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Wiz: A Cybersecurity Decacorn
An exclusive interview with Francis Odum
Good Afternoon!
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DEEP DIVE
Wiz: A Cybersecurity Decacorn
Introduction
Wiz, the cutting edge cloud cyber security company, announced a $300M Series D @ a $10B valuation in a round led by Lightspeed, Greanoaks, and Index. Over the past year, Wiz has continued to add to their leading cloud security platform adding Container and Kubernetes security, Data Security Posture management, Cloud Detection and Response, and so much more.
Even after launching in just March 2020, Wiz already has 35% of the Fortune 500 using their services including BMW, Slack, Salesforce, and many other notable enterprises. With the raise, Wiz will continue to add to their 650 person headcount and fuel further expansion in the US, EMEA, and APAC.
Cybersecurity is a complex landscape, and I therefore wanted to get an expert's opinion on the raise, Wiz's journey to date, and future prospects. I therefore connected with my good friend, Francis Odum, or otherwise known as "InvestiAnalyst."
Francis has been sharing his thoughts on the cybersecurity landscape for years on Twitter to over 30k followers and writing the InvestiAnalyst Substack to thousands of subscribers as well. Professionally, Francis was most recently with Contrary Capital as an investor and research analyst where he focused on Cybersecurity, Cloud Computing, and B2B SaaS.
The interview is edited for length and clarity purposes.
Pictured: The InvestiAnalyst himself - Francis Odum
The Interview
Alan: Francis! Great to be connecting today and excited to be talking about Wiz! Would you be able to start off by giving a high level overview of Wiz and what they do?
Francis: Of course. First, it is great to re-connect with you Alan, and I appreciate you including this conversation in the The Crossover. At a very high level, Wiz is a cloud security company, meaning they are focused on protecting companies data on the cloud. The story of the last decade has been companies moving their data and workload applications from on-prem to the cloud. Whether companies are on AWS, Azure, etc. they need to make sure these workloads are secure. There are different ways that companies can secure their data including scanning that proper protocols in place, the right people have the right permissions, no misconfigurations, or just having visibility into your workload. It is important to recognize at it its core that from a security perspective, now that you are in the cloud, in some ways it is much more easily accessible to the public and hackers due to where the data is being stored. Therefore, long story short, Wiz is there to help companies protect their data.
Alan: Wiz has secured deals with some of the biggest enterprises on the planet. I am curious as to who these companies were using before/who did Wiz displace.
Francis: A huge part of Wiz's story comes down to just their timing of when they entered the market which was during a transition from on-prem to the cloud, meaning that many of their opportunities are greenfield opportunities. When companies held their data on-prem, they had their data centers, live servers, with them physically. So many of them had legacy providers like Macafee, Checkpoints, Symantec. Now, with the move to the cloud, its a very different dynamic and in many cases there wasn't a solution companies really used before.
Alan: I am sure that an AWS and Azure have basic security components right?
Francis: Well sort of. Let's step back for a moment. A lot of the cloud providers' solutions, have matured a lot over the past decade, when you think of IAAS, cloud computing stack, network, etc. the major hyperscalers protect the core network, the core storage, the core infrastructure. These are the responsibilities of the provider. Then it is on the vendor to protect their applications and data. The AWS's always had basic solutions like identity, data security, etc. but Wiz is a multi-cloud solution that can cut across all three major cloud providers and provide security.
Alan: What do you think some of Wiz's competitive advantages are?
Francis: So something we should discuss is the dynamic of agent based vs. agentless solutions. An agent based solution is one where you are actually downloading a security solution to your computer (think the process of downloading an Adobe or Figma). This software is then constantly scanning your files, workloads, websites, etc. This is a very heavy process and consumes a lot of memory. Then there is agentless solutions. The best way to think of agentless solutions is like when you give someone remote access to your computer. All you have to do is go to a website and give them an access code. It is simply an online connection - this is an agentless solution and what Wiz brought to cybersecurity. When Wiz came to market just when COVID launched, it is clear why this type of solution caught on rapidly.
I also think it is important to discuss Wiz's founding team who are exceptional. Assaf Rappaport, Yinon Castica, Roy Reznik, and Ami Luttwak. These guys founded a company before called Adallom, an early company in cloud security, that got acquired by Microsoft. These four founders actually led cloud security at Microsoft for Azure. And they worked at Microsoft for a few years and they saw the early days of the cloud and how it matured. The knew how to protect Azure better than anyone else and knew they could start a great company. When selling at Wiz, they leveraged a lot of their relationships from Microsoft and were able to do a top down sales model which helped them win really large deals.
Alan: We have established that there aren't really any public comps to Wiz, I was wondering if there are any private companies in the space that excite you?
Francis: Oh Ya. There are a few. Orca is one who launched right before Wiz. Although Orca has very similar technology, their go to market strategy in contrast to Wiz's (due to the founding team's relationships) is likely a big reason why they have not landed the deals that Wiz has. Another one is Aqua who is strong in container security and also has strong general cloud security offerings. Finally, another one to keep your eye on is Sneak whose acquisition of Fugue really put them on the cybersecurity map. Oh and then of course Lacework.
Alan: Awesome. I will definitely keep an eye on these companies. I feel like we could go deeper into the cybersecurity space for hours! We definitely need to do this again soon. Thank you so much for your time Francis.
Francis: My pleasure! Talk soon.
Alan's Angle
Full disclosure, cybersecurity is not an industry that I follow closely, however, one that I want to learn more and more about - which is why I lined up Francis for an interview. At the highest level, it really sounds like Wiz has things rocking and rolling.
I think it is awesome how the founding team has deep experience in the space, were successful founders prior, and specifically had serious leadership positions at Microsoft. It sounds as if leveraging the relationships with key decision makers at these enterprises is a big reason for their success.
