Hybrid: Founder & Corporate - Lookout

Alicia_Schmidt — Tue, 05 Mar 2024 22:35:32 GMT

John Hering, Co-Founder

1% of equity via co-founder’ and CEO personal holdings & Corporate equity; Transferred pre-exit

“Technology is changing the world, and it is critical that we ensure it is for the better. Pledge 1% is a platform that enables companies to express their core values in the form of positive impact.”

• Pledge 1% member: since April 2015 (Builder)

• Pledge Types: Equity, Time, Product

• Stage: Private, Series F

Over 5 years (pre exit)Timing of commitment:

Late stage: Series F

Vehicle:

Equity source:

Hybrid: Founders/CEO & Corporate

Funding schedule:

Company transfers 0.2% a year for 5 years (pre exit)

Investor dilution:

Over 5 years (pre exit)

% Upfront:

0.2% corporate equity & unknown founder equity

“Top off”:

N/A

Donor-advised fund:

No - Lookout Foundation

Background

Lookout’s co-founders John Hering, Kevin Mahaffey, and James Burgess, were all very philanthropic and passionate about giving back. When they hired a new CEO, Jim Dolce in 2014, he shared this core value. Together, they decided to create the Lookout Foundation, an employee-run initiative, and each donated a combination of personal cash and stock to jumpstart the Lookout Foundation’s social impact activities. They saw an opportunity to persuade the Board to set aside 1% of company equity during a Series F funding round--a moment in time where the company could proclaim its culture of giving.

Strategy

John, his co-founders, and his new CEO, believed that by demonstrating their personal commitment first, they would be able to more easily convince the Board to set aside 1% of company equity, despite their late stage of funding. The strategy worked! The Lookout Board committed to transfer 1% of the company’s outstanding shares to the Lookout Foundation over a period of 5 years (0.2% a year).

Execution

During its 2015 Series F round, Lookout passed a board resolution to a grant 1% of outstanding shares to the Lookout Foundation. The shares, which were newly issued as part of its Series F round, were scheduled to be granted 0.2% per year for 5 years starting in 2015 (pre exit). Additionally, the co-founders and CEO donated cash and/or equity to seed the Foundation.

The Lookout Foundation is an independent organization run by employee volunteers who drive grant-making activities and employee engagement.

Pros/Cons of This Approach

✓ Demonstrates both founder/CEO and Board commitment to social impact.

✓ Seed funding/equity vesting (pre-exit) keeps employees engaged pre-liquidity.

⌧ More administrative overhead with Foundation than DAF.

⌧ Typically greater continuity and impact with a strong social impact leader vs. volunteers.

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