Layoff stories have dominated the tech world over the past year amid rising interest rates, inflation and fears of economic turmoil. Even in a growth area like cloud computing, businesses are spending less.
Don’t tell Wiz.
The cybersecurity software vendor said in August that it hit $100 million in annual recurring revenue after just a year and a half of selling its products. Nine months later, the revenue figure hit $200 million.
Wiz’s technology uncovers vulnerabilities hidden in public clouds as companies shift data storage and computing needs to amazon, Microsoft and Google. The accelerated shift to cloud computing has boosted the adoption of security software that can identify where hackers can launch attacks.
Far from laying off staff, the 700-person startup Announce In February, it raised $300 million at a $10 billion valuation.Its client list now includes chili sauce, Colgate-Palmolive, Morgan Stanley and snowflake.
“For us, it’s still an infinite market,” Wiz co-founder and CEO Assaf Rappaport told CNBC. “The opportunity is still huge, so we can still grow triple digits every year, even with a downturn and a potential recession.”
Wiz’s strong growth propelled the three-year-old company to CNBC’s 2023 Disruptor 50 list at No. 5, the highest of the five cybersecurity companies on this year’s list. The others are Vanta at No. 17, Arctic Wolf at No. 22, Orca Security at No. 24 and Snyk at No. 40.
With offices in Israel, New York, and Denver, Wiz is capitalizing on a secular trend in technology.Over the past decade, giant corporations such as Goldman Sachs and walmart Increasing willingness to push critical data and workloads to the cloud. The same goes for large government entities like the CIA and the Food and Drug Administration.
What started as a playground for startups has become the status quo in IT departments. This shift has accelerated during the pandemic as companies have had to adapt quickly to remote work.
Older security companies such as Palo Alto Networks and Rapid7 have expanded their portfolio to focus on securing the cloud.
But it’s not just a matter of being in the right place at the right time. Even Wiz’s competitors have to contend with a more spendthrift customer base. In February, Rapid7 Chief Executive Corey Thomas told analysts on a conference call that executives were finding it harder to free up money for security projects and that deals were taking longer to close.
Elsewhere in security software, the market is more challenging. Cybereason is one of the top companies in endpoint protection, having made the Disruptor 50 list in each of the past two years. However, the company slashed its valuation by 90% in April from a peak of $2.7 billion in a new funding round after laying off hundreds of jobs and abandoning talks to go public last year. According to Axios. Other security vendors, including Sophos and Snyk, also announced layoffs.
There is also no buying sentiment among public investors. The Global X Cybersecurity exchange-traded fund has fallen 16 percent over the past 12 months, underperforming the S&P 500, which was roughly flat over the period.
As a highly valued startup, Wiz is enjoying a venture-backed growth phase highlighted by excessive sales and marketing spend, Rapid7’s Thomas said in an interview. That period generally doesn’t last longer than three to four years, he said.
“You can’t do this indefinitely,” Thomas said. “You have to have a stable business model.”
A Wiz spokesperson told CNBC that the company emphasized “smart growth” over profitability, and said sales and marketing expenses were low compared to revenue. Rappaport said Wiz’s growth has been driven by word of mouth, as users tell other users about the software.
Regardless of what Thomas thinks of Wiz, his company added the startup to its list of competitors in February, tying it to Palo Alto NetworksThomas said the market is young and still evolving.
“People are just starting to secure the cloud now,” he said. “We won some, we lost some.”
Rappaport called Palo Alto Networks, which has a product called Prisma Cloud, the best place for his company to get business.
“Probably the product we’ve replaced the most is Prisma Cloud,” Rappaport said, adding that it wasn’t a price war because Wiz “is usually priced higher than any other product.”
Much of Palo Alto’s expansion into cloud computing has come through acquisitions, which CEO Nikesh Arora has allocated more than $3 billion in recent years to build his company’s presence in the space. Rappaport said that while he respected the strategy, the result was a “Frankenstein mashup.”
“They’re still figuring out how to make it a single platform,” Rappaport said.
Ankur Shah, senior vice president of Palo Alto Networks, defended his company’s technology and said Wiz is not the right choice for customers who want to protect their assets.
“Wiz is all about visibility,” Shah said. “Good visibility. Better security.”
A spokesperson for Wiz disputed that notion, saying the company’s technology “helps organizations detect, prioritize, prevent and remediate issues.”
While Wiz is gaining traction with industry stalwarts, it still has a long way to go. Palo Alto Networks is the best-positioned cloud security vendor for 28 percent of respondents to KeyBanc’s Q1 survey of technology resellers and channel partners, while 24 percent chose Microsoft and 4 percent chose Got Wiz.
A big way Wiz gained popularity so quickly was by spotting potential problems involving mass-market software. In March, Wiz disclosed a vulnerability in Microsoft’s Azure Active Directory login service that could allow attackers to change the results people see in Microsoft’s Bing search engine. Microsoft fixed the issue and said “no unexpected access occurred.”
Wiz also has set up many kinds of weakness In Microsoft’s Azure cloud infrastructure, the company knows the product well because many of its customers use it. Rappaport also knows Microsoft well, having sold his previous security startup, AdalonAcquired from the company in 2015 for $320 million.
Microsoft’s strength, Rappaport said, is its expertise in quickly assessing threat risk and hiring the right team to counter it.
“They have the most scars on their hands,” he said.
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