The cloud security industry is full of competitors. But when the industry is big and growing rapidly, a newbie with the right value proposition can blow away earlier established companies.
That’s what Tel Aviv-based Wiz, an Israeli cloud security startup launched by Microsoft, is all about
That 11,000% increase beats that of Santa Clara, California-based rival Palo Alto Networks
I expect Wiz to go public in 2022, and if it continues to grow at this rate it will be one of those rare IPOs that I would seriously consider investing in. Here are four reasons:
- Large, fast growing market
- Excellent management team
- Industry leading customer value proposition
- Investing in the next generation of cloud security
(I have no financial interest in the securities mentioned in this post).
Wiz and Palo Alto networks
Wiz – which competes in the cloud security market – is targeting Palo Alto Networks as a competitor to be beaten.
Palo Alto Networks – provider of cloud security software and hardware – started the year well. As I wrote after my first interview with Wiz CEO Assaf Rappaport in March, the second quarter of Palo Alto Networks’ fiscal year – which ended in January – saw growth of 25% to $ 1.02 billion.
The company’s most recent earnings report for the fourth quarter of its fiscal year ending July included even faster growth and an upgrade to its guidance for the new fiscal year. Sales rose 28% to $ 1.22 billion, according to CNBC.
Palo Alto Networks has raised its revenue forecast for the quarter ending this month – the median of $ 1.2 billion is 27% higher than last year. For the quarter ending October 2021, Palo Alto Networks expects revenue in the range of $ 1.19 to $ 1.21 billion – the mean is $ 85 million above analysts’ expectations, according to CNBC.
Wiz – which started operations in February 2020 – is growing rapidly. Wiz – which now had 180 employees on October 11, according to the Pitchbook – bills itself as a service that helps cloud operators stay one step ahead of hackers. His service helps companies secure their cloud infrastructure on a large scale.
Wiz boots up a lot faster than other startups in general. Corresponding Forbes, Index Ventures, which invested in the company’s $ 100 million Series A round last December, took Wiz less than six months to hit $ 2 million in annual sales – much better than the 35-40 Months that an average startup normally needs.
Wiz has continued to grow. Rappaport told Bloomberg that the company had “ten million” sales. CTECH reports that Wiz has annual recurring revenue (ARR) of $ 25 million.
Venture capital is pumped up to increase its rating. In March 2021, Wiz raised an additional $ 130 million in Series B funding that raised its valuation to $ 1.7 billion. In May 2021, Wiz raised an additional $ 130 million in a Series C round, and on October 11, Wiz added an additional $ 250 million – bringing its valuation to $ 6 billion, according to PitchBook.
Large, fast growing market
Why are VCs investing so much capital in Wiz? In an October 28 interview, Rappaport said, “Venture capitalists see the cloud security market as huge and rapidly growing – it will double in the next 18 months. You can see that there is currently no established player in the industry and that we have the best chance of becoming a market leader – creating a company worth $ 60 billion to $ 70 billion. “
Wiz competes with Palo Alto Networks and other competitors in a global cloud management and security market that Gartner forecast in April this year would grow 26% in 2021 to $ 18 billion. This growth is driven by the pandemic that forced a shift to remote work – accelerating the adoption of cloud networks and creating a wasted opportunity to secure them, Bloomberg reported.
The excellent management team at Wiz
Founded in 2020 by Assaf Rappaport, Yinon Costica, Ami Luttwak and Roy Reznik, Wiz was founded by the same team that worked in the 8200 unit of the Israel Defense Forces and then founded Adallom, a company that sold for US $ 320 million Dollar was sold to Microsoft in 2015. The group also built Microsoft’s Azure Cloud Security Group to $ 1.5 billion in revenue, Rappaport told me in February.
Wiz knew it was targeting a crowded market. “Cloud security wasn’t a new problem. Everyone struggled with it. You were already using other solutions. What did we have to offer? We had a unique perspective on a known problem. We started before Covid-19 and today it’s more exciting, ”he said.
The Wiz team had experience that would help the company catch on. “Our previous company was taken over by Microsoft. We had startup DNA and had been with for five years [one of the largest cloud providers] in the world and the largest security provider in the world. We developed Azure Security and are responsible for the support of 40,000 developers. We tried to protect the cloud as part of the largest cloud provider, ”he said.
Rappaport summarized the strengths of his team as follows: “Due to our experience in building Azure Security, we are in the position of the customers and we know the pain of the Chief Information Security Officer (CISO). This is not our first startup. We have the talent, the venture capitalists and the money to be successful. “
Wiz’s industry-leading customer value proposition
Wiz says it’s gaining traction in the marketplace – noting that its customers include 15% of Fortune 500 companies. Wiz’s service helps Blackstone Inc.
Customers choose Wiz over Palo Alto Networks technology because it takes much less time to protect customers’ cloud networks. Maybe that’s why Rappaport told me this week that it wins 90% of its competitive situations.
A typical example is a competition win for a very large company that he did not want to name. “We won a Fortune 5 client that used [Palo Alto Networks’] Prism cloud. The Fortune 5 company had only achieved 10 to 15% agent use after two years. We started working with the company and four weeks later it was 100% covered, ”he told me.
The difference between the two companies is that Palo Alto Networks uses agents – software that needs to be installed on every single endpoint – e.g. laptop, PC, smartphone, or tablet – that is connected to a network.
In contrast, Wiz’s technology is agentless – it gives organizations “100 percent coverage of their cloud environments in minutes using application programming interfaces (APIs). Scans are performed with no impact on the customer environment, which enables Wiz to scale and require minimal maintenance over the long term, ”explains Rappaport.
If agentless technology is so much better, why isn’t Palo Alto Networks developing its own version or an even more effective approach? This could be because doing a backtrack with its customers on the long-held idea that agents are the best solution.
“Palo Alto Networks has spent the last five years asking its customers to use agents. It’s a religion. Why should Palo Alto Networks now turn back and spend $ 300 million on a team to develop agentless technology? After working at Microsoft, I saw that it is really difficult to innovate in a large company. Eventually the leader becomes the incumbent and is undermined, ”explained Rappaport.
Invest in the next generation of cloud security
Wiz is investing to avoid this big corporation sickness.
It starts with delivering a solution that works better than competing ones. Wiz’s service does this by giving CISOs a complete view of a company’s cloud networks and highlighting their most dangerous security vulnerabilities. “We highlight the toxic combination – a device with an attack vector that is open to Internet services and reveals sensitive data,” he said.
Wiz is investing the over $ 600 million in marketing, geographic expansion and new product development. Rappaport told me: “The demand is huge and we win nine out of ten bids. If we get more at-bats, we will get more revenue. To this end, we will build up our marketing team and target new regions. “
Wiz will also invest in research and development. “We will continue to drive innovation in cloud security by working with design partners. I don’t know the answers – customers can help us find them. We will ask, “What are the holes in our line of products? What else do you need?’ Our engineers are more innovative and will take a step forward, ”he concluded.
Insight Partners, a leading Wiz investor, sees a bright future for the company. Jeff Horing, Co-Founder and Managing Director of Insight Partners, told Bloomberg, “Wiz’s growth in the enterprise market is amazing. When you have a proven leadership team like this one that has created a groundbreaking product, you can place big bets. Wiz builds security technology that the world needs. “
When Wiz hits that $ 70 billion valuation, Horing will have a big payday.