Canadian private equity firm PartnerOne has acquired HeadSpin in a fire sale, TechCrunch has learned exclusively. And most of its former employees received nothing for their options, according to multiple sources. HeadSpin is the mobile app testing company whose founder was sentenced to prison for fraud earlier this year.
In total, HeadSpin raised $117 million since its 2015 inception from investors such as Google Ventures, Iconiq, Dell Technologies Ventures, Battery Ventures, Felicis and Tiger Global. It was last valued at $1.1 billion in 2020. The company’s ARR was around $20 million and the acquisition price was probably between $20M and $40M, one former employee who wishes to remain anonymous told TechCrunch. Another former employee told TechCrunch the sales price was believed to be “cents on the dollar.” Ironically, at the time of its $20 million Series B raise in 2018, investors were touting the company as “one of the fastest-scaling software companies” ever.
Montreal-based PartnerOne confirms on its website that it has acquired HeadSpin, but has not disclosed the amount. TechCrunch has reached out to PartnerOne but had not heard back at the time of publication. The phone number on HeadSpin’s website was not in working order.
Former executives of HeadSpin, however, are not benefiting from the PE buyout, according to several former workers.
In an email sent to employees, the company shared that HeadSpin had a new home with a PE firm, calling it “great news.” Then 10 minutes later, according to a document viewed by TechCrunch, workers got an email that all of their options, vested and unvested, were canceled because the options were “underwater.”
The email said in connection with the buyout, that all options would be “canceled in exchange for no consideration.”
Although the terms of the deal were not disclosed to employees in this email, by announcing that options would be underwater, the email indicates that the purchase price for the company’s shares was lower than any strike price employees were eligible to pay.
“The CEO, COO and CTO were all let go that day. We can only speculate they got packages,” one source said. “But some employees who had been there for 9-10 years and weathered the storm though the former founder, working 15 hour days – they got nothing.”
The company’s founder, Manish Lachwani, was sentenced to 18 months in prison after pleading guilty to two counts of wire fraud and one count of securities fraud in April. He was also ordered to serve three years of supervised release after leaving prison and ordered to pay a $1 million fine for lying to investors. A hearing on restitution was scheduled for July 31.
Lachwani led the company as CEO until May of 2020, when he was replaced by Rajeev Butani.
The New York Times reported that Lachwani inflated “HeadSpin’s revenue nearly fourfold, making false claims about its customers and creating fake invoices to cover it up.”
“I think the former c-level executives, specifically the CEO did a good job getting the company out of the hole that the former CEO created but I think overall the company was not managed in the best way,” one employee said. “They were trying to catch every new customer, not really having a vision for what the company was.”
Companies use HeadSpin to test and monitor their apps across various geographies and device. The company claims that it helps businesses “ship products faster with zero end-user issues.”
Christine Hall and Marina Temkin contributed to this article.
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