Investments in cybersecurity startups can often be high-risk, but they also present opportunities for extraordinary returns. One such case is the early investment in Wiz, a cloud security firm that recently made headlines for its acquisition by Alphabet for a staggering $32 billion. One of its earliest backers, Cyberstarts, turned a $6 million investment into a $1.42 billion windfall, representing a 222x return. This remarkable success underscores the lucrative potential of investing in high-growth cybersecurity startups at their inception.
Cyberstarts’ Early Investment in Wiz
Cyberstarts, a venture capital firm specialising in cybersecurity, was one of the first investors to identify the potential of Wiz. In February 2020, Cyberstarts invested $6.4 million in Wiz from its first fund, which had a total capital of $54 million.
At the time of investment, Wiz was in its early development stages but showed promising signs of innovation in cloud security solutions. Cyberstarts acquired 4.1% of Wiz’s shares through this initial funding round. The company’s subsequent growth validated the foresight of early investors, as Wiz expanded rapidly in the cybersecurity sector, attracting attention from major tech players.
Massive Returns from the Alphabet Acquisition
When Alphabet finalised its $32 billion acquisition of Wiz, Cyberstarts’ 4.1% stake became immensely valuable. The fund’s initial investment of $6.4 million was now worth approximately $1.3 billion, reflecting an exceptional 222x return.
Additionally, Cyberstarts had previously liquidated part of its stake in Wiz through secondary sales, generating $120 million before the acquisition. When these earlier exits are combined with the Alphabet deal, Cyberstarts secured a total return of $1.42 billion from its investment in Wiz.
Key Takeaways from Cyberstarts’ Investment in Wiz:
- Initial Investment: $6.4 million in February 2020
- Ownership Stake: 4.1% in Wiz
- Alphabet Acquisition Valuation: $32 billion
- Final Return: $1.42 billion
- Overall ROI: 222x
Further Investments and Additional Returns
Cyberstarts continued to back Wiz in subsequent funding rounds through its opportunity fund, investing an additional $40 million. While this later-stage investment did not yield the same extraordinary multiple, it still generated a 3.2x return, bringing in $128 million.
This demonstrates the strategic decision-making involved in venture capital—early-stage investments often provide exponential returns, while later investments, though profitable, typically yield lower multiples.
Comparison with Other Early Investors
Cyberstarts was not the only firm to benefit from Wiz’s meteoric rise. Other venture capital firms also saw significant returns, albeit at lower multiples.
- Sequoia Capital, which invested $10 million in Wiz, realised a 25x return, with its stake now valued at $3 billion.
- Index Ventures, which held 12% of Wiz, saw its stake valued at over $3.8 billion.
These figures illustrate how different funding rounds affect the return potential for investors. While later-stage investors secured substantial gains, those who entered during the seed round—like Cyberstarts—experienced the highest multiples.
Cyberstarts’ Investment Strategy and Track Record
Founded in 2018 by Gili Raanan, a former Sequoia general partner, Cyberstarts focuses exclusively on cybersecurity startups, leveraging deep industry expertise to identify promising ventures.
The firm’s first fund, which backed Wiz, has now generated a 26x return on its limited partner (LP) capital. This performance is exceptional by venture capital standards, further solidifying Cyberstarts’ reputation as a top-tier cybersecurity investor.
Factors Behind Cyberstarts’ Investment Success:
- Specialisation in cybersecurity – deep industry knowledge allows better risk assessment.
- Early-stage focus – investing before mass-market adoption results in higher multiples.
- Strategic secondary sales – liquidating part of the stake before acquisition secured additional returns.
- Strong founder relationships – backing startups with proven leadership ensures execution capability.
Wiz’s Journey to a $32 Billion Valuation
Wiz was founded in 2020 by Assaf Rappaport, former head of Microsoft’s cloud security business, alongside a team of seasoned cybersecurity experts. The company’s rapid rise was driven by:
- Cutting-edge cloud security solutions that addressed modern threats.
- Strong leadership with industry experience that built trust with investors.
- Rapid customer adoption among enterprises seeking enhanced security.
- Strategic funding rounds that supported growth while maintaining valuation discipline.
Wiz’s acquisition by Alphabet marks one of the largest cybersecurity deals in history, highlighting the increasing importance of cloud security solutions in an era of growing digital threats.
The Broader Implications for Cybersecurity Investments
Cyberstarts’ success with Wiz reflects a broader trend in cybersecurity venture capital. Investors are increasingly focusing on startups that provide scalable, cloud-native security solutions, as businesses shift to cloud-based infrastructure.
Key Trends in Cybersecurity Investments:
- Rise in cloud security funding as enterprises move away from legacy systems.
- High valuations for promising startups driven by increased demand for cybersecurity solutions.
- Early-stage investments delivering the highest multiples due to lower entry valuations.
- Strategic exits through acquisitions as tech giants consolidate cybersecurity capabilities.
The Wiz deal reinforces the notion that cybersecurity will continue to be a lucrative sector for investors, particularly those who identify and back innovative startups at an early stage.
Final Thoughts
The story of Wiz and Cyberstarts is a prime example of how early investment in high-potential cybersecurity startups can yield extraordinary returns. Cyberstarts’ $6.4 million bet ultimately delivered a 222x return, cementing its place as one of the most successful cybersecurity investments in recent history.
As businesses and tech giants continue prioritising cloud security, more opportunities like Wiz are likely to emerge. For investors, the key lesson remains clear—identifying groundbreaking cybersecurity startups early and backing them with strategic funding can lead to unparalleled financial gains.