Philip Clark, Investor, Thrive Capital Assaf Rappaport, Co-founder and CEO, Wiz Interviewer: Allie Garfinkle, Fortune
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00:00Thank you so much for being here, gentlemen.
00:02Thanks for having us.
00:03So, Wiz has been a little bit of a rocket ship.
00:06Founded just four years ago, Wiz has raised nearly $2 billion.
00:10Investors include Andreessen Horowitz, Lightspeed, and of course, Thrive Capital.
00:14The Ascension has been pretty meteoric.
00:17And now there's a little bit of an elephant in the room, isn't there?
00:21A 23-ton elephant.
00:23A 23-ton elephant.
00:24So I'm sitting on a plane yesterday, minding my own business,
00:28and the news comes through that Wiz is reportedly set to be acquired, possibly,
00:33by Alphabet for $23 billion, hence the 23-ton elephant.
00:38You know, what's going on?
00:40What can you tell us is up?
00:42So, as you can imagine, I can share very little, if at all.
00:46I'll share a bit from my experience, in a way.
00:49In my career, I got lucky.
00:51You know, my first startup was acquired.
00:53I ran the cloud security business for a public company.
00:57Now I'm lucky to run a private company.
00:59I would say that in all of these events, I think, that either IPO or acquisition,
01:04or even staying private, like great companies like Databricks or Stripe,
01:07eventually it's all about the mission.
01:09Every of these events that are very exciting to the media are a milestone in a long journey.
01:16Sometimes it's even the beginning of a journey.
01:18And I think that's the mindset that always founders think about,
01:22that it's all about the mission, it's all about our talent and customers,
01:25and what's the best way, what's the best vehicle to provide it to the market.
01:29So that's kind of the mindset that we always have, being private, being public, and a startup.
01:36That's a delicate dance you just did there, isn't it?
01:39What about you, Philip? How are you feeling about this?
01:41I mean, did you imagine that four years into the existence of this company,
01:44we would even be having this type of conversation?
01:46Wiz is a company that has defied every expectation at every turn of the journey.
01:51So I try not to imagine, and I like to let Asaf and the team lead.
01:55I will say that the great security companies get built at these moments of paradigm shifts.
02:01You had Palo Alto with the internet, and CrowdStrike with mobile and distributed work.
02:05And so Wiz is one of the rare companies where it's not just one paradigm shift they're on top of,
02:10with the cloud, it's actually two, with AI.
02:12And I think as a result, they are the center of attention for a lot of people,
02:16and as a result, I think there's a lot of screwdata that comes to them.
02:20Well, and let's take a couple steps back now about how we got here.
02:24What does Wiz do, and why does Wiz do it?
02:27Okay, so basically we're helping every organization on the planet in a way
02:32to help them secure everything they run and build in their cloud.
02:36That's kind of the mission.
02:37And I think that what excites me about this mission, in a way,
02:42that it's not a technology problem.
02:44Actually, technology, and I'm building technology, to be very fair,
02:48but that's not the main problem.
02:49And I think that cloud introduced us many challenges, in a way, definitely in the security phase,
02:55like the way it revolutionized the way we're doing IT.
02:58For example, from centralized IT to decentralized,
03:01giving the keys to the kingdom, in a way, to every developer in the organization,
03:05which is great, but poses some risk.
03:08I think the complexity of the cloud, being multi-cloud, different technologies,
03:13all of that, it's much, much more complex than we're used to.
03:16And the last thing is definitely the speed and the agility and the dynamic environment,
03:22the very ephemeral environment.
03:23So, basically, the way we should do cloud security is going to be very different
03:27than the way we did security in the past as a whole.
03:30And that's kind of what excites us.
03:32Again, Wiz is providing technology as part of the bigger problem,
03:36but this is a huge mission that we're excited to be part of.
03:39And why do you think Wiz has resonated?
03:41Because it's actually not easy to explain what Wiz does,
03:44because the cloud itself is already abstract, right?
03:46Why do you think it's resonated?
03:47Why do you think it's captured people's imaginations?
03:49What's behind that growth?
03:51Do you know what I mean?
03:52Yeah, I think it's a couple of things.
03:54First of all, Wiz founded, as you mentioned, March 2020, you know, COVID hit.
03:59And cloud security…
04:01Did you think you were done for?
04:03March 2020.
04:04Look, I left Microsoft in March 2020, and it felt like the most horrible decision ever.
04:09You know, I was in the mother ship.
04:10Truly, I loved Microsoft.
