Financiers for Melbourne startup Strongroom AI have forced the company into administration, amid concerns about the company’s accounts.
The move comes after the lead investor, EVP called in police on Monday after asking for its money back following a $17 million raise in early March. The request was declined by StrongRoom.
On Friday morning, new regulatory filings with corporate regular ASIC revealed that Strong Room Technology Pty Ltd was in external administration.
Todd Gammel, Barry Taylor, Matthew Levesque-Hocking from HLB Mann Judd stepped in on Friday as administrators for the company.
Walsh & Associates has also been appointed as receiver for banking assets in the startup at the behest of Paddington Street Finance.
Paddington Street, part of the Sherman Group, lends between $500,000 and $15 million to mid-tier companies, either with an annual EBITDA of $1-$5m or for R&D Tax Incentive finance.
The medication management software startup was founded in 2017 by university colleagues Max Mito, Christopher Durre and Kieran Start. StrongRoom was meant to acquiring the healthcare loyalty program Member Benefits Australia with the funding.
But just 10 days after announcing the raise, which was meant to value the company at $70 million, EVP called in legal and forensic accounting experts, as well as police.
The Sydney VC began was warning investors in its Opportunities Fund that it was “pursuing all avenues to recover the investment” and would wear any costs.
In a statement to Startup Daily on Monday, an EVP spokesperson did not name the startup, but said that “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”.
EVP declined to comment for this story when contacted. The founders of StrongRoom AI have not responded to Startup Daily’s request for comment.
Other investors include Artesian Venture Partners, which is backed by super fund Hostplus, Kalytix and InterValley Ventures, as well as UK-based Tyson & Blake.
This morning in Capital Brief, Tyson & Blake’s Aaron Michelin accused EVP of being “unprofessional” by not informing other other shareholders of their plan first, saying he was “in shock”.
“They put their money on the table, surely they should think that before they rush to conclusions they should talk to the other shareholders and try to solve this,” Michelin told Capital Brief.
“This is the worst possible way.”
He accused EVP of defaming both themselves and StrongRoom.
“If you make an investment, and we approve you as a big common investor, we assume you are professional and you’ve done your homework,” Michelin said.
“And then you defame the company? Whatever happens from here, the damage will be there. What this VC was doing, that was really unprofessional and they are defaming themselves as well.”
Michelin told Capital Brief that they’d invested in StrongRoom in 2021 and again in 2022, building up a 7% stake.
EVP has not disclosed the nature of the allegations and Victorian police will not comment for privacy reasons.
The VC has also told its investors that it will also cover any costs incurred by the investigation.
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