How did this B2B SaaS startup founded in 2020 raise a $300M round at a $10B valuation in early 2023?
Wiz — a multi-cloud security startup founded in 2020 — just raised 300M$ at a $10B valuation. In this market climate. How is this possible? 🤯
Well, Wiz is unique in many ways, but most importantly the startup is a masterclass of top-percentile business execution, founder-market fit and playing on strong secular tailwinds with the right GTM.
Wiz is the fastest SaaS company to reach $100M in ARR and $200M in ARR respectively and has changed how security intelligence is acted upon with a unique data architecture. As noted by Sam Wholley, if you impress Igor Tsyganskiy, you’re doing something very right. Wiz achieved $100M in ARR in mid-2022 18 months after its founding and scaled to $200M ARR in 6 months.
Compounding your way to $100M ARR in 18 months
As noted by Gokul Rajaram, Wiz is the 2nd decacorn (after Rippling) that was built as a compound startup from the very beginning.
What does he mean by a compound startup? Well, instead of building a point product for cloud infra security, Wiz set out from the get-go to build a platform tackling 4 distinct dimensions:
1️. Workload security
2️. Posture management
3️. Data security
4️. Entitlements management
This — coupled with easy deployment due to being “agentless” — has enabled Wiz to land & expand customers at a remarkable velocity.
The sales and CS teams at Wiz can enter with any of the 4 products, depending on customer need, and expand to the others. Especially during this macroeconomic climate, customers want to rationalize spend and are tired of point products (point product = a product that provides a solution to a single problem rather than addressing all the requirements that might otherwise be met with a multipurpose or multiservice product).
Over the last ten years or so, the prevailing advice for startups has been to focus their efforts. By identifying a specific problem and solving it, they can expect to reap the benefits. This strategy has proven successful, as numerous point-solution SaaS products have emerged, displacing outdated components in traditional enterprise software suites.
Here’s a excellent talk by Rippling founder Parker Conrad from February 2021 on the virtues of building “Compound Startups” (a.k.a. companies with a multi-product portfolio rather than a point solution). In the talk, Conrad explains why the “focused” approach to building a software business may be outdated, and makes a case for the strategic advantages to building a compound startup like Rippling (and Wiz).
As e.g. Gokul however underlines, building compound startups shouldn’t be perceived as easier than point solution ones. The founders of Rippling and Wiz, Parker Conrad and Assaf Rappaport, are unique entrepreneurs who have built successful software businesses before with exceptional understanding of customer needs, market dynamics and various GTM wedges.
However, now we have two concrete cases & playbooks for extremely successful compound startups to look at in two different categories (Rippling in HR and Wiz in security), who have created an interlocking set of products from the very beginning. Gokul Rajaram is not the only one excited about seeing more ambitious entrepreneurs to launch compound startups!
Sidecar products + B2B SaaS startups — a love story
Sidecard products (also called ‘Side Product Led Growth’ by some) is a business strategy that relies on building and launching free tools, apps, or microservices as a way to create brand awareness, earn trust, and acquire and activate customers. It’s also known as side project marketing or building growth tools.
These are products that solve small friction points outside of the core value prop of your business. If you’ve used Hubspot, Buffer or Shopify, you’ve likely witnessed this first-hand.
Sidecar products are an other ‘flavor’ of a compound strategy. A sidecar product is a product that offers value adjacent to the startup's core product. It gives users a sense of your product experience without having to sign up for the core product.
Examples of companies who use sidecar apps to improve top of funnel and become more ‘PLG’ include:
- Hubspot — website grader, email signature generator
- Wix — logo generator
- Snyk — vulnerability database
- Nutanix — test drive
- Shopify — a free logo maker
E.g. Hubspot’s website grader, launched in 2006, was a huge success for Hubspot, driving enormous amounts of traffic, inbound leads and building customer trust by offering something of value for free. Shopfit has created 16 side products that drove millions in visitor site traffic and helped their customers be successful, such as the free logomaker Hatchful.
As noted by e.g. Kyle Poyar, due to the new macroeconomic realities we’re all looking to grow faster with tighter & tighter marketing budgets. One way to go are free sidecar products to get as close to $0 CAC as possible.
The reasons above are some of the reasons why I’m so excited to work with ambitious early-stage startups executing a compound & sidecar strategy in the multi-cloud, B2B software and AI space!
Congrats to the whole team at Wiz for this monumental milestone and for serving as a great inspirational story for all founders out there during these times.
Let’s build (and compound) the future!
