Outpacing Palo Alto Networks, Wiz’s Valuation Soars 11,000% In 10 Months


The cloud security industry is full of competitors. But if the industry is large and growing fast, a new entrant with the right value proposition can wiz past incumbents.

That’s what Tel Aviv-based Wiz, an Israeli cloud security startup launched by Microsoft

veterans, has done. Since last December, Wiz’s valuation has soared from $500 million to $6 billion.

That 11,000% increase outpaces that of Santa Clara, Calif-based rival, Palo Alto Networks

, whose stock has increased 45% in 2021 as of October 29. Wiz says it is winning nine out of 10 competitive bids — including against Palo Alto Networks which did not respond to my October 28 request for comment.

I expect Wiz to go public in 2022 and if it keeps growing at this rate, it will be one of those rare IPOs in which I would give serious thought to investing. 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 — targets Palo Alto Networks as a competitor to beat.

Palo Alto Networks — which provides cloud security software and hardware — started off the year well. As I wrote in March following my first interview with Wiz CEO Assaf Rappaport, Palo Alto Networks’ fiscal second quarter — ending in January — featured 25% growth to $1.02 billion.

The company’s most recent earnings report for its fiscal fourth quarter ending in July — featured even faster growth and a boost in its forecast for the new fiscal year. According to CNBC, its revenues popped 28% to $1.22 billion.

Palo Alto Networks boosted its revenue forecast for the quarter that ends this month — the midpoint of which — $1.2 billion — is 27% above the year before. For the quarter ending October 2021, Palo Alto Networks expects revenue in the range of $1.19 billion to $1.21 billion — the midpoint of which is $85 million more than analysts’ expectations, according to CNBC.

Wiz — which began operations in February 2020 — is growing rapidly. Wiz — which now employed 180 people as of October 11, according to Pitchbook — bills itself as a service that helps cloud operators stay ahead of the hackers. Its service helps companies to secure their cloud infrastructure at scale.

Wiz is ramping up much faster than other startups generally do. According to Forbes, Index Ventures which invested in the company’s $100 million Series A round last December, it took Wiz less than six months to reach $2 million in annual revenue — way better than the 35 to 40 months the average startup usually requires.

Wiz has kept up the growth. Rappaport told Bloomberg that the company has “tens of millions” in revenue. CTECH reports that Wiz has an annual recurring revenue run (ARR) of $25 million.

Venture capital has poured in sending its valuation higher. In March 2021, Wiz raised another $130 million in a Series B funding which brought its valuation to $1.7 billion. In May 2021, Wiz raised another $130 million in a Series C round and on October 11, Wiz added $250 million more in capital — boosting its valuation to $6 billion, according to PitchBook.

Large, Fast-Growing Market

Why are VCs pouring so much capital into Wiz? In an October 28 interview, Rappaport said, “Venture capitalists see the cloud security market as huge and growing fast — it will double in the next 18 months. They see that there is no incumbent in the industry now and that we have the best opportunity to become the leader — creating a company worth $60 billion to $70 billion.”

Wiz competes with Palo Alto Networks and other rivals in a global cloud management and security market that Gartner predicted this April would grow 26% in 2021 to $18 billion. Driving that growth is the pandemic, which forced a shift to remote work — accelerating the adoption of cloud networks and creating an untapped opportunity to secure them, reported Bloomberg.

Wiz’s Excellent Management Team

Founded in 2020 by Assaf Rappaport, Yinon Costica, Ami Luttwak, and Roy Reznik, Wiz was established by the same team that had worked together in the Israel Defense Forces’s 8200 unit and then founded the firm Adallom, a company sold to Microsoft for $320 million 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 was not a new problem. Everybody was struggling with it. They were already using other solutions. What did we have to offer that was new? We had a unique perspective on a well-known problem. We started it before Covid-19 and it is more exciting today,” he said.

Wiz’s team had experience that would help the company prevail. “Our previous company was acquired by Microsoft. We had startup DNA and five years at [one of the largest cloud providers] in the world and the largest security vendor in the world. We built Azure Security and we are responsible for serving 40,000 developers. We were trying to protect the cloud as part of the largest cloud provider,” he said.

Rappaport summed up his team’s strengths as follows: “Because of our experience building Azure Security, we are in the customers’ shoes and 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 succeed.”

Wiz’s Industry-Leading Customer Value Proposition

Wiz says it is gaining market traction — noting that its customers include 15% of Fortune 500 companies. Wiz’s service helps Blackstone Inc.

and DocuSign “find potential risks related to their use of platforms such as Amazon Web Services and Microsoft Azure,” according to Bloomberg.

Customers choose Wiz over technology from Palo Alto Networks because it takes much less time to protect customers’ cloud networks. That may be why Rappaport told me this week that it wins in 90% of its competitive bidding situations.

A case in point is a competitive win for a very large company which he declined to name. “We won a Fortune 5 client that was using [Palo Alto Networks’] Prisma Cloud. The Fortune 5 company had only gotten 10% to 15% agent deployment after two years. We started working with the company and it got 100% coverage four weeks later,” he told me. 

The difference between the two companies is that Palo Alto Networks uses agents — software that must be installed on every single endpoint — e.g., laptop, PC, smartphone, or tablet — connected to a network.

By contrast, Wiz’s technology is agentless — it gives companies “100% coverage of their cloud environments in minutes by using application programming interfaces (APIs). Scans are performed without any impact on the customer environment, which allows Wiz to scale while requiring minimal maintenance in the long run,” Rappaport explained.

If agentless technology is so much better, why doesn’t Palo Alto Networks make its own version or come up with an even more effective approach? It could be because that would mean back-tracking with its customers on the long-advocated idea that agents are the best solution.

“Palo Alto Networks has spent the last five years telling their customers to use agents. It’s a religion. Why would Palo Alto Networks turn around now and spend $300 million on a team to develop agentless technology? After working at Microsoft, I saw that it is really hard to do innovation in a large organization. Eventually the leader becomes the incumbent and gets undermined,” Rappaport explained.

Investing In The Next Generation Of Cloud Security

Wiz is investing to avoid catching this big company disease.

That starts with providing a solution that works better than competing ones. Wiz’s service does that by giving CISOs a complete view of a company’s cloud networks and highlights their most dangerous security weaknesses. “We highlight the toxic combination — a device with an attack vector, open to Internet services, and exposing sensitive data,” he said.

Wiz is investing the more than $600 million it has raised into marketing, geographic expansion, and new product…


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