Alphabet, the parent company of Google, is currently in discussions to acquire cybersecurity startup Wiz for a whopping $23 billion. If this deal goes through, it would mark Alphabet’s largest acquisition to date. The potential acquisition has sparked conversations about how it could impact the venture capital funding landscape.
According to Angela Lee, a professor at Columbia Business School, and founder of angel investor community 37 Angels, the market is in need of a catalyst to boost startup mergers and acquisitions (M&A). The size of the potential acquisition is significant and could potentially kickstart a wave of M&A activity in the startup space, which has been relatively quiet in 2024 compared to previous years.
While the acquisition of Wiz by Alphabet could bring some much-needed momentum to the startup M&A market, it may not necessarily address the liquidity crunch faced by large late-stage startups. The sheer size of the deal is something that only a company like Google can pull off, and it may not set a new trend of startups opting for acquisitions over IPOs.
In addition to potentially revitalizing the M&A market, the deal could also have a positive impact on venture fundraising. With U.S. venture firm fundraising on track to be lower than in previous years, LPs are more cautious about deploying capital. The acquisition of Wiz, a relatively young company, could provide LPs with more confidence in the venture space and encourage them to invest.
The potential acquisition of Wiz could also prompt VCs to start writing checks again. While pitch deck activity has been on the rise, actual deals getting closed have been relatively stagnant. The acquisition of a young, fast-growing company like Wiz could generate excitement in the VC community and lead to increased investment activity.
Overall, while the future of the deal remains uncertain and could face regulatory challenges, it has the potential to inject new life into the venture capital and startup M&A landscape. The impact of the acquisition could be felt across various aspects of the startup ecosystem, from fundraising to deal-making, and could pave the way for a more vibrant and active market in the coming months.
