Consolidation continues apace in the world of security. Sources tell us that Lacework — a cloud security startup that was valued at $8.3 billion post-money in its last funding round — is in talks to be acquired by another security player, Wiz, for a price of just $150 million – $200 million.

Sources close to the negotiations said that the two parties have already signed a letter of intent and described the state of negotiations as “somewhere in the middle”. That is to say, the acquisition is not yet completed and so the deal could still fall through. Although both work in the wider area of cloud security, sources tell us that there is relatively little competitive overlap between the two companies so it would likely be a technology plus talent plus customer acquisition play. We are still trying to find out more terms of the deal, such as whether it would be in stock, cash, or a mix.

Wiz has said on a number of occasions that it’s looking to hit $1 billion in ARR ahead of an IPO. We understand that its soft deadline on that is end of 2025, but considering it announced ARR of only $350 million in February 2024, it has to get aggressive on bulking up to get there. Laceworks, we understand, has ARR of around $100 million.

(The Information has reported some of the above details today too.)

The deal underscores a story of two parts.

Part one: Security startups continue attract a lot of funding attention, but some companies that have reached high valuations over recent years are struggling to justify those numbers and are considering their options as they come close to the end of their funding runway.

From what we understand, Laceworks’ investors — the longer list includes Snowflake Ventures, GV, General Catalyst, Tiger Global and many more — were shopping the company around to potential buyers, which is how Wiz came into the frame.

Laceworks, we should note, is not the only security business getting a valuation haircut. Just last week, we broke the news that Noname was in talks to be acquired by Akamai for $500 million, after last being valued at $1 billion.

Part two: Other players are emerging as consolidators in this process. Wiz — valued at around $10 billion — is one of them.

The company is positioning itself as a one-stop-shop for all things cloud security en route to its IPO. Earlier this month it acquired Gem Security for $350 million, and it sounds like the M&A will not end with Laceworks.

“Wiz has experienced unprecedented organic growth since its inception, and we are dedicated to pushing this growth even further,” a spokesperson from Wiz said in a statement provided to TechCrunch. “Simultaneously, we recognize that consolidation is the future of the security industry and therefore are actively engaged in discussions with companies across the industry. We are always exploring compelling M&A opportunities that will enhance both our technological capabilities and business expansion, as we strive to build the world’s leading cloud security platform.”