A Canadian private investment firm recently paid $28.2 million to acquire HeadSpin, a mobile application testing startup that had faced challenges in recent years. Documents obtained by this publication show that PartnerOne Capital acquired the company, whose former founder was convicted of fraud charges earlier this year.
HeadSpin generated $21 million in revenue for the 2023 fiscal year according to the documents. Revenue during the first quarter of 2024 stood at $5 million. Based on these figures, PartnerOne valued HeadSpin at approximately 1.4 times its annual revenue. Data from investment banking firm PitchBook shows the median acquisition multiple for deals announced or closed in Q1 2024 was 1.6 times revenue.
Neither PartnerOne nor HeadSpin provided official comments about the purchase price or revenue amounts. In 2020, irregularities surfaced regarding inflated revenue reporting by the company’s founder, which led to his resignation. He later pled guilty to wire fraud and securities fraud and was sentenced to prison time.
Prior to these issues coming to light, HeadSpin had raised over $100 million from notable investors. However, the new leadership team was unable to achieve a new round of funding last year. This forced the mobile testing platform to seek a potential sale led by investment bank Shea & Company.
It is understood that HeadSpin’s new executive team appointed after the founder’s exit also resigned following the PartnerOne acquisition. Most former employees did not receive any compensation for vested or unvested stock options.
The acquisition value represents a significant decrease from HeadSpin’s last private valuation of $1.1 billion set during a funding round in 2020 led by ICONIQ Capital and Dell Technologies Ventures. While the new ownership aims to stabilize operations, HeadSpin will operate under PartnerOne with a drastically reduced valuation in light of its prior challenges.
