around technology, talent and customer acquisition strategies. That's it. We are still working out further terms of the transaction, including whether it will be inventory, cash or a mix.
Wiz has stated numerous times prior to its IPO that it aims to reach $1 billion in annual recurring revenue. We understand that the soft deadline is the end of 2025, but considering the ARR announced in February 2024 is only $350 million, the company will aggressively increase its amount to get there. need to do it. We understand that his ARR for Raceworks is around $100 million.
The Information reported some of the above details today.
The deal emphasizes a two-part story.
Part 1: Security startups continue to attract funding attention, but some companies that have reached high valuations in recent years have struggled to justify their numbers and are struggling to raise funding. As we near the end of the runway, we are considering our options.
From what we understand, Laceworks' investors (a long list that includes Snowflake Ventures, GV, General Catalyst, Tiger Global, and others) were shopping around for potential buyers. This is how Wiz joined the slot.
It's worth noting that Laceworks isn't the only security company whose valuation has been significantly reduced. Just last week, TechCrunch broke the news that Noname was in talks to be acquired by Akamai for $500 million, with a final valuation of $1 billion.
Part 2: Other players are emerging as integrators of this process. Wiz, valued at about $10 billion, is one of them.
In the run-up to its IPO, the company is positioning itself as a one-stop-shop for all things cloud security. Wiz acquired Gem Security for $350 million earlier this month, but it looks like the M&A isn't going to end with Laceworks.
In a statement provided to TechCrunch, a Wiz spokesperson said, “Wiz has experienced unprecedented organic growth since its inception, and we are dedicated to further driving this growth.” . “At the same time, we recognize that integration is the future of the security industry, which is why we are actively talking with companies across the industry. We strive to build the world's leading cloud security platform. However, we are always looking for attractive M&A opportunities to strengthen both our technological capabilities and business expansion.”
Founded nearly nine years ago and based in San Jose, California, Lacework has raised more than $1.8 billion from investors over the years. Most of that funding ($1.3 billion) is related to a round in late November 2021 that valued the company at $8.3 billion at the time.