An investee of Sydney venture capital firm EVP has been placed under external administration in the wake of EVP calling in police and alleging the company had misrepresented its financial position.
The company, Melbourne-based Strong Room Technology – which trades as StrongRoom AI – is now under the administration of Martin Walsh of insolvency specialist accountancy firm Walsh & Associates of North Sydney.
It is believed the company was placed in administration on the request of a lender.
On 14 March, EVP announced its new Opportunities Fund had led a $17 million investment in StrongRoom AI. The round valued the business at close to $70 million.
StrongRoom AI provides software which pharmacies use to help patients manage their medications.
On Monday (24 March) EVP contacted investors in the Opportunities Fund to tell them it had discovered a “potentially serious issue” involving an investment.
A spokesperson said: “EVP is deeply concerned about recent developments regarding one of its investment companies and we have taken immediate action, including notifying law enforcement and pursuing all available avenues to recover the investment.
“While this situation is disappointing, it does not reflect the integrity of our broader investment strategy and we remain committed to making impactful and ethical investments.
“We are conducting a thorough review of our due diligence processes to strengthen measures and safeguards and ensure we can continue to uphold the highest standards of responsible investing.
“At no stage did we have prior knowledge of the alleged activity, and since becoming aware we have proactively provided information to police and are working collaboratively with them as they investigate.
“As this matter is now under investigation, it would be inappropriate to comment further.”
The investment in StrongRoom AI was the third from the EVP Opportunities Fund, which raised $42 million last year. The Opportunities Fund’s primary objective is to provide follow-on investment for successful companies backed by EVP’s early-stage funds but its mandate allows for investments to be made in companies outside the EVP portfolio. The investment in StrongRoom AI was the first such investment.
The company had previously received venture investment of $15 million from Artesian Alternative Investments, InterValley Ventures, and London firm Kalytix Ventures. The new round was supported by Artesian and InterValley.
StrongRoom AI founders Max Mito, Christopher Durre and Kieran Start began working on ideas for a software-as-a-service start-up while they were university students in Melbourne in 2017. They first developed a facial recognition app for patients to use to access their medical records. Despite gaining some early interest from independent pharmacies, that proved difficult to integrate with all the necessary software. They decided to change tack and develop software to replace paper-based systems for keeping track of patients’ medications.
Two core products resulted, a digital logbook to record the receipt, supply and use of controlled drugs and an artificial intelligence (AI) platform that helps pharmacists track whether patients are taking their medications as prescribed.
StrongRoom AI has entered the UK market and is in the early stages of gaining sales in the US. Mito re-located to Philadelphia, Pennsylvania to lead US expansion.
The new funding round was planned to help finance the company’s acquisition of Members Benefits Australia − a business-to-business loyalty scheme for pharmacies − and accelerate overseas expansion. The company has signed partner deals with Green Light Pharmacies in the UK and Centennial Management Group in the US.
Image: Insolvency specialist accountant Martin Walsh.