04:12I had a great job, great impact on security,
04:19and decided to leave, by the way, with the founders that I have.
04:22And then we're living a perfect time in March 2020,
04:25and then nobody picks the phone, nobody answers us.
04:27And it truly felt like, in the first couple of months,
04:30it felt like the worst timing ever to start a company.
04:33In hindsight, maybe Philip will agree with me that
04:36if you pinpoint a time in history,
04:38probably March 2020, that's the time to start a cloud security.
04:41But I would say that the advantage that we have, as I said, Wiz didn't start.
04:45Didn't start cloud security with Wiz.
04:47It was actually a decade before it was that.
04:50I think that one of the advantages that we had is like
04:53learning from the mistakes of the others,
04:55and that's kind of the ability to use the cloud native abilities
04:59actually to solve the cloud security problem,
05:02which sounds like now very easy to understand,
05:05but it wasn't the case when we started the company.
05:07And Philip, you sort of talked about this a little bit,
05:10about there being a platform shift.
05:12What was your thesis around Wiz?
05:14Yeah, look, I can tell you all the obvious reasons to invest in Wiz, right?
05:18What are the obvious reasons? Please tell us.
05:20Fastest growing security company and enterprise software company of all time.
05:24The top two or three products that every chief security officer will buy at this point.
05:29And I'll embarrass Asaf a little, but I was at dinner with
05:32one of the C-suite executives at one of his foremost competitors,
05:35and they told me that Asaf gives them nightmares.
05:37So when you hear that, you're pretty interested.
05:39What do they mean by nightmare? Hold on.
05:41I think when you see a competitor like Asaf, you get out of the market usually.
05:45So not the type of person you want to be in a cage match with.
05:48How do you feel about that, Asaf?
05:50I wish it was the case. I have dozens, if not more than 100 competitors.
05:53So I wish, but yeah, I won't embarrass anyone.
05:57But I think the real reason is the point of SoftBank,
06:00which is that to us, the cloud is different in a really special way
06:03when it comes to security.
06:05Normally in security, the formula is you take a piece of the security stack,
06:08you take identity or email or network, and you build a faster horse,
06:12and if you're lucky, you build a $5 or $10 billion company.
06:15Pretty good outcome, right?
06:17But cloud is a sea change in how the entire technology stack is getting built.
06:22And so really, every enterprise software workload, process, workflow
06:26is now built on the cloud.
06:28And so for us, the big deal was that we used it as an opportunity
06:31not just to be a piece of the security stack,
06:33but actually to reimagine the entire security stack
06:36in a cloud-native way, end-to-end.
06:38And then you combine that with the fact that working with Asof and Yunon
06:42and Ami and Ron is sort of a dream.
06:45Investors talk about second-time founders.
06:47These guys are functionally third-time founders
06:49between Atalam and then building the biggest security business
06:52in the world at Microsoft and now having even bigger ambitions.
06:55It was sort of a no-brainer for us.
06:57You know, we've used that phrase a couple of times already,
06:59the fastest-growing startup in the world.
07:01What does that actually mean? This is for both of you.
07:03What does it mean for you, Asof?
07:05Look, I would say...
07:06Is that a label given to you?
07:08I would say it's great to be fast and great to see the numbers.
07:13I think the important, eventually, is to be the best.
07:16We're not there yet.
07:17And the best place for talent, the best product for the customer.
07:22And this is a journey, and always we need to understand this.
07:25First of all, ever-changing journey and ever-changing challenge.
07:30But fast is great. We love that.
07:34But in a way, to be very honest here, it's also a bit about luck,
07:39like being in the right timing.
07:41When COVID hit, when I'm talking about why the timing was so great,
07:45when COVID hit, every business rushed to become a digital business
07:49and rushed into the cloud, created a security debt.
07:52Everybody needed a solution.
07:54Even if you think about it in the go-to market,
07:56you talked about competition.
07:57As a startup during COVID, and I'm going like two years ago,
08:01Palo Alto Networks, Microsoft, or CrowdStrike,
08:05they have the same real estate on the Zoom.
08:07They look the same as the tiny whiz when we were very, very tiny.
08:11So, even the advantages of the incumbents in a way during COVID
08:15were kind of taken from them, which allowed us.
08:17So, I would say, yes, there are many things that we're very proud of.
08:21I think on the fast, there is a lot of luck and environment
08:24and an ecosystem that actually helped us, that is less related to us.
08:29So, the COVID rush to the cloud basically sends you into hyperspeed.
