Consolidation continues apace in the security world. Sources tell us that Lacework – a cloud security startup valued at $8.3 billion after funding in its latest funding round – is in talks to be acquired by another security player, Wiz, for a price of between 150 and 200 million dollars only.
Sources close to the negotiations said the two companies had already signed a letter of intent and described the status of the negotiations as “somewhere in the middle.” In other words, the acquisition is not yet finalized and the transaction could still fail. Although both work in the broader cloud security space, sources tell us there is relatively little competitive overlap between the two companies, so it would likely be a technology acquisition play more talent, more customers. We are still trying to find out more about the terms of the deal, for example if it would be stock, cash or a mix.
Wiz has repeatedly stated that it is seeking to reach $1 billion in annual recurring revenue before its IPO. We understand that its soft deadline is late 2025, but given that it announced an ARR of only $350 million in February 2024, the company needs to be aggressive in achieving this. Laceworks, we estimate, has an ARR of around $100 million.
The Information also reported some of the above details today.
The agreement highlights a two-part story.
Part 1: Security startups continue to attract a lot of funding attention, but some companies that have achieved high valuations in recent years are struggling to justify those numbers and are considering their options as they are nearing the end of their funding period.
From what we understand, Laceworks investors – the longest list includes Snowflake Ventures, GV, General Catalyst, Tiger Global and many others – were shopping the company around to potential buyers, i.e. is how Wiz entered the frame.
Laceworks, it should be noted, is not the only security company to suffer a valuation downgrade. Last week, TechCrunch reported that Noname was in talks to be acquired by Akamai for $500 million, after last being valued at $1 billion.
Second part: Other actors emerge as consolidators in this process. Wiz, valued at around $10 billion, is one of them.
The company is positioning itself as a one-stop shop for all things cloud security heading into its IPO. Earlier this month, Wiz acquired Gem Security for $350 million, and it looks like the M&A won’t end with Laceworks.
“Wiz has experienced unprecedented organic growth since its inception, and we are committed to pushing that growth even further,” a Wiz spokesperson said in a statement provided to TechCrunch. “At the same time, we recognize that consolidation is the future of the security industry and are therefore actively engaged in discussions with companies across the industry. We are always exploring exciting M&A opportunities that will enhance both our technological capabilities and business expansion, as we strive to build the world’s leading cloud security platform.
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