No oversight: inside a boom-time startup fraud and its unraveling
Manish Lachwani founded the Silicon Valley software startup HeadSpin in 2015, he inflated the company's revenue numbers by nearly fourfold and falsely claimed that firms including Apple and American Express were customers. He showed a profit where there were losses. He used HeadSpin's cash to make risky trades on tech stocks. And he created fake invoices to cover it all up.
What was especially breathtaking was how easily Lachwani, now 48, pulled all that off.
Elevate Your Tech Prowess with High-Value Skill Courses
Offering CollegeCourseWebsiteNorthwestern UniversityKellogg Post Graduate Certificate in Product ManagementVisitIIM KozhikodeIIMK Advanced Data Science For ManagersVisitMITMIT Technology Leadership and InnovationVisit While HeadSpin had raised $117 million from top tech investors — including GV, the venture capital arm of Google's parent, Alphabet; and Iconiq Capital, which helps manage Mark Zuckerberg's billions — it had no chief financial officer, had no human resources department and was never audited.
Lachwani used that lack of oversight to paint a rosier picture of HeadSpin's growth. Even though its main investors knew the startup's financials were not accurate, according to Lachwani's lawyers, they chose to invest anyway, eventually propelling HeadSpin to a $1.1 billion valuation in 2020. When the investors pushed Lachwani to add a chief financial officer and share more details about the company's finances, he simply brushed them off.
These details emerged this month in filings in US District Court for the Northern District of California after Lachwani had pleaded guilty to three counts of fraud in April. He is set to be sentenced next month, with a maximum penalty of 20 years in prison for each
