Seer Medical co-founder stands by allegations in court fight against Victoria’s VC fund

An extraordinary blow-up by the founder of a medtech company against Victoria’s $2bn venture capital fund over funding and governance has abruptly ended.

Former prime minister Scott Morrison with Seer Medical co-founder Dean Freestone.

A legal blow-up by the founder of a medtech company against Victoria’s $2bn state venture capital fund alleging the investment manager interfered in the business and squandered a takeover has ended abruptly. His legal cases were dismissed on Thursday.

Dean Freestone, who co-founded Seer Medical, told The Australian the “protracted litigation has been a disaster for me and my family and many other shareholders who invested in the company pre-(Breakthrough Victoria)”. He remained proud of his time with the business, which toppled into administration late in December. It will carry on as a new entity.

“Our unique home monitoring technology eased the pressure on the public health system. In Victoria alone, we saved taxpayers over $90m,” he said.

“When health issues forced me to hand over the reins as CEO in mid-2023, Seer had broken into America, was about to break into the UK, and had a top-tier US-based investment firm ready to back our expansion. We achieved all of this with about half the level of investment that is normally required by medtech start ups.

“At the moment, I do not wish to comment on the way the business has been run over the past two years, and I am unable to comment on the finalisation of the court proceedings.”

A spokesman for Breakthrough Victoria, chaired by former Victorian premier John Brumby, said: “the matters are subject to a deed and BV is unable to comment.”

The dismissal of proceedings came as court documents released to The Australian revealed Breakthrough Victoria was concerned its investment in the company was becoming risky, and was seeking to increase its grip on governance.

Dr Freestone claimed Breakthrough Victoria refused to consent to a proposed $20m capital raising unless Seer agreed to conditions in a restated deed that were to Seer’s detriment.

But Breakthrough Victoria denied this, and said it told Seer the changes sought “were designed to reflect the revised commercial situation and adjust for the increased risk of the investment” rather than commercial factors.

Breakthrough Victoria required increased governance controls as a “prudent investor”, the defence document said.

Dr Dean Freestone, co-founder of Seer Medical. Picture: Bionics Institute

“But those controls did not have the effect of constraining the ability of Seer and its management to undertake its business,” the document said.

Breakthrough Victoria and its chief asset management officer Sally McCutchan denied other allegations made by Dr Freestone central to his claim, including denying that it pledged an extra $10m of funding to the company in 2023. Breakthrough Victoria pumped $30m into the business the year before.

Dr Freestone claimed Breakthrough Victoria executives, including its former CEO Grant Dooley, “represented” to Seer during a meeting on March 10, 2023, and at a board meeting on March 15, 2023, it would provide $10m as part of plans to raise up to $20m through issuing convertible notes to shareholders.

Breakthrough Victoria rejected that, and draft minutes prepared for the March 15 meeting made “no reference” to the proposed additional $10m, according to the investment manager’s defence.

As well, Seer “had a cash burn of approximately $3 million per month without a near-term increase in its US revenue”, the defence added.

Breakthrough Victoria rejected allegations it scuppered potential deals with Boston-based private equity fund Safar Partners and HostPlus between August and November 2023 in favour of a proposal from healthcare investor KPRx.

Seer put in place a safe harbour plan in November 2023 to mitigate the risk of insolvent trading, and Breakthrough Victoria said it supported Seer in discussions with Safar and KPRx during that period.

“Seer knew that it would exhaust its cash resources by February 2024, by reason of Seer’s financial modelling and the McGrathNicol cash flow review,” the defence document said.

Scott Morrison tours the Seer facility in Melbourne in 2021. Picture: NewsWire / David Crosling

After a period of cash flow concerns and apparent disagreements about other funding deals, Seer’s board quit on January 23 last year leaving only Dr Freestone.

Dr Freestone had alleged he was unfairly sacked from Seer in March last year, which Breakthrough Victoria also rejected and said was a decision made in good faith by the board, not the venture capital firm.

Mr Dooley also informed Dr Freestone that he had spoken with Ms McCutchan who “provided assurances that no one from BV had made any threats in relation to Freestone”, according to the defence.

Breakthrough Victoria, which launched during the Covid-19 pandemic in November 2020, boasted its initial investment in Seer would nearly double its Victorian workforce and help the company to expand overseas.

Last week, it revealed it would take an equity position with Cadwell Industries and TrialCap, billed as “some of the world’s largest neurodiagnostic equipment manufacturers”, in a deal worth more than $40m.

After it was placed into administration earlier this year, Seer’s creditors signed a deed of company arrangement and as part of that, Breakthrough Victoria will see its investment converted into shares in a new entity set up to control Seer Medical.

Seer’s administrator, Lindsay Bainbridge of Pitcher Partners Melbourne, said most of the company’s staff will be retained and its creditors will get back most or all of their outstanding investment.

The state-backed fund posted a $3m loss after three years of operation last year and CEO Mr Dooley recently announced he would step down.

As for Dr Freestone, he said: “I am now looking to the future to continue the mission of helping people with neurological disorders, by building great products at the intersection of AI and healthcare.”

Originally published as Seer Medical co-founder stands by allegations in court fight against Victoria’s VC fund