A Look At Lookout's Valuations and Deal Terms

VC Experts Intelligence Team

3 minutes to read

"Everything is ok" for Lookout, the developer of security software that protects people, businesses and networks from mobile threats. The company broke into the hundred million dollar valuation range back in late 2010 with the issuance of their Series C round. The Series D round followed in September 2011 and brought the company up to the $3.5 million range. The close of their Series E round in October 2013 brought them into the $800 million valuation range.

Click below to view the terms of each round, including common and preferred price per share, est. fully diluted share count, and valuations...

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What Do The Deal Terms Mean?

Conventional Convertible Preferred Stock: A type of preferred stock that can also be referred to as "Non-Participating Preferred Stock". This preferred stock typically receives a liquidation preference prior to the common stock, and does not participate on an "as if converted basis" with common stock in any remaining proceeds of a defined "liquidation" event. Upon such a "liquidation" event, holders of Conventional Convertible Preferred Stock must choose whether to receive their liquidation preference or convert their shares to Common Stock in order to participate in the pro rata distribution of assets.

Dividends: The payments designated by the Board of Directors to be distributed among the shares outstanding. The type of share determines the amount. On preferred shares, it is generally a fixed amount. With common shares, the dividend can be omitted if the Directors decide to invest the money in a capital expenditure or if the business is slumping. If the dividend is paid, the amount varies depending on the amount of cash on hand.

There are several types of dividends:

Cumulative—Missed dividend payments that continue to accrue.

Non-cumulative—Missed dividend payments that do not accrue.

Participating—Dividends which share (participate) with common stock.

Non-participating—Dividends which do not share with common stock.

Liquidation Preference/Multiple: The amount per share that a holder of a given series of Preferred Stock will receive prior to distribution of amounts to holders of other series of Preferred Stock or Common Stock. This is usually designated as a multiple of the Issue Price, for example 2X or 3X, and there may be multiple layers of Liquidation Preferences as different groups of investors buy shares in different series. For example, holders of Series B Preferred Stock may be entitled to receive 3X their Issue Price, and then if any money is left, holders of Series A Preferred Stock may be entitled to receive 2X their Issue Price and then holders of Common Stock receive whatever is left. The trigger for the payment of the Liquidation Preference is typically a sale or liquidation of the company, such as a merger or sale of assets.

Anti Dilution Protection: Contractual measures that allow investors in convertible preferred shares an automatic reduction in the conversion price, meaning more common shares on conversion, if a subsequent round is a "down round," thereby mitigating down round dilution.

Pay-to-Play Provisions: A "Pay to Play" provision is a requirement for an existing investor to participate in a subsequent investment round, especially a Down Round. Where Pay to Play provisions exist, an investor's failure to purchase its pro-rata portion of a subsequent investment round will result in conversion of that investor's Preferred Stock into Common Stock or another less valuable series of Preferred Stock.

Post-Money Valuation: The valuation of a company immediately after the most recent round of financing. For example, a venture capitalist may invest $3.5 million in a company valued at $2 million "pre-money" (before the investment was made). As a result, the startup will have a post-money valuation of $5.5 million.

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