Good morning,

Today, we’ll dig into why Google’s potential largest acquisition yet - a cloud security startup, could be an M&A trap. We’ll also cover the top tech news you need to know for this week. 

Let’s dive in👇

This week’s insight

What happened

Google is considering a $23B acquisition of Wiz, a startup that provides a unified cloud security platform. Wiz offers comprehensive services including threat detection, response, and protection for organizations. 

The NYC-based startup, which originally hails from Israel, has sat at the intersection of almost every mega-valuable tech trend:

• Raised a ton of money from top investors ($1.9B total)

• Reached a sky high valuation—decacorn status ($12B)

• Building security in the cloud computing space

• Leverages AI to do so

• Projecting $1B in ARR by 2025

Now, its crowning moment—a potential $23B takeover at one of the biggest tech companies ever. All of this in just 4 years…

But, this also presents its biggest obstacle ever… these mega-valuable tech trends, after all, are what antitrust regulators are zooming in on too.

Why this could be an M&A trap

• Antitrust scrutiny for Google

  • This deal would face months of antitrust review by regulators who are critical of big tech M&A.

  • Google, in particular, is already in the government’s crosshairs. J.D. Vance, the new Republican VP nominee, has been on the “let’s break up Google” train.

• Unnecessary distraction for Wiz, a fast-growing startup

  • M&A regulatory purgatory can be a big, momentum-busting distraction for fast-growing startups like Wiz. It can slow product development, spook customers, and divert attention from company executives. 

  • Employees and investors of Figma (design software) and Plaid (fintech app)—both of which went through big failed merger deals—can surely attest to this.

What’s left for Wiz to consider?

Wiz may not want to risk taking such a high-risk high-reward deal that could fall apart under regulatory scrutiny, particularly as it aims for $1B in ARR by 2025. 

This revenue milestone is something Wiz’s CEO Assaf Rappaport said they must hit before going public. This implies that his startup could be ready for a blockbuster IPO by next year.

Bottomline

Wiz’s 4 co-founders each own 9.5% in the company. 

They definitely have a tough decision to make. Should they sell and risk months-to-years of regulatory scrutiny for it all to go bust (or a slim chance of it going through)? Or should they decline and try to build their company into a self-sustaining business? 

They will have to choose wisely.

This week’s videos

Top news

• Cybersecurity firm Crowdstrike made a software update that caused machine’s running Microsoft Windows operating systems to crash, causing a major global IT outage affecting flights, banks, and businesses around the world.

• A number of Silicon Valley’s top figures are publicly supporting Trump—including Elon Musk, Palmer Luckey, Marc Andreesen, David Sacks, and more. 

• OpenAI is developing an AI server chip. It’s hired former Google chip staffers and has been talking with Broadcom and TSMC about it.

Other news

• Amazon’s Prime Day drives US onlines sales to record $14.2B, up 11% year over year..

• Meta is considering buying a small stake in EssilorLuxottica, the European eyewear giant it currently partners with to make Ray-Ban “smart glasses”. 

• OpenAI unveils GPT-4o mini, a smaller and cheaper AI model.

• Both Google Cloud and Microsoft Azure are offering to rent Nvidia’s AI chips to Chinese companies, including AI startups, for use in data centers outside of China. US export controls forbid Chinese firms from buying Nvidia’s AI chips, but these companies can still gain access by renting outside the country. 

• As Meta ramps up its spending on AI, it’ll cut 20% of its Reality Labs hardware team’s spending through 2026. Though, its CFO told staffers they should target AR/VR as a $1T opportunity.

• Microsoft’s AI Designer app arrives on iOS and Android with AI editing and creation.

• Antropic’s most powerful model Claude 3.5 Sonnet is now available on Android.

• Mercedes-Benz’s 400kW EV chargers are coming to Starbucks Mercedes-Benz and Starbucks are teaming up to install fast electric vehicle chargers at 100 coffee-slinging locations on Interstate 5, which runs along the West Coast from Canada to Mexico.

• OpenAI co-founder Andrej Karpathy launches Eureka Labs, an AI-powered education startup aimed at developing a “new kind of school that is AI native.”

• Amazon AI chatbox Rufus is now live for US Customers in the Amazon mobile app The assistant, which lives on the bottom right of the app’s main navigation bar, is designed to offer customers help with finding products, performing product comparisons and getting recommendations on what to buy.

• Elon Musk confirms Tesla robotaxi reveal will be delayed due to an important design change.

• OpenAI says there are 5 'levels' for AI to reach human intelligence It's already almost at level 2. The ChatGPT maker believes it's on the first level, which is conversational AI.

• Huawei Builds $1.4 Billion Shanghai Center in a move that’s likely to advance China’s technological ambitions even as the US tries to halt its rise.

• Smartphone Market Grows 6% as AI and discounts help demand

• SpaceX HQ officially moving to Texas over new law in California concerning the privacy of LGBTQ+ kids.

Deal flow

• Coast raises a $40M Series B round led by ICONIQ Growth to accelerate adoption of modern fleet payments.

• GitLab (GTLB) $8B-listed DevOps platform is exploring a sale after attracting takeover interest.

• Aven, a startup offering consumer credit cards backed by home equity, raised a $142M Series D round led by Khosla Ventures and General Catalyst.

• Kandji, an Apple device management platform, raises $100M at a $850M valuation. It has raised over $288M total.

• Slope, a B2B payments platform, raised $65M in funding from J.P. Morgan, YC, and Saga.

• Freshpaint, a healthcare privacy platform, raised a $30M Series B round. This brings its total funding to $42M.

• An investor group including Coatue, Alkeon Capital, and General Catalyst acquired secondary shares in Figma, the interface design tool at a $12.5B valuation.

• Stripe is now valued at $70B after Sequoia Capital has offered to buy $861 million worth of shares from its own investors.

• Google parent Alphabet talks about acquiring cyber security startup wiz for $23B. 

• Exa raises $17M from Lightspeed, Nvidia, Y Combinator to build a Google for AIs.

• Echo Chunk raises a $1.4M Pre-seed round from a16z to build the Wordle for chess.

• Anthropic launches a $100M AI fund with Menlo Ventures, ramping up competition with Open AI.

• Onestream files to go public looking to raise $465M in offering.

Was this forwarded to you?

That’s it for this week. I hope it was insightful. As always, let me know what you think and if you have any questions. Cheers!

🌜 Loryn and Nicole from Dark Mode Digest