Breaking Records: How Wiz Reached $500M ARR in Just 4 Years

Good morning. It’s the Olympics. It is a time when records are broken, and medal dreams are coming true. If a startup hyperscaling discipline existed, today’s strategy analysis could be the gold medal playbook.

Let’s talk about records.

Achieving $500 million ARR in 4 years for a startup is comparable to Usain Bolt’s 100m record—a once unbeatable feat. But Wiz has done it. Today, we look at how.

Wiz has declined Google's acquisition offer and intends to IPO. It said no to $23 billion despite being valued at $12 billion in its most recent funding round.

They are making $500 million in ARR (annual recurring revenue) and think they can easily scale to $1 billion. Here is the crazy part… the company started in 2020.

Within four years of operation, Wiz achieved an astronomical revenue growth rate. For a startup that is undergoing a massive pressure test, scaling all your systems to $500 million ARR is a tremendous achievement.

4-minute-read

Background

In 2022 Wiz became the fastest-growing software company ever. After just 18 months, they reached $100 million in ARR.

The team

The founding team has deep expertise in the industry and a solid track record. All four founders have already sold another cybersecurity company. In 2015, they sold their company Adallom to Microsoft for $320 million.

That’s the track record any VC is looking for.

And so, in 2021, they raised a Series A for Wiz of $100 million at a $500 million valuation. Yes, all these numbers are not typos. I quadruple-verified them all.

Investors

With the founders' track record like that, it is no big surprise that they were able to attract investors like Sequoia, Insight Partners, Index Ventures and Cyberstarts. They partizipated in a mind-boggling Series A over $100 million.

What convinced the investors besides the team?

• Fast-growing market — the cybersecurity market has a projected compound annual growth rate of 11% until 2032 and has recently reached $215 billion.

• Customers — Wiz showed a portfolio of 30 existing notable large corporate customers early on.

• Fast revenue — here is what Shardul Shah had to say about why he invested in Wiz:

Within the next 11 months, Wiz raised two more rounds, an additional $370 million, and achieved a $6 billion valuation.

During Series B—E, they added almost all the Sand Hill Road addresses and beyond: Greenoaks Capital, Salesforce Ventures, Lightspeed Venture Partners, Andreessen Horowitz, Thrive Capital, Greylock, Wellington Management, as well as individual investors like Howard Schulz (former CEO of Starbucks) and Bernard Arnault (CEO of LVMH).

Google’s $23 billion offer

Last week, Google offered to acquire the startup for $23 billion and integrate it into one of its main revenue drivers—the Google Cloud Platform.

Wiz said: No, I’d rather you didn’t, but thanks anyway.

Wiz strategy

Conventional startup advice: Start small and focus on a niche, one cloud, and one small market segment. For most founders, this is the best choice.

Not for Wiz.

Go big - and sell to enterprises

From the very first design explorations, Wiz started working closely with large-scale organizations, from “cloud natives” like Salesforce and Snowflake to “cloud adopters” like Blackstone and BMW. Knowing your type of customer early helped them zero in on enterprise pain points.

Wiz designed an enterprise-grade, multi-cloud, multi-geography, scalable graph database platform. From the first version, their solution was built to handle all the complexity and operational intricacies these corporate customers represent.

Within two years they had 25% of the Fortune 100 as customers.

This alone is an unthinkable challenge for most startups. Aside from the technical complexities… imagine the level of enterprise-grade account management, customer support, and user onboarding that has to be worked out.

A rare example of a compound startup

As described above, to build a startup the traditional way, you would set out to develop one idea and solve one problem with one product.

The compound startup model is like building a multi-leg tech company from day one. Multiple products, multiple revenue streams.

It's like if I build out this newsletter, a t-shirt brand about tech tales, and simultaneously open a tech taco truck.

Why was this such a smart move?

Imagine large enterprise cybersecurity officers constantly getting calls from the newest single-solution cybersec startups, trying to sell them a security tool for the latest hack.

This narrowness has been extremely painful for enterprises. When security risks appear, all these tools throw their security alerts, each of which has to be chased down.

Enterprises can’t keep up. They want one comprehensive solution. Wiz was designed to handle several dimensions of cloud security end-to-end.

1. Workload security

2. Posture management

3. Data security

4. Entitlements management

Know your customer’s pain

Now imagine a Wiz salesperson calling an enterprise lead. They can offer 4 different product dimensions and take the sales call in the enterprise's preferred direction.

In addition, most enterprises have been looking to cut software spending and combine as many services as possible in one solution since 2021, another boost under Wiz’s wings.

Simplicity is key

It’s all great, but this might be the real kicker.

Wiz can be rolled out IN MINUTES via an agentless, API-centered approach. It can immediately start to operate, scan workloads, and provide full visibility of the cloud environment.

If you ask any enterprise customer, that’s exactly what they want. Startups selling to enterprises must nail setup and usability simplicity. With this, they will always outperform more complicated competitors.

Help your users

Wiz knew that cloud security solutions were often one-off solutions. Each would trigger alerts and notifications that must be investigated, managed and acted upon. After talking to security teams directly, they quickly learned that it often felt like wasting hours.

…and win customer advocates

When Bridgewater (the world's largest Hedgefund) and one of Wiz’s customers got hit with threats like Log4shell in 2021 (it was like a digital COVID), a 10 out of 10 seriousness score (I made scale up), btw this vulnerability was discovered on computers not just all over the world but reached all the way to Mars too.

Wiz was able to support Bridgewater and deliver their security solution. This was so impressive to the CTO that he came on a podcast with Wiz and raved about how the product bailed them out big time.

Conclusion and key takeaways

Summary of the special sauce in Wiz’s strategy:

• Killer team with a solid track record in the industry

• Compound startup model - outpace single solution startups

• Enterprise focus from the beginning - design with enterprise in mind

• Easy to deploy

• Create customer advocates

• Build for scale - this must include all departments - one doesn't just scale a 30-person startup to $500 million ARR without a solid strategy.

Is this a playbook that works for all? Probably not. But the cloud cybersecurity space is still wide open, and not many traditional, enterprise-grade solutions that thought through these differentiators existed before Wiz.

They deployed true product genius to make their company stand out and be successful.

And it’s always helpful to be in a growing market. If you are on the fence about your next gig, this industry could be a consideration…

If you enjoyed this and think it might be interesting to someone you know, do them and me a favor and forward this email. 🙏🙏

Have a great rest of the week,