Geeking about Loom’s $975M

The math didn’t add up

The big startup news of the week was, of course, Loom ’s acquisition by Atlassian for a reported $975M ($880M cash and the rest in vested stock).?

Don’t get me wrong, this is GREAT SUCCESS (read that in ‘Borat’ voice), but it’s not the success you might have expected for the founders.

The key to that is that Loom’s last valuation was $1.5B. It’s understandable that the valuation was so high since it was raised at the height of the bubble pandemic when startup valuations were through the roof. It’s not immediately obvious why they ‘rushed’ to sell at a lower valuation. Had growth slowed down? Were there cash/runway problems??

The fact that Atlassian predicts a decrease in its profitability for the next fiscal year is a reflection of Loom not being so profitable.?

Breaking down the rounds

I plugged the publicly available information about Loom’s funding into our Cap Table template to estimate how the rounds and equity might have played out. By my calculations, the founders should have walked out with about $90M each (assuming their equity stakes are all the same).?

CB Insights’ estimate was $50M per founder if you want to cross-check my math.?

Both estimates take into account the 1x liquidation preference that each round of investors likely requested. For context (and in very simple terms), ‘liquidation preference’ is a protection on the funding deal that guarantees investors receive at least 1x the capital they invested.?

Here’s a breakdown of earnings and multiplier per investment round. I couldn’t waste the opportunity to record a Loom video going over my math.?

A personal note: $50M, or $90M, is life-changing, generational wealth (vs the risk of walking out of the deal). It may not have been the end game the founders had in mind a couple of years ago, but it will still change their lives. Hats off.?