Cloud Security Company AceIsrael’s most valuable private company, valued at $12 billion, today announced the acquisition of a unified Israeli security remediation company. Glarewhich was co-founded by CEO Merav Bahat, one of Wiz CEO Assaf Rappaport’s closest friends when they worked together at Microsoft. Both entrepreneurs, Rappaport and Bahat, have invested in each other’s businesses and share common investors, including Gili Raanan’s Cyberstarts, Insight Partners and Index Ventures, all of whom derive value from this deal.
No financial details have been disclosed about the size of the transaction, but sources estimate that Wiz would pay $450 million in cash and Wiz stock. This is close to the valuation given to Dazz 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 of the company’s investors. This also shows that Dazz has had to raise huge sums of money to finance its growth. Additionally, the fact that its latest funding round was from existing investors indicates that increasing the company’s valuation from $220 million in 2021 to $400 million this summer was not necessarily expected to happen. done with the consent of a new investor. The fact that a significant portion of the deal is in exchange for Wiz stock indicates that investors have confidence in Wiz’s continued growth, but also that Wiz needs the cash it has raised to continue its growth.
There is also great business logic behind this 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 enterprise data security managers to simply connect cloud applications – such as Salesforce, HubSpot or Microsoft – and secure them, Dazz’s platform identifies security weaknesses in developed applications within these organizations and helps secure them.
Wiz recently raised $1 billion in acquisitions to become a platform offering a broader range of cloud cybersecurity products and 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 modest sum, and Gem Security for $350 million. The two companies work together and have teams that collaborate with each other, although Dazz also works with competitor Palo Alto Networks, and will likely continue to do so even after the acquisition. Last July, the two CEOs Bahat and Rappaport hosted a gala dinner for the American cybersecurity industry in Salt Lake City.
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Although the two companies are synergistic, it is not clear whether due diligence was conducted in which Wiz scanned the market for companies that could be acquired in the segment in which Dazz operates, nor if Dazz undertook the reverse process. The companies did not respond to « Globes » regarding possible due diligence prior to the acquisition.
Dazz began sales in 2022 and achieved multi-million dollar sales last year. The company’s annual revenue rate (ARR) reportedly crossed the $10 million mark earlier this year. Assuming ARR is around $15 million, the acquisition represents a 30x sales multiple. Representatives for Wiz and Dazz declined to provide Globes with financial details of the deal. Dazz declined to provide details on its sales and valuation.
The main beneficiaries of the deal are early investors Greylock and Cyberstarts, one of Wiz’s main investors, which invested $10 million in Dazz in its early days, at a valuation of $16 million. Insight Partners also holds a similar stake after leading the company’s second funding round in 2021. Insight Partners sold a significant stake in Wiz earlier this year as part of its efforts to raise its 13th fund, reportedly after negotiations for its acquisition by Google for $23. billions went down the drain.
Each of the three funds is estimated to own around 15% of Dazz, while other investors such as Index and private investors like Assaf Rappaport himself are expected to own another 20%. Founders Bahat, along with Tomer Schwartz and Yuval Ofir, are estimated to own about 20% of Dazz’s shares, and the 125 employees (50 of whom are in the United States) will reap more than $60 million from the 15% that they own. they hold. . This represents an average of $500,000 per employee.
Bahat does not come from the same background that most cybersecurity experts in Israel come from. She did not serve in the 8200 or any of the IDF’s elite intelligence units. Bahat was born in Beersheba and served in the IDF’s Givati Division, before enrolling in industrial engineering and management studies at the Technion. She has held product leadership positions at companies such as Comverse and at communications company Flash Networks, where she was chief product officer.
The turning point in her career began when she became a product director in Microsoft Israel’s cloud security group, where she worked alongside Rappaport, who was responsible for cybersecurity in Israel – a division created after the acquisition of ‘Adallom, the startup he founded, by Microsoft. Rappaport became Microsoft Israel’s general manager of R&D and Bahat became his deputy, both reporting separately to heads of Microsoft’s U.S. cloud division, including Bharat Shah, then Microsoft vice president and head of cloud operations. Azure. Rappaport left his position in early 2020 to found Wiz, while Bahat stayed until the end of the year and then left to found Dazz. Bahat and Rappaport continued to maintain good relations even after Microsoft. Bahat invested a modest amount in Wiz when it was founded, while Rappaport later invested in Dazz.
Wiz has walked away from its major acquisition by Google in order to pursue an IPO. It said it wanted to become a billion-dollar company. Meanwhile, Wiz is still a company without a senior, experienced CFO, doing deals that in the publicly traded world would be called « interested parties » simply because they share a long list of common investors. Highly placed sources in the cybersecurity industry say a company considering an IPO must work with greater transparency to the public and media. Both companies are incorporated in Delaware in the United States and operate R&D offices in Israel.
Bahat rejects any criticism of the acquisition. “The deal arose from requests from mutual clients,” she told Globes. « Instead of dealing with two suppliers, they will now deal with one company. Of course, our investors, like Gili Raanan, know the details of the deal, but none of them ‘insisted’ on it happens – the deal is good and will serve customers, investors and founders. The relationship between Dazz and Wiz is very professional and based on the appreciation of their team, which is exceptional.
Bahat earlier said in a press release: “Exposure management and remediation is the top priority for cybersecurity teams across the industry, from Fortune 500 companies to high-growth enterprises. Our team’s commitment to meeting real customer needs, combined with unparalleled technology, has resulted in Dazz’s hypergrowth over the years. We have revolutionized this space with innovations focused on prioritization, root cause analysis, and remediation capabilities of AI. We are now excited to join Wiz for. continue the shared mission of simplifying cloud remediation, while together creating the global leader in cybersecurity.
Rappaport said: “Wiz has always been committed to empowering organizations to truly improve their security posture, not only to report risks, but also to prioritize and resolve them. Dazz is a powerful addition to Wiz’s mission, bringing a cutting-edge solution that has gained strong market momentum through relentless innovation and AI-driven capabilities. The talented Dazz team has already worked closely with Wiz, and we are excited to bring this unified offering to our customers, marking a new era in application security. and vulnerability management.
Published by Globes, Israel Business News – fr.globes.co.il – November 21, 2024.
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