The cybersecurity startup darling Wiz made waves earlier this year when it passed on a $23 billion acquisition bid by Google, opting to remain independent and instead prepare for a future IPO. Wiz’s thinking is understandable. It claims to be the fastest startup to hit $100 million in annual recurring revenue, a figure that now reportedly sits around $500 million. In October, co-founder Roy Reznik aimed his sights even higher: $1 billion in annual recurring revenue in 2025 .
Just about any investor might be salivating at the prospect of getting their hands on Wiz shares if it goes public. Wiz, after all, counts 40 percent of the Fortune 500 as customers. But a new report by Forbes digging into Wiz’s first venture capital backer, Cyberstarts, should temper this optimism since the piece casts doubt around how the startup has raised so much revenue so quickly.
It’s a question that should be on the minds of potential investors, and, perhaps, federal regulators if Wiz moves forward with an IPO next year.
The Forbes article sheds light on Sunrise, an advisory network of chief information security officers (CISOs) convened by Cyberstarts that industry investors, entrepreneurs, and security executives told Forbes represents a major conflict of interest. That’s because Sunrise members, which counted CISOs from major corporations including Kraft Heinz, Colgate-Palmolive, and Fidelity among its ranks, could receive payouts of up to $250,000 from Cyberstarts’ funds for their participation in the program, according to Forbes.
The ethical concerns are clear. These CISOs, charged with making the most sensitive and critical security decisions for their employers, were potentially incentivized to recommend six- and seven-figure corporate cybersecurity contracts to Cyberstarts portfolio companies, including Wiz. While the Forbes report does not make specific allegations of pay-to-play contract arrangements, it did note that at least eight corporations with executives involved with the Sunrise program, such as Chipotle, signed contracts with Cyberstarts companies.
Cyberstarts denied any wrongdoing and it shut down Sunrise’s compensation program.
Putting aside the potential corporate ethics issues surrounding Sunrise, the Forbes investigation raises significant questions about the genesis of the eye-popping revenue figures Wiz has boasted about for years. One venture capitalist even told Forbes that their firm removes Sunrise-affiliated revenue from their assessments of Cyberstarts portfolio companies, saying, “You have to figure out what’s been force-fed.”
It all raises the question: Are Wiz’s revenues simply borne from a great product that has swept the industry? Or are they the result of a competitive advantage “force-fed” by financial incentives handed to security decision-makers at some of the world’s largest companies?
Wiz CEO-Assaf Rappaport As Wiz continues to dominate the discussion of the cybersecurity software industry, it’s a question the media should be putting to Wiz’s leadership any time company leaders tout its revenue benchmarks. And it’s a question that any company considering doing business with Wiz should be asking.
Most importantly, it’s one that investors — and regulators — should have ready if Wiz seeks to go public in the future.
Dr. Carl B. Mack is former executive director of the National Society of Black Engineers.
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