From Waze to Wiz: How Google learned to love Israeli tech

Would you turn down $23 billion from Google’s parent company, Alphabet?

Last summer, the four Israeli founders of cloud security unicorn Wiz did just that, opting to seize a once-in-a-lifetime opportunity to build the largest cyber firm in the world and go public.

That changed on Tuesday when Google flipped the digits from $23 billion to $32 billion – a sweetened offer that the founders found hard to refuse. The cyber unicorn they created just five years ago will now make them multibillionaires.

For mobile mapping and navigation app Waze co-founder Uri Levine, the biggest exit of an Israeli-founded firm in the country’s history was a deja vu moment. Twelve years ago, when Google set its sights on Waze, the founders of the navigation app turned down the search giant’s initial $400 million takeover offer in January 2013 as they thought they could do better, Levine wrote in his handbook for entrepreneurs, “Fall in Love With the Problem, Not the Solution.”

Following a blast of publicity around the takeover attempt that lured a bid from Facebook, Google more than doubled its offer six months later and the deal was sealed within 10 days in June 2013 for $1.15 billion, the largest sum ever paid for an Israeli-developed mobile consumer app.

“I was not surprised that Google came back with another offer,” Levine told The Times of Israel this week. “Maybe it’s even something they have learned as a way to negotiate.”

“If we look at the evolution of the Israeli ecosystem from Waze to Wiz, then this is pretty dramatic — Waze set the direction, and Wiz is doing it big time,” Levine remarked.

While the price tag for Wiz is almost 30 times what Google paid for Waze, the two companies faced a similar dilemma since they both sought to remain independent to grow their businesses and were eyeing an initial public offering.

“At the end of the day, if you get an offer that is hard to refuse, then you do not refuse,” Levine said. “Back then, the thinking was that we have the ability to raise additional capital and keep on growing the company to become a market leader.”

“That was the plan – now Wiz executed that plan, but under the Google hat,” he noted.

The 8200 factor

Pending regulatory approvals, Wiz will join Google’s Cloud business but remain independent. The firm, which says that its cyber platform is tailored to map and secure any application developers build and run in the cloud, employs about 1,800 workers, who will remain in place following the closure of the transaction. Wiz said it expects the deal to close in 2026.

“The most important aspect about getting an offer from Google is that everyone appreciates them: If Google recognizes that there is something significant, then the company must have built something amazingly well, and this is kudos to [co-founder of Wiz] Assaf Rappaport and the team,” said Levine.

Wiz was founded by four tech musketeers, who met in the Israeli army and served together in the IDF for almost a decade. Assaf Rappaport, 40, Yinon Costica, 41, Ami Luttwak, 40, and Roy Reznik, 35, are graduates of the famed elite Israeli military intelligence unit 8200, which has built a track record of churning out serial tech entrepreneurs and founders of startups including Nice, Palo Alto Networks, CyberArk and Waze.

Levine attributed the boldness and success of Wiz to its founders’ experience in the army.

“The skills acquired during Israeli military service are also serving the startup ecosystem,” said Levine. “It has not so much to do with technology – it is about maturing and dealing with challenges that no one else in the world deals with at the age of 18, establishing leadership, building teams, and understanding that giving up is not an option.”

“This is maybe the most significant differentiator of the Israeli ecosystem from the Silicon Valley ecosystem,” said Levine.

Record-breaking success in just five years

Rappaport, Costica, Luttwak and Reznik in 2012 founded their first startup, Tel Aviv-based cloud security firm Adallom, which they sold three years later to Microsoft for $320 million. At the time, the deal was hailed as the most Microsoft ever paid for an Israeli tech firm. The four worked together at Microsoft’s R&D center in Herzliya and led Microsoft Azure’s Cloud Security Group.

A few years after helping Microsoft build its cloud security business, the four decided to leave and establish Wiz to develop a comprehensive solution for securing cloud environments. This happened in early 2020, just as the COVID-19 pandemic started gaining pace around the world, sending entire enterprises and workers online and spurring a huge wave of migration to cloud-based servers.

