Lookout Records was first founded in Laytonville, California in the spring of 1987 as a device to put out the first album by The Lookouts, a punk rock band featuring Larry Livermore (née Lawrence Hayes).

[2] The year was an exciting one in the East Bay, however, with the explosion of a vibrant musical scene around the Gilman Street Project, closely associated with the influential monthly punk fanzine Maximumrocknroll (MRR).

Livermore decided to launch Lookout as a general record label as a means of documenting the new Gilman bands, entering into a business partnership with David Hayes (no relation), who had previously been instrumental in preparing a compilation album released by MRR.

[2] After two years of rapid-fire releases, Livermore and Hayes would soon suffer an acrimonious parting of the ways.

David Hayes left to start his own Berkeley-based label, which he named Very Small Records, with Livermore retaining the name and back-catalog of Lookout — which would ultimately explode in popularity, powered by such associated East Bay bands as Operation Ivy and Green Day.