08:33Were you ready for that?
08:34No.
08:35So, in a way, I would love to say, hey, that's how we planned.
08:38We started the company.
08:39You didn't plan that.
08:41No.
08:42We did the most horrible deals with the cloud providers.
08:45Hey, we're starting a company.
08:47You need to assess how good you're going to do,
08:50and that's kind of the deals that you're doing,
08:53like the procurement that you're doing with the cloud.
08:57We did horrible deals just because we never predicted.
09:00I think now, and again, this is also a maturity of a company.
09:03You need to be predictable.
09:04It's fun not to be predictable and like, hey, everything happens,
09:07and it's not good for a company.
09:09You're putting lots of stress about the team.
09:12If your sales capacity is much lower than the demand in the market
09:16and what your ability to address, that puts a lot of pressure
09:19that most of the time is not a good pressure.
09:21So, yes, it's great to be fast, but I would prefer to be predictable
09:25and knowing where we're going.
09:26And, Philip, how do you talk about the total addressable market
09:29for something like Wiz?
09:30How much growth is still on the table now and, say, in six months?
09:35Totally.
09:36Look, I think when we invest, we invest over a period of decades,
09:39ideally, because we believe, like ourself,
09:41in the long term of how these markets are going to play out.
09:44I think to the point of thinking about platforms,
09:47really what we think about is there are these moments in time
09:50where technology is not a smooth curve, but it is non-linear.
09:55You get these step function changes.
09:57And for us, there was really a paradigm shift in technology,
10:01like we talked about, on the order of the internet
10:04or mobile that was happening with the cloud.
10:06And Wiz was the company to do that.
10:09Now, what makes that special is that the cloud is great.
10:12It's one of the biggest markets in the world.
10:14Every enterprise is built on top of it.
10:16Even they aren't completely penetrated.
10:18We're seeing huge secular tailwinds to that market.
10:20But when we think about the other big technology revolution
10:23happening right now, which is AI,
10:25which may even be bigger than the cloud,
10:27the important thing to remember is that,
10:29unlike the internet or mobile,
10:31where it was both a technology shift and a platform shift,
10:34you had to literally change the tech stack,
10:36AI is a cloud technology.
10:38It's a revolution being delivered by API.
10:40And therefore, for us, you have this wonderful stacking effect
10:43where we think cloud security alone is enough
10:45to build the biggest security business in the world.
10:47But I think once you layer on the AI opportunity as well,
10:50well, I think there's an opportunity to build
10:52the biggest enterprise software business in the world with Wiz.
10:55This is as good a time as any.
10:57Thrive is also an investor in open AI.
10:59We are.
11:00How does open AI connect to Wiz?
11:02How does AI and cloud security all connect?
11:04Bring this all full circle for me here, Philip.
11:06Well, I think there's the literal answer,
11:08which is that a lot of great AI providers
11:11are lucky enough to be secured by Wiz.
11:13Like who?
11:14You know, I can't name names, but...
11:16Are you sure?
11:17One can guess.
11:18But I think more importantly,
11:20the real answer here is that
11:22we are facing an entirely new threat surface area
11:25that every CISO, every CEO is asking themselves,
11:29as I incorporate AI into my tech stack,
11:32how am I going to create new vulnerabilities?
11:34And the company at the leading edge of this
11:36that is literally going through
11:38all the most famous model companies
11:40and open source companies
11:41and pointing out vulnerabilities
11:43and making sure that we stay safe is Wiz.
11:45And so for us, at the end of the day,
11:47this is a known unknown
11:49that is the center of conversation
11:51and all the boards I'm a part of and Thrive sits on.
11:54And to us, open AI is going to succeed as Wiz succeeds,
11:58and Wiz is going to succeed as open AI succeeds
12:00for that reason.
12:01Do you think their futures are tied together
12:03in some specific way?
12:05It's the most important technology paradigm shift.
12:07I think...
12:08Do you think that who are the winners
12:10of AI becoming ubiquitous?
12:11It is the companies that power the revolution
12:14with great models,
12:15and it's the companies that enable enterprise adoption
12:17of those models.
12:18I had to try.
12:19I had to try.
12:20You know, on to the subject of acquisitions.
12:23Wiz has been incredibly acquisitive this year.
12:25Asaf, you've used the phrase
12:27the year of security consolidation.
12:29Yeah.
12:30What is going on in the cyber security M&A marketplace
12:32right now?
12:33So not only when we look about consolidation,
12:36you know, we thought 2024 was going to be that.
