TechCrunch Startup News PE firm PartnerOne paid $28M for HeadSpin, a fraction of its $1.1B valuation set by ICONIQ and Dell Technologies Capital
Jul 22, 2024
A Canadian private equity firm recently snagged HeadSpin for just $28.2 million, a sharp drop from its former $1.1 billion valuation. The dramatic decline follows allegations of founder misconduct and overstated revenues. With a history of major investors like GV and Dell, HeadSpin struggled to secure new funding after the scandal. To add to the chaos, leadership changes followed the acquisition, leaving most employees without benefits. This story highlights the tumultuous world of startup valuations and the impact of founder integrity.
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Valuation Collapse After Founder Fraud
- HeadSpin's valuation collapsed after its founder overstated revenue and pleaded guilty to fraud.
- The company went from a $1.1B valuation to being sold for $28.2M in a fire sale.
Sale Priced Near Revenue Multiple Median
- PartnerOne valued HeadSpin at roughly 1.4x trailing revenue based on disclosed figures.
- That multiple sat slightly below the Q1 2024 median M&A multiple of 1.6x from PitchBook.
From Big Funding To Emergency Note
- HeadSpin had raised $117M from high-profile investors before the fraud revelations surfaced.
- After cuts and failed fundraising, it took an $11.4M convertible note from existing backers then sought a sale.