The Twenty Minute VCJason Lemkin: Crowdstrike, WTF Happens From Here? Wiz Rejects Google’s $23BN Acquisition Offer|E1181
CHAPTERS
- 0:00 – 2:50
Wiz turns down Google’s $23B: is the price actually cheap for that growth?
Jason and Harry open by stress-testing the headline number: $23B for ~$500M ARR growing 120% YoY. Jason argues ARR multiples are misleading here and that forward revenue (soon $1B+) makes the offer look far less expensive, especially versus CrowdStrike’s prior trading multiples.
- •46x current ARR vs a more relevant forward revenue multiple
- •Wiz’s ‘nothing to $500M in 4 years’ changes how you value it
- •Public comps (e.g., CrowdStrike) previously supported higher forward multiples
- •The offer is attractive but not ‘insane,’ enabling a confident ‘no’
- 2:50 – 4:57
Why Google wanted Wiz: big-tech ‘chips,’ Cloud momentum, and buying fuel for the engine
Jason explains big-tech acquisition behavior: when a division is winning, leaders get ‘chips’ to spend on transformative M&A. With Google Cloud accelerating but still #3, Wiz is framed as a scale move to sustain momentum and differentiate cloud offerings.
- •Division leaders allocate ‘big chip’ and ‘small chip’ acquisitions
- •Google Cloud’s acceleration makes leadership more willing to swing big
- •Wiz as a strategic wedge for enterprise cloud decisions
- •Rationale: buy growth, write off goodwill over time if needed
- 4:57 – 6:21
Antitrust risk and the ‘Figma lesson’: why even try if regulators can block it?
They dig into regulatory uncertainty, arguing that if Adobe–Figma could be blocked, almost anything can. Even if Wiz isn’t a direct competitor, security is strategic to cloud bundles—raising the odds of scrutiny across the US, UK, and EU.
- •Regulators may misunderstand product markets and still intervene
- •Security is central to cloud competition and enterprise switching
- •Past precedent increases perceived risk even when logic says ‘should pass’
- •Cross-jurisdiction review (US/EU/UK) lengthens timelines and uncertainty
- 6:21 – 10:15
Why Wiz likely walked away: distraction, low close probability, and founders’ risk tolerance
Jason’s core take: Wiz didn’t believe the deal would close and the process would be brutally distracting. He cites founder anecdotes (e.g., Mailchimp) about failed or extended M&A processes damaging teams, making a quick ‘no’ rational for repeat founders.
- •Deal dynamics: 2x last round often becomes the ‘clearing price’ quickly
- •Even large termination fees don’t compensate for lost momentum
- •Long M&A ‘dance’ can wreck management teams and execution
- •Repeat founders with strong growth prefer control over prolonged limbo
- 10:15 – 12:33
M&A vs IPO: choosing between antitrust purgatory and public-market scrutiny
Harry frames the choice as two painful paths: regulatory purgatory versus the grind of being public (short sellers, lockups, activism). Jason argues most founders should take good exits, but acknowledges elite outliers like Wiz can likely IPO smoothly if financials are ready.
- •Public markets add ongoing volatility, scrutiny, and activist pressure
- •Jason’s updated advice: take decent exits more often post-2021
- •Wiz’s growth makes IPO execution feasible; ‘the hard part’ is years of hitting numbers
- •Decision depends on founder goals, fatigue, and risk appetite
- 12:33 – 14:15
Board dynamics and secondaries: who benefits from saying ‘no’ and why liquidity still matters
They explore how different investors vote: early investors may favor partial liquidity via secondary rounds, while late-stage investors prefer holding for a bigger step-up. Jason references Groupon’s post-acquisition-rejection secondary as a precedent and predicts Wiz will enable a new secondary window.
- •Early-stage can ‘de-risk’ by distributing/booking returns while staying long personally
- •Late-stage incentives skew toward doubling down for 4–5x outcomes
- •Rejection can create a secondary market at/near the headline price
- •Liquidity preferences differ by fund vintage and entry price
- 14:15 – 17:00
Venture liquidity drought: ‘we’re all pretending’ and the pressure to maintain momentum
Jason calls venture liquidity a ‘disaster’ since late 2021 and argues big M&A has effectively ended under current regulation. He claims many firms behave as if liquidity is back—still investing heavily—because mega-funds need activity and fundraising momentum even without exits.
- •Three years of minimal IPO/M&A liquidity creates systemic strain
- •If big M&A is blocked, a major liquidity outlet disappears
- •Funds keep deploying to sustain fundraising cadence and narrative
- •Debate: do VCs ‘have to’ deploy, or is it cultural/momentum-driven?
- 17:00 – 19:10
The real venture job: find the next Wiz—every year—then win allocation
Jason and Harry zoom out to first principles: venture success hinges on finding the rare founders who reshape categories. Jason reframes downturn excuses as irrelevant—great founders build anyway—then challenges: LPs should ask GPs, ‘Why weren’t you in Wiz?’
