Cybersecurity company Wiz is reportedly in talks to acquire Lacework for $150 million to $200 million.

Israeli cloud security company Wiz Inc. is reportedly in talks to acquire rival cloud security startup Lacework Inc. for about $150 million to $200 million, a move that would add to previous funding. That's far below the company's $8.3 billion valuation at the time of the funding round.

It's not as clear as the basic facts about who broke this story, as TechCrunch, The Information, and Calcalist all claim credit, but between the three, the core fact is that Lacework is now on the market for far less than its former value.

Calcalist claims that a letter of intent has been signed between Lacework and Wiz, and that upon completion of the transaction, $800 million of Lacework's cash reserves will be distributed to the company's investors.

Founded in 2015, Racework provides a cloud-native application protection platform that delivers build-to-runtime threat detection, anomaly detection, and cloud compliance across multicloud environments, workloads, containers, and Kubernetes. Masu. The platform is designed to protect cloud environments such as Amazon Web Services Inc., Microsoft Corp.'s Azure and Google LLC clouds, private data centers, and hybrid environments.

As part of its capabilities, Lacework provides breach detection and investigation tools that provide information about when and how a breach occurred, including the users, machines, and applications involved in the breach. We also offer Polygraph Data Platform, a zero-touch breach detection system that automatically tags workloads, monitors application behavior, and alerts you when anomalies are detected.

Tracxn says Lacework has raised an impressive $1.9 billion toward a potential acquisition. Investors include Sutter Hill Ventures LP, Altimeter Capital Management LLC, Tiger Global Management LLC, D1 Capital Partners LP, Durable Capital Partners LP, Coatue Management LLC, Dragoneer Investment Group LLC, General Catalyst Group Management LLC, XN-Ventures LLC, Includes Liberty Global Ventures. Holding BV, Franklin Templeton Investments, Morgan Stanley, Snowflake Inc.

The obvious question today is how a company that raised $1.9 billion ends up going to market for $150 million to $200 million.

The first sign that Racework might be in trouble came in May 2022, when the company announced it would lay off 20% of its workforce. Notably, this was before the post-COVID-19 economic slowdown and associated layoffs at various companies. Lacework isn't the only company cutting staff, but it started doing so before other companies in the industry.

But layoffs aside, there's no clear explanation as to why Lacework is selling for so little. The size of this deal is perhaps odd, as the company reportedly has $100 million in annual recurring revenue.

But one thing is clear: this is a sign of market consolidation. Calcalist points out that the two companies competed with each other, so there was no overlap in their customers. If the deal goes through, 600 Lacework customers could become Wiz customers.

Wiz has regularly acquired other companies. The company's acquisitions include cybersecurity firm Raftt in December for $40 million to $50 million, and Gem Security for a reported $350 million on April 10. The company was also reportedly looking to raise an additional $800 million for a $10 billion valuation in March.

Image: Wiz