With hybrid work now standard and digital transformation moving data centers to the cloud, businesses face heightened network security risks, including sophisticated ransomware, malware and other breaches. The changing environment bolstered the need and ample demand for Wiz’s fast-growing multi-cloud security platform powered by artificial intelligence. Its customers include more than 40 percent of the Fortune 100 companies, such as Slack, Mars, BMW, DocuSign, Plaid and Agoda.

Only four years after its founding, Wiz last May raised $1 billion, at a company valuation of $12 billion.

The fast success last year earned all four Wiz founders entry into Forbes’ uber-exclusive roster of the world’s richest people with a net worth of about $1 billion each. Rappaport, who is set to continue to serve as the CEO of Wiz, was often seen wearing a T-shirt, jeans and sneakers with his dog Mika by his side. When Mika, who has a profile on LinkedIn listed as chief dog officer at Wiz, died four months ago, Rappaport in an emotional tribute called her “love of my life.”

Described as shy and humble but approachable, Rappaport has been living for years in a rented apartment in central Tel Aviv, doesn’t own a car and is known for getting around on foot or by public transportation.

Costica’s brother Yotav said that Wiz’s journey, which broke just about every record ever set in the tech world in just five years, has come at a price.

“This is likely a deal people will be talking about for many years to come,” Yotav Costica wrote in a LinkedIn post. “But for me, it’s mostly about the immense pride I feel seeing my big brother take this extraordinary journey, making such incredible personal sacrifices that are hard to see from the outside — crazy hours of work, late-night calls with clients, countless flights, and the endless challenges of building a company and a team.”

“All while serving as a role model for his employees and remaining humble,” he said, commenting on a picture he posted of his brother sitting on a couch in T-shirt and shorts, which he described as “yet another family vacation where the laptop had to come out.”

Major tax windfall for Israel

Google’s largest-ever acquisition is not just another deal that strengthens Israel’s dominance as a global cybersecurity powerhouse — it is also of macroeconomic significance to the country.

“This is going to be a life-changing event for all of the Wiz family,” said Levine. “The fact that you have impacted so many families that went through the entire journey with you is the most amazing reward that you have when a significant exit happens.”

Wiz is technically a US company as its mother company and its intellectual property are registered in the US. However, as the four founders of Wiz and many of its employees are Israeli residents and some of its investors are based in Israel, the country’s coffers are set to benefit from a big tax windfall should a deal be sealed, according to Racheli Guz-Lavi, a senior tax partner at Amit Pollak Matalon & Co.

Each of the founders, who are believed to own just under 10% of the company’s shares apiece, is estimated to net $3 billion from the deal, and Wiz’s 1,800 employees are set to get about $1.5 billion combined, although not all are Israeli residents.

Most of the remaining shares are held by non-Israeli investors, among them Sequoia Capital, Index Ventures, Insight Partners, Andreessen Horowitz, and LVMH CEO Bernard Arnault. Israeli investors who have invested via these foreign funds will pay tax at 28%. Israeli investors include Gili Raanan’s Cyberstarts.

For Israel, the multi-billion mega-deal by a US giant comes amid renewed fighting with Hamas, which began October 7, 2023, when thousands of terrorists streamed into Israel to murdered some 1,200 people and took 251 hostages into Gaza. War costs since the October 7 onslaught have spiraled to NIS 112 billion ($31 billion) as of the end of 2024.

“A large amount of tax of about NIS 15 billion ($4 billion) is estimated to be paid by the founders and the Israel-resident investors, and by the Israeli employees who have received options, which is great news for Israel as the country grapples with war-related costs and expenditures,” said Guz-Lavi.

The estimated tax revenue Israel could earn from the transaction is equal to about 0.6 percent of the GDP and would help relieve government pressure to introduce measures to fund the war’s defense and civilian expenditures and bring down the budget deficit and high debt levels.

If a deal is finalized, it would also further anchor Google’s commitment to develop key technology in Israel and cement its presence in the country.

The acquisition still faces the challenge of regulatory hurdles and clearance of US antitrust authorities.