Sydney venture capital firm EVP is reportedly working with the police and legal and forensic accounting experts to try to recover its investment in software startup Strongroom AI, just weeks after leading a $17 million investment round.
The VC firm on Monday was notifying investors in its EVP Opportunities Fund about the discovery of “a potentially serious issue” at the startup, according to a report from the Australian Financial Review.
Earlier in March, EVP announced it had led a $17 million funding round for the medication management startup, which was founded in Melbourne in 2017 by Max Mito, Christopher Durre and Kieran Start.
At the time, reports said the capital raise valued the startup at $70 million. Existing investors Artesian Venture Partners and InterValley Ventures also participated in the funding event.
Now, EVP has confirmed it is “pursuing all avenues to recover the investment”, while also reportedly telling investors it will absorb any costs from doing so.
In a statement provided to SmartCompany, an EVP spokesperson said the firm 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”.
The investor has not named the startup in question and the exact nature of the issue under police investigation has not been identified.
“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,” the spokesperson added.
“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 said it is now thoroughly reviewing its due diligence processes “to strengthen measures and safeguards and ensure we can continue to uphold the highest standards of responsible investing”.
SmartCompany has contacted StrongRoom AI for comment.
Early days as facial recognition startup
Strongroom AI’s software is used by pharmacies to streamline medication tracking and dosage management, as well as improve patient engagement and provide analytics.
Founders Mito, Durre and Start launched the startup in 2017 and in 2019, took part in the inaugural Swinburne University accelerator.
From that program, the founders secured $30,000 in funding, and got their software up and running in 35 pharmacies in Victoria.
In late 2019, the startup spoke with SmartCompany about how it was developing AI software for the dispensing of the opioid replacement drug methadone.
While acknowledging privacy concerns about the use of such technology in a pharmacy setting, co-founder StrongRoom co-founder Christopher Durre predicted at the time that attitudes were evolving.
“When people talk about facial recognition, to a lot of people it has this negative connotation. So I don’t think the industry has done a particularly good job, and that kind of makes sense given the way it’s been used in the past,” Durre said in 2019.
“But I think we are going to see a change, especially in the medical industry, where there are these more interesting use cases.”
According to the startup’s website, it has more than 2,000 customers and to date, 10 global partnerships, and a team of more than 40 employees.
Startup Daily reports that the startup recorded around $13 million in annualised revenue last year.
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