The Wall Street Journal reported that Alphabet, the parent company of Google is in advanced talks to buy cybersecurity start-up Wiz for $23 billion(Acquisition). The deal’s discussions might extend into next week according to TOPCLAPS sources.
Why This Deal Matters
Once through, this acquisition would be Alphabet’s largest ever purchase as well as a significant exit for a startup in a slow M&A environment. It could potentially affect venture and startup environment in several ways, both anticipated and unexpected.
A Potential Game Changer for the M&A Market Acquisition
According to Angela Lee who is an angel investor community 37 Angels’ founder and Columbia Business School professor, Alphabet’s purchase of Wiz is a potential catalyst for the startup M&A market. Sizeable scale of the acquisition has been emphasized by Lee as one possible way forward regarding over taking prevailing hesitation felt among market participants.
State Acquisition Of The Current M&A Market
PitchBook data shows that there were 356 start-up acquisitions in America during H1 2024 which means that it may not outpace last year’s total of 771 deals by the end of this year as per Pitchbook data noted by Angelina Lee. It is unlikely to significantly influence the liquidity problems experienced by large late-stage start-ups according to her perception.
Implications for Venture Fundraising
The potential acquisition could positively influence venture fundraising. U.S. Venture firm fundraising is expected to fall below 2023’s total of $81.5 billion. Which was already a 57.4% drop from 2022. Brian Borton, a VC and growth equity partner at StepStone, pointed out that venture funds hold company stakes longer than any other asset class, creating hesitancy among LPs amid the current lack of exits.
Impact on Exit Timelines and Fundraising Leverage
Lee suggested that the acquisition could reduce exit timelines by volume, potentially enticing LPs back into the market and giving VCs more leverage when fundraising. The deal, given Wiz’s young age of just 4 years, could contrast sharply with the average age of late-stage startups in the U.S., which is over 12 years, according to PitchBook data.
Driving Investment Activity
A successful acquisition of Wiz might encourage VCs to resume investing actively. DocSend reported a significant increase in pitch deck activity in Q2 2024, despite limited deal closures. Lee posited that the acquisition of a young, rapidly growing company like Wiz could generate excitement and momentum, unlike deals involving older startups.
Conclusion and Future Outlook Acquisition
While the future of the deal remains uncertain, with potential antitrust challenges and the possibility of it not happening at all, its completion could provide the necessary impetus for revitalizing the venture market. If successful, this acquisition might be the key to sparking renewed activity and optimism in the startup and venture capital ecosystem.