12:39That's also the reason we raised $1 billion.
12:42In May.
12:43$1 billion valuation.
12:44Yeah.
12:45A month and a half ago.
12:47Truly because we're looking about the opportunities
12:49that we're going to see.
12:50I think when we're looking specifically in cyber security
12:52about why the market is going to be more consolidated
12:56maybe than other,
12:57I think first and foremost,
12:59I think consolidation in the security market
13:02is truly a necessity.
13:04It's not only about vendor consolidation.
13:07Hey, I prefer working with only three vendors
13:09and that kind.
13:11Insecurity consolidating into one platform
13:14is actually providing better security for the organization.
13:17I think cloud is an example.
13:18It's not the only example,
13:19but it's a great example.
13:21Think about it like the organization have like,
13:23hey, how do I manage?
13:24I have one tool to manage vulnerabilities in my cloud,
13:27and then I have misconfiguration,
13:28I'm running another tool.
13:29And to understand network exposure,
13:30that goes other ways.
13:32But actually when you're looking about risk,
13:34it's all combined.
13:35And in a way,
13:36if you don't have the right platform
13:38or the platform is not consolidated,
13:39it's truly,
13:41you're getting less of a value.
13:43So I think that's kind of one of the major things
13:45that we're seeing in the market.
13:46We cannot ignore as well that
13:49if you ask any founder,
13:51definitely in the cybersecurity space,
13:53two years ago,
13:54hey, what's your dream?
13:55Going to IPO,
13:56ring the bell,
13:57I'm going to be unicorn,
13:58and then I'm going to become a public company.
14:01I think that the trends has changed in a way,
14:04and the maturity in a way of companies and founders
14:07like that their dream a bit has changed,
14:09and they're seeing other options.
14:12That also pushes the market into consolidation.
14:15And the last thing is, of course,
14:17investors that are also looking and pushing that.
14:19So I think these three kind of streams in a way
14:23puts lots of pressure in the market for consolidation
14:26and would love to seize on that opportunity.
14:28Well, and we're going to continue our delicate dance here.
14:32You use the phrase a lot,
14:33winner take all,
14:34to describe the level of competition in cybersecurity.
14:36But what you're also saying now,
14:38you're like, well,
14:39there are actually a lot of ways to win here.
14:41What does it actually mean to be winner take all
14:43in this context?
14:44I think it's all in tech.
14:46The winner takes it all.
14:48I think that in cybersecurity,
14:50there is another element that is important.
14:53And if you think about it,
14:54cybersecurity is a lot about trust.
14:57My team has a preference if they prefer Office 365 or G Suite.
15:03They have a very knowledgeable way to think about it.
15:06And I can have my opinion,
15:07and the organization can choose.
15:10I think if you're looking in cybersecurity,
15:13you're looking much more as a trust.
15:15And this is where you're relying more on the community.
15:20And it's not only, hey,
15:21I'm just relying because others bought it
15:22in like a herd way, in a way.
15:26I think that what's truly important
15:29is the more customers you have,
15:32the more data, the more signal,
15:34the more attacks that you're seeing.
15:36And you definitely can leverage it in others.
15:38So it's not like only a perception.
15:40Scale creates scale, essentially.
15:41Exactly.
15:42It's kind of the network effect that is being created.
15:44And the last thing that is also important,
15:47and that's kind of where Wiz is truly greatly positioned.
15:50When the winner takes it all,
15:51we have the ability to work with Andresen and Thrive and Sequoia
15:54and to raise billions of dollars.
15:56And truly, there are very few companies
15:59that are able to invest $2 billion
16:02into the specific solution,
16:04the specific problem that we're solving.
16:06Even the large one, even the Microsoft of the world,
16:09the Palo of the world,
16:10they're unable to invest as much as Wiz,
16:12the tiny Wiz, can invest.
16:14And I think that also takes it to the winner,
16:17takes it all.
16:18So these are the motions that we're seeing.
16:20And kind of to this end, too,
16:22I was looking at the Fortune 500,
16:24and there actually aren't any pure play cybersecurity companies
16:27in the 500.
16:28We have one that makes it in at 513,
16:30so it's just over the other end.
16:32They'll get there.
16:33You believe?
16:34Okay.
16:35Definitely, I'm a big believer.
16:36Okay, why?
16:37Look, I'm a big believer in the cybersecurity.
16:39As we said, it's a top of mind for everyone,
16:42and we're going through a revolution
16:44and platformization, and it's too fragmented.