It sounds as if Wiz's revenue is around $200M ARR which would represent a 50x multiple to ARR ($10B valuation). I look forward to looking into this closer, but in my eyes the tailwinds in this industry and initial success will help this company continue to grow into their valuation. My gut tells me an IPO over the next couple of years is not too far away and Wiz will be a winner for investors.
Make sure to give Francis a follow here on Twitter and sign up for his newsletter. He has some serious serious things coming in the pipeline.
THE CROSSOVER ARCHIVE
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Media Minute
Paramount CEO Bob Bakish Speaks @ Conference
Another week and another Media Minute on Paramount! Why? Because I like the company and enjoy writing about them! Easy enough right?
Earlier this week, Paramount Global CEO Bob Bakish spoke at a Morgan Stanley Conference where he discussed everything Paramount. Below are a few of my thoughts from the conversation including the Showtime sale, future of dividend, Paramount's success in streaming and so much more.
Showtime: Starting with the Showtime rumors, Bakish shared this: "the reality is, it wasn't that interesting to us because if you compare that price ($3B)... to our internal business plan, the reality is our internal plan is far more value creating when you take the base earnings and the synergies." Bakish deviated from Paramount's normal stance to not discuss M&A as the Showtime rumors were so widely reported. I could not agree more with this approach as I discussed last week, and I am happy with the strong stance that Bakish took on the rumors.
Dividend: It is almost mid-March, and Paramount has not declared its quarterly dividend (when it is normally declared in Q1 in mid February). I have no problem with them pausing the dividend for a few quarters to fuel their growth and keep the balance sheet strong. However, what is odd is the lack of clarity behind $PARA's plans. On the earnings call, when Naveen Chopra discussed the dividend it sounded like that it would stay in place. In Bakish's comments at the conference, that also seemed like the case as he shared "we have the levers to pull to manage through the negative FCF of '23." In my eyes, this sounds like as if it will stay in place, but why not just come out strongly one way or another. Very odd. (UPDATE: Earlier this morning $PARA declared their quarterly dividend of $0.24! Cha-ching!).
Future FCF: Easily, the best Bakish zinger from the call is when he shared that as Paramount enters '24 where the company returns to positive FCF, the FCF growth will be like an "uncoiled spring, then it goes." After the investment in streaming is done, Paramount will be looking to grow FCF into perpetuity (or at least a very very long time). Due to the success of Paramount's streaming strategy, I have never felt better about its prospects to become a FCF machine. At a $14B market cap, if Paramount can show a clear trajectory to just $2B of FCF, this thing is a grand slam. I feel that number will move closer to $3-$4B (like Netflix) over the next 7-10 years. If I am right, this stock, just like Bakish said, will be like an uncoiled spring!
Value Creation: In my eyes, the most interesting part of the conversation was when Bakish shared this just after discussing Simon & Schuster's strong sale prospects: " And we've got some other things that we haven't talked about publicly that we're thinking about to unlock some incremental value." Very very interesting. Just given the context, it seemed like Bakish was referring to more of some type of strategic deal vs. a move to unlock share value like announcing a spin off of the legacy assets in '24. I always think about Apple and how nicely the Paramount content could fit into its AppleTV+ offering. And, the best part, Apple has plenty of cash to make something like that happen. A couple ideas could include Apple announcing they are buying a serious equity stake in $PARA and will be getting some Paramount+ originals on a non-exclusive basis for AppleTV+. I am also intrigued by selling Apple 10% of PlutoTV and having that become the native FAST asset to AppleTV. Regardless, these were very interesting comments by Bakish, and I am very curious to see what Paramount has up their sleeve.
And with that, we likely say goodbye to writing about Paramount for the next little while. I know. It is a sad day, but we will get through this together!
CHART OF THE WEEK
1. Carta on Funding Slowdown
Peter Walker, Head of Insights @ Carta, had a great Linkedin post on the slowdown of investment into startups on their platform. Here is what he had to say with the chart above:
Carta serves over 35,000 startups, the vast majority of which are US domiciled. Last December, those startups collectively took in $26 billion in new investment.This past December, that same group took in just over $5 billion.That's whiplash.The speed of change is something often missing from the conversation about startup fundraising. Whether or not this new normal is "good" (and for companies that are just beginning, it probably is) skips over the impact of how abrupt the shift has been.
I really like the use of the word "whiplash." It is not talked about enough how difficult the change of environment is for founders whether it being from a fundraising perspective or abrupt changes in investor expectations.
Make sure to give a follow to Peter on LinkedIn as he consistently shares phenomenal posts.
PORTFOLIO
The Crossover Portfolio
Note: The Crossover Portfolio is a mock portfolio of how I would be investing and not with real money. All trades are shared publicly @ The Crossover Twitter as they are recognized.
Moves: Zero moves. Just how we like it. Again! However, we are considering lightening up on our $PENN position.
The Zone: The Zone announced yet another launch with Marquette! Keep crushing it Ivan!
RocketVR: RocketVR keeps crushing it too as the company announced the launch of an 80 person randomized trial with MGH.
$SRAD: Sportradar has earnings lined up for March 15th, and I am pumped!
Note: I did not update the portfolio picture due to load management and will make sure to have it up to date for the next issue. At the launch of this edition, the portfolio is down 15%.
MEME OF THE DAY
GOLDEN NUGGETS
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— Alan
Disclaimer: The Crossover is not a professional financial service. All materials released from The Crossover are for educational and entertainment purposes. The Crossover is not a replacement for a professional's opinion. Contributors to the Crossover might have positions in the equities in the The Crossover Portfolio or mentioned in the newsletter.