- •One or two truly industry-defining entrepreneurs emerge each year
- •Finding them is harder than deciding to invest once you do
- •Competitive rounds mean ‘finding’ isn’t enough; you must win the deal
- •Downturns don’t stop great founders—so investors can’t hide behind cycles
- 19:10 – 21:47
When should Wiz IPO—and what revenue scale is really required?
They debate IPO readiness thresholds. Jason’s nuanced view: it’s not strictly $500M revenue, but $500M growing ~30% is the common workable profile; smaller companies can IPO around $200M if growth is ~50–60%, but there are fewer candidates like that today.
- •‘$500M to IPO’ is shorthand for scale + sustained growth + market attention
- •$200M IPOs can work with sufficiently high growth rates
- •Many SaaS companies decelerate too early (100–200M ARR growing <30%)
- •Secondaries let top companies optimize timing rather than rush public
- 21:47 – 25:20
CrowdStrike crisis response: what they got wrong and why churn won’t show up fast
Jason grades CrowdStrike’s response poorly on transparency and root-cause communication, especially given its single-point-of-failure role. He predicts logo churn may be limited in the short term because ripping out endpoint infrastructure is a multi-year project, but upsells and NRR could suffer materially.
- •Missing/insufficient root-cause narrative and ‘why it won’t happen again’
- •Single-vendor systemic importance demands higher transparency
- •Switching costs make near-term churn unlikely; impact is lagged 3–5 years
- •Upsells likely stall, hurting NRR even if GRR remains high
- 25:20 – 29:08
Bull vs bear case for CrowdStrike: ‘one pass’ versus cascading fallout
They structure the forward view into bull and bear cases. Bull: it wasn’t a security breach, outrage fades, and customers grant one mistake if reliability holds going forward. Bear: legal exposure, brand damage, and historical parallels (e.g., McAfee-era incidents) could force conservatism or worse.
- •Bull thesis: not a breach; customers tolerate one major operational failure
- •Comms matter: earning the ‘pass’ requires credible prevention steps
- •Bear thesis: fines/legals + brand damage + opportunistic follow-on attacks
- •Risk of becoming overly conservative and slowing product momentum
- 29:08 – 33:03
Where does CrowdStrike trade by year-end? Buffers, guidance games, and market logic
They make a market-cap prediction game: Jason expects a partial rebound based on conservative forward guidance and built-in buffers. Harry is more cautious due to brand damage and legal overhang, but both treat guidance conservatism as the key stabilizer.
- •Stock reaction may be ‘rational’ if growth/upsells are impaired
- •Conservative forward guidance creates buffer to still hit numbers
- •Jason’s call: ~83B market cap by Christmas (partial gap-fill)
- •Harry’s call: ~75B, citing brand and legal/fine headwinds
- 33:03 – 37:28
Clio’s $900M round at $3B: late-bloomer SaaS, secondaries, and payments as the accelerator
They analyze Clio’s financing as mostly secondary, implying less dilution than the headline suggests. Jason frames Clio as a ‘late bloomer’ that took many years to reach $100M ARR, then accelerated after payments/fintech monetization unlocked a new growth curve.
- •Valuation math: ~10x ARR at ~$200M, reasonable for today if growth is solid
- •Round composition: largely secondary for investors/employees
- •Payments + software (Shopify model) can dramatically change growth trajectories
- •Clio as a motivational founder story: persistence + eventual inflection
- 37:28 – 41:59
Harvey’s $100M at $1.5B: AI revenue surges, but ‘AI parity’ threatens defensibility
Jason acknowledges AI companies can grow at breathtaking speeds, but questions durability when competitors rapidly copy features. He predicts 2025 as a year of ‘SaaS AI parity,’ where many categories (legal, contact center, sales tools) converge on similar AI claims, pushing differentiation back to distribution and vertical focus.
- •AI can break traditional growth models, but moats may be thin
- •‘AI parity’ thesis: most incumbents will match core AI features quickly
- •Defensibility depends on vertical depth, workflow ownership, and distribution
- •Markets will test whether current ARR is experimentation budget or sticky spend
- 41:59 – 50:15
Quick-fire truths: 1x fund generation, underrated Klaviyo, Snowflake’s mortality, and recruiting talent
In rapid Q&A, Jason claims many recent VC vintages will end as 1x funds, stressing the hidden underperformance problem. He names Klaviyo as underappreciated, argues Snowflake became ‘mortal’ amid competition and leadership change, and closes with a personal lesson: great outcomes hinge on relentless recruiting—both for founders and investors.
- •VC reality: many funds may return ~1x; a painful but unspoken outcome
- •Underrated public co: Klaviyo (ecommerce marketing) despite strong love and scale
- •Overappreciated/misread: Snowflake’s shift from ‘invulnerable’ to merely great
- •Personal takeaway: recruiting/hiring is the core job post-PMF; expand surface area for deals
