Many tech companies wouldn’t walk away from a $25M verbal offer, but recent Corum customer LunarG wanted more from its global partner search. Not a higher valuation—rather, LunarG prioritized the business advice, strategic positioning, market feedback and relationship building provided through the Corum process.

As LunarG CFO Tom Ptach explains, “The Corum process gave us a better understanding of what our company was, what we need to do with our company going forward to create more equity value in our company—either internally or externally. And it helped us realize and solidify what our goals and ambitions are for the company.” 

Karen Ghavam, LunarG CEO and founder agrees, “It was a focusing event for us. It made us learn about ourselves to determine where we want to go."

Why LunarG engaged Corum

LunarG started its global partner search to gain a deeper understand of how the outside world would view its business. While LunarG was confident in the services and consulting it provides as a 3D graphics software engineering firm, a talented team and a loyal customer base aren’t the only things that the market values.

So, when Ghavam received a call from Corum dealmaker Mark Blundell regarding the Corum process, Ghavam and Ptach began to weigh the cost and benefits of “going to market” when they weren’t set on achieving an equity transaction.

“We’re not dumb. We’re businesspeople,” Ptach remarks pointedly as he recalls his discussions with Ghavam to decide if engaging Corum was worth the time and monetary commitment.

Ptach continues, “Between Mark, the presentation materials and how Corum postured itself, it was clear what they intended to deliver. That gave us enough confidence to risk moving forward into a six-month process with Corum, to see if at the end of that process, we might find an equity transaction. But if we didn’t, we felt we’d get something that’s worth at least what we’d spent.”

LunarG’s business model learnings

From the initial steps of the Corum process, LunarG gained impactful feedback from industry experts on where it excelled as a company and how it could improve its business model.

Ghavam explains, “Our primary business model has been consulting in software engineering services. And in that business model, the Corum process solidified that we would want more diversification of our customer base. It also emphasized that we need to seriously consider creating some intellectual property and our own revenue-generating products based on that IP as well.”

Adjusting its business model will make LunarG not only a more successful company but also a more valuable prospect for buyers.

Ptach says, “We got a good understanding of the multiples that we could generate in the marketplace right now. And that—by taking the time to seek some more diversification—we might be able to increase that by 50 percent. Further, by pursuing some proprietary IP—be it monetizable or not—and coupling that with our current consultancy business model, we could increase that multiple ten times, if not more, depending on the nature of that IP.”

The $25 million verbal offer

While LunarG had some areas to improve, it drew interest from the market, including a verbal offer of $25 million. However, one potential buyer was more interested in LunarG’s expert team than its services and would have redistributed the LunarG team throughout its organization.

Such an acquihire situation would dampen the team’s synergistic connection and end its work on the software development kit for the open source Vulkan graphics API. Moving forward with the $25 million offer would have been against LunarG’s business philosophy and, Ghavam realized, her personal motivation.

LunarG CEO Karen Ghavam’s motivation

Ghavam calls the Corum process “crystallizing,” saying that it helped her better understand her values and intentions for her company.

“I'm not motivated by getting a ton of money in my bank account,” Ghavam says. “I am motivated by having a positive impact on the industry—or, I should say, not having a negative impact on the industry. We are very fundamental to this ecosystem, and therefore, the success of this graphics API, this open standard. And if we were disbanded, split up and distributed within a company unable to support that ecosystem, my conscience would not have felt right.”

Although LunarG chose to not sell, the Corum process helped LunarG realize what it needs to find the right fit in the future.

Ghavam says, “I believe that we could find a transaction that is aligned with our personal values of what we want to achieve with the company—our philosophy—and being profitable. We do not believe that those have to be in contradiction to each other.”

Ptach adds, “It’s not that Corum couldn’t find that transaction, but one of the things the Corum brought to our attention is that our current business operating scenario wasn’t going to bring that very readily. We needed to do a little bit of an adjustment to make that goal a reality.”

So, LunarG didn’t pursue the $25 million verbal offer, but it built a different relationship with the potential buyer. “When they realized I didn't want them to buy me, they came back around and became one of my clients,” Ghavam says, adding with a chuckle, “So that was useful.”

LunarG’s next steps

Having engaged the Corum process to LunarG’s satisfaction, the company now focuses on implementing what it learned from the market.

Ptach says, “The Corum process gave us an opportunity to create more value in our company to somebody outside an acquihire type. A venture capitalist or more of a true merger—something that would allow the value that LunarG brings to the ecosystem to persevere after an equity transaction. And we were willing to step back—take the two to three years necessary to create the business model that will create that type of value and longevity in what LunarG is doing.”

After closing out its current Corum process, LunarG pulled together key individuals at the company to identify potential IP opportunities. Through disciplined strategic planning for the business, it’s hoping to launch its IP on a tight timeline and restructure its business model around the IP.

From there, LunarG may continue to build around its IP or return to the market, looking for an equity transaction as the optimal outcome. The plan is flexible because, as Ptach says, “My crystal ball is not that clear. I can’t tell you what the step is after that. But we're taking steps in that direction, all as a result of the process we went through with Corum."

Benefits of the Corum process

Though LunarG’s goals for the Corum process are different from many Corum clients, the company is a prime example of the five benefits of going to market. LunarG is forming a better business model and improving its strategic position, based on the market feedback it received. Additionally, it’s moving forward with new relationships formed during the global search.

Moreover, now LunarG knows what it needs to do to attract the buyers it wants. If LunarG decides to sell in the future, it will have better leverage to find the kind of exit that clearly reflects the values of the company and its leadership.

If you want to learn how your company can benefit from going to market, contact us. Our tech M&A experts stand ready to advise, offering no-obligation assessments on the salability and value of your company.