Exclusive: Wiz acquires Gem Security

The first time Gili Raanan ever gave Assaf Rappaport a big check, it was in a gas station.

“It was a convenience store in a gas station that didn't really have tables, and there were two seats we could occupy,” said Raanan, a venture capital investor who was then at Sequoia Capital.

The unusual meeting point was a compromise of sorts, halfway between Tel Aviv, where Rappaport lived, and Raanan’s homebase in Mikhmoret, a coastal town 26 miles to the north.

“Assaf said, ‘I don't own a car. I live in Tel Aviv, and I have no idea where Mikhmoret is,’” Raanan recalls. So they closed the deal in the gas station. “We had a conversation about terms, shook hands, and that’s how the first investment in Assaf happened.”

That was in 2012, for a startup called Adallom—a company Rappaport and his cofounders Ami Luttwak, Yinon Costica, and Roy Reznik would ultimately sell to Microsoft for a reported $320 million in 2015.

And that’s where the story moves into hyperspeed. About 12 years after sitting across from Raanan in that gas station, Rappaport is now handing out checks of his own. Rappaport isn’t a VC though; he’s the CEO of fast growing cloud security startup Wiz, and he’s on the hunt for acquisitions.

In December, Wiz announced its first deal, buying developer-focused cloud platform Rafft for a reported $50 million. Now, Wiz is on to its second, even larger deal, closing the acquisition of Gem Security, the companies have exclusively confirmed with Fortune. Wiz and Gem declined to disclose the financial terms, but sources familiar with the matter told Fortune that it’s a $350 million transaction.

Gem, which was founded in 2022 and specializes in what’s commonly termed cloud detection and response, or CDR, landed on Rappaport’s radar last year. “I never got so many calls from so many investors saying: ‘Hey, how can we get into Gem?’" said Rappaport. “That's when I knew something was happening.”

Rappaport started calling Gem CEO and cofounder Arie Zilberstein. But until very recently Zilberstein wasn’t considering a deal.

“We weren't thinking about getting acquired at all, not even a month ago to be frank,” Zilberstein said. But Gem’s CEO eventually came around as he considered the benefits of combining forces. From there, the deal moved quickly. “This wasn’t relatively fast, this was shockingly fast,”  said Nadav Zafrir, cofounder of Team8 and an investor in Gem.

The Gem acquisition, which was reported to be in the works in March by Bloomberg, marks another key milestone in Wiz’s rapid rise in the cyber industry. Rappaport founded Wiz in 2020 with his former Adallom cofounders, and the company is based in New York.

Wiz, which was among the Fortune Cyber 60, has raised $900 million from backers including Sequoia, Lightspeed Venture Partners, Index Ventures, Insight Partners, Salesforce Ventures, and Raanan’s Cyberstarts, and is reportedly valued at $10 billion.

The Financial Times reported in March that Wiz is looking to raise a new round for as much as $800 million valuing the company north of $10 billion. Though Rappaport declines to comment on the report directly, he’s open about the inbound interest that Wiz has received.

“There’s fundraising excitement, after we’ve crossed the $350 million, expanding in the U.S., AI, and now with the Gem acquisition that’s public—I would say we’ve got a lot of interest from investors,” Rappaport says.

2024 will be “the year of acquisitions”

The speed of the Gem acquisition can be in part attributed to the common language between Rappaport and Zilberstein. The two have a lot in common, in a way that’s easy to see as they talk to each other on a Zoom call—they both sit with evocative art in the background (on Rappaport’s side, there’s even a painting by his cofounder Costica) and they’re both very excited to let me know that they both have border collie mixes.

And then there’s how they first met—more than a decade ago, Rappaport and Zilberstein were both in the elite cyber division of the Israeli Defense Forces, Unit 8200. It’s a program that screens thousands of candidates and ends up recruiting the top 1%.

Rappaport also had his own experience to bring to the table, as a founder whose company was acquired. “Assaf, being a former founder who sold his company, helped one hundred percent,” said Zilberstein. “It was a valuable part of the trust that we’ve been able to have as part of this deal.”

To hear Rappaport talk, there will likely be more Wiz deals in the near future. The Wiz CEO calls 2024 “the year of acquisitions,” and he’s currently asking himself: “How do we copy and paste the success we’re addressing here? How do we look for the next amazing companies that are going to grow in our cloud security market?”

Raanan, who founded VC firm Cyberstarts and was also an early investor in Wiz, says the M&A strategy is a sign of the startup’s maturity, despite being only four years old: “getting to the point where you realize that you can acquire talent and technology that would accomplish things you couldn’t or would take you a lot of time to accomplish.”

It’s quite a change for someone who, more than a decade ago, didn’t have a car and met his VC in a comically tableless gas station convenience store. I ask Raanan what he knew, looking back on that moment; he thinks very seriously about the question before answering.

“When I meet founders, I ignore the product ideas, I ignore the technology, and I ignore the market,” he said. “Back in 2012, everything was the pitch, the product, the market, but that whole setting, that whole interaction, there was something that was pure gold… I sensed that I was looking at a young individual that can go the whole way.”

This story was originally featured on Fortune.com