Lookout, the mobile security company with ambitions to become the Symantec of the wireless world, is picking up a new backer, and and a major distribution partner in its bid to become a household name. France Telecom, owner of the mobile carrier Orange, is making a strategic investment in the startup, and it has also signed a deal in which Lookout will be preloaded on devices that it sells. Orange has 169 million subscribers and it will start first with Lookout service bundles covering antivirus protection and device tracking for Android devices, installing it as standard on devices in France, Slovakia, Spain, and the UK (through its EE JV with T-Mobile) starting in early 2013.
Exact financial terms of the investment in Lookout — which has 30 million active installs and has already raised $76 million from a top list of VCs including Khosla Ventures, Chris Sacca, Trilogy Equity Partnership, Index, Accel Partners, and most recently $40 million from Andreessen Horowitz – were not disclosed, but it could be as high as $20 million (€15 million).
That’s because the investment comes out of the OP Ventures Growth fund, a $400 million fund backed by Orange and two other French leviathans, advertising giant Publicis and Iris Capital Management. First announced in March, OP Ventures makes investments of up to €15 million in startups that are strategic for one or both of the companies. This is one of the first U.S. investments made out of the fund (MoPub was another).
Xavier Perret, VP of partnerships for Orange, says that the investment in/distribution deal with Lookout is structured similarly to its past stake in Deezer, the music streaming company. In other words, the plan is to use the technology as much as invest in it.
“We wanted a strategic investment because this is not just a distribution agreement,” said Perret in an interview. “We are including Lookout into our service bundles, but we also see mobile security as an important part of the bigger security-privacy-personal data issue, and in that sense we wanted to be close in terms of positioning.”
While mobile security may have found early adopters among enterprises and organizations with sensitive information, Perret calls Lookout “a consumer play.” The growth of smartphones has given rise to new security threats in the form of malware and lost devices. But equally, there are now more consumers — later adopters — that may be less proactive in how they use the devices, and will be less inclined to seek out security solutions on their own. Alex Abey, the VP of business development for Lookout, describes consumer awareness of mobile security as still “emerging, although it is increasing over time.”
The opportunity, Orange believes, is to sell consumers — later adopters specifically — more service bundles that include security solutions from Lookout, as retailers have done for years with antivirus software sold with PCs. “Orange has the opportunity to be the digital coach for those consumers, explaining the services and offering support,” Perret said.
Orange is focussing on Android first for a couple of reasons: it is the most popular mobile platform in the world at the moment, but it is also, as an open-source platform, one of the most targeted by hackers. The Kaspersky Lab found that in Q2 2012, the number of malicious programs targeting Android had risen to 14,900, nearly three times the number in Q1. Lookout estimates that 40% of Android users will click on a malicious web link on their phone this year.
Orange plans to extend Lookout to other platforms in the future, too. Lookout’s software already works on iOS and it has plans to cover Windows Phone in the future, and others if market penetration merits it.
While France Telecom may want sole use of new technology in some cases, in this one, perhaps because FT is an investor and can benefit regardless, the deal is anything but exclusive. Lookout already works with other operators — another European giant, T-Mobile owner Deutsche Telekom, as well as Verizon and Sprint are among Lookout’s customers. Some 40% of Lookout’s 30 million active users are outside the U.S., and international will be a big focus going forward, says Abey.
France Telecom is, however, the first carrier that has chosen to take that customer relationship to investor level. Abey believes that having a carrier as an investor is an important step for Lookout as it continues to develop its mobile security “ecosystem.” His description of that ecosystem could also be an indication of where we might see Lookout announce its next partnership beyond traditional VCs as it continues to build out its product.
“It’s about OEMs, carriers and security companies working together to make mobile computing safer for consumers,” he says. So: perhaps look out for Lookout and what it might do next with device makers.