Last month, rumours swirled about Google’s $23 billion offer for cloud security startup Wiz, potentially the most lucrative offer ever for a startup. Though the deal fell through, it raises questions about how such deals are made and why startups choose to sell or stay independent.
Factors in Play
1. Seriousness of the Offer: For private companies like Wiz, offers are usually exploratory initially due to limited public financial information.
2. Strategic Fit: Startups must evaluate if the combined entity is beneficial and how it affects employees and products.
3. Economics: The financial terms must make sense for shareholders. For Wiz, the offer was reportedly 46 times its current ARR, but they chose to remain independent.
Insights from Jyoti Bansal
Jyoti Bansal, founder of Harness and former CEO of AppDynamics, shared his experience with acquisition offers. When Cisco bought AppDynamics for $3.7 billion just before its IPO, Bansal faced multiple offers and intense negotiations. The decision balanced risk and reward for shareholders.
The Decision Process
Deciding to sell involves polling investors, executives, and board members, each with different interests. For AppDynamics, the looming IPO deadline and a good offer tipped the scales in favor of selling.
Regrets and Reflections
Despite the success, Bansal wonders what AppDynamics could have achieved post-IPO during the tech boom years. Similarly, Wiz might face future regrets if it doesn’t grow into its potential value.
While the Google-Wiz offer remains a rumour, it highlights the high stakes and complex decisions behind major tech acquisitions.