16:47We're going to see the consolidation.
16:48I think this is a big opportunity for the platform players.
16:51Wiz is one of them, but we're definitely not the only one.
16:54And some of the large ones are great players,
16:56and they have great technology they're playing,
16:58and they're playing there.
16:59So I'm a big believer.
17:01And for you, Philip, to what extent do you think
17:03a cybersecurity company can really go at it alone?
17:06What are your expectations when you invest in a company like Wiz?
17:09Yeah, I think there are two dimensions to this answer, right,
17:12which is on with the soft,
17:14that when you think about what are the sectorally more important areas,
17:19well, we know that the velocity of attacks on companies
17:22and even U.S. government institutions are rising,
17:25so it should make sense that the importance of security technologies
17:28are going up as well.
17:30I think some of the biggest security businesses
17:32are hiding in plain sight.
17:34Microsoft reportedly is doing $20 billion of revenue in security,
17:38so slap any type of multiple you want on that.
17:40That would make the Fortune 500.
17:42But to us, there's actually a second element here,
17:45which is that when you are a platform like Wiz,
17:48you end up being the system of record
17:50for some really important data.
17:52And for Wiz, it's the fact that they're the source of truth
17:54for all cloud assets, workloads, code, identities, run times, etc.,
17:58which is really valuable for security,
18:01but it's also really valuable for other buyers in the enterprise.
18:05Wiz was really innovative in being able to bridge the divide
18:08between traditional security practitioners and executives
18:11and the people who are actually responsible
18:13for building things like companies, the engineering teams.
18:16And I think through time we'll likely see a blurring
18:19between security platforms that are security qua security
18:23and also security platforms like Wiz
18:25that are ultimately enabling faster innovation
18:28and engineering velocity in companies.
18:30And so it wouldn't surprise me if, in the same way,
18:34Microsoft is a hybrid company
18:36working across enterprises in many ways,
18:38the same thing starts to be true of the security platforms.
18:41You know, I drafted this question, I promise, before Sunday.
18:46The goal in venture, of course, is an exit.
18:49And if you have a rock star company, the goal is a great exit.
18:52What does a great exit look like for Wiz?
18:54And I actually would like to let you start, Philip,
18:57because this is for both of you.
18:58I think I soft-covered this one already, Allie,
19:00which is that I think at the end of the day
19:02Wiz is a customer-centric company.
19:04And to us, we care a lot about the inputs to that
19:06and less about the outputs.
19:07We believe that if you put in the right inputs,
19:09which is invest a lot in R&D,
19:11be unbelievably aggressive about being the best possible vendor
19:15for your customers,
19:16and then seize the new technology paradigms when they come,
19:19the rest will compound over time.
19:21And maybe that's an exit that happens soon.
19:23Maybe that's an exit where we're partnered with Wiz
19:25for 10, 15 years.
19:27Asaf might get tired of me, but I won't get tired of him.
19:30But to us, that's the question.
19:32And I think every time we've made an investment,
19:34it's with the expectation that we're going to be long-term holders.
19:37And if we're surprised at the upside in the interim,
19:39no one's going to complain.
19:40But that's how we think we should partner with companies.
19:43What about you, Asaf?
19:44What does success look like in this context?
19:46They're stuck with me.
19:48I think there's no exit.
19:50We talked about the IPO requisition.
19:52It's a milestone in the journey.
19:54As long as there is one customer that kind of believes in your product
19:57and believes in what you're delivering,
19:59I think we're there to deliver.
20:02But I would say, if we're talking about the opportunities,
20:05and I think that's kind of what has changed in the market,
20:09the opportunity to stay a private company for much longer is here.
20:15The opportunity, it's not only the ability to raise
20:18hundreds of millions and billions of dollars
20:20and having great VCs like Thrive in the market
20:23to support the Stripe of the world and Open AI of the world
20:26and Wiz of the world in a way.
20:28As private companies, this is great,
20:30but also the ability we can provide liquidity to early investors,
20:34to some of the employees,
20:36so there is no rush to go to the public market,
20:38and you can actually go public when the markets are right
20:43and when it's best and right for the company.
20:45And that's a big advantage that like a decade ago
20:48we didn't have as startups.
20:50All right. One sentence, gentlemen.
20:52What does the future look like for Wiz?
20:54Philip?
20:55Large.
20:57I have no clue.
21:00Should have added your name.
21:02I actually like where we landed.
21:03Thank you so much, gentlemen.