Blame game over ‘severe financial difficulties’, as Vic state venture capital court fight heats up

A court fight involving the Victorian government’s venture capital fund, a medtech start-up and its founder is heating up with Seer Medical’s co-founder being blamed for the company’s ‘severe financial difficulties’.

Former Prime Minister Scott Morrison tours the Seer medical facility in Melbourne in 2021. Picture: David Crosling/NCA NewsWire

A medtech start-up which received a $30m injection from the Victorian government’s venture capital fund has blamed the company’s “severe financial difficulties” on one of its founders, court documents reveal.

Dean Freestone, who co-founded epilepsy monitoring company Seer Medical, is suing the start-up he helped launch along with its major investor Breakthrough Victoria and the venture capital fund’s chief asset management officer Sally McCutchan.

In his Federal Court case, Dr Freestone claimed Breakthrough Victoria and Ms McCutchan undermined a second round of capital raising for the company by allegedly withdrawing the offer of an extra $10m unless Seer agreed to “cost-cutting measures” and making certain roles redundant.

Dr Freestone claimed Breakthrough Victoria were attempting to increase its “ownership of and control over Seer’s business” and that it preferred additional investments from healthcare investor KPRx instead of a Boston based venture capital group Safar and Hostplus.

Seer Medical is an epilepsy monitoring company.

In response to Dr Freestone’s claim that as chief executive officer of the company between 2017 and July last year he was responsible for securing funding for Seer’s operation, in its defence papers Seer agreed but said by early 2022 it was “experiencing severe financial difficulties under the Applicant’s (Mr Freestone’s) leadership.”

Seer’s entire board resigned on January 23 this year amid concerns about financial strains and personal liability, leaving him as the sole director, Dr Freestone said.

The Australian was previously told Seer was “burning through cash” and the shareholders viewed the leadership and board of the company as failing.

Seer agreed in its defence papers the entire board resigned on January 24 except for Dr Freestone after they received a letter from independent shareholders that was critical of their conduct and actions.

In its defence, Seer said early this year the independent shareholders and Breakthrough Victoria proposed a joint $10m rescue deal for the company so long as Dr Freestone was removed from his position — a condition insisted upon by the independent shareholders.

Seer’s defence identified Simon Bartlett of EWM Group as an “agent” for the independent shareholders. According to his profile, Mr Bartlett was formerly head of global trading and research for a single-family office in Sydney and has worked at blue chip investors Societe Generale and Macquarie Bank.

Seer also rejected Dr Freestone’s claim that Breakthrough Victoria and Ms McCutchan threatened to arrange terms of further funding to be contingent on Dr Freestone’s resignation from the board and leadership positions. Instead, Seer said independent shareholders insisted on that term.

Former Prime Minister Scott Morrison tours the Seer medical facility in Melbourne in 2021. Picture: David Crosling/NCA NewsWire

Seer claimed the $10m investment offer from Safar was unfunded, and it received a letter from independent shareholders stating the offer should not be accepted.

In its defence documents, Seer agreed Ms McCutchan became the primary contact between Seer and Breakthrough Victoria but did not agree she “seemed to have a personal animosity towards him, and BV was adopting an aggressive approach to changing the terms of the initial BV investment” as alleged.

In response to Dr Freestone’s case that he complained to members of the board about Ms McCutchan’s conduct, Seer simply said all members of the board as at July 6 last year have resigned.

Seer did not admit Dr Freestone’s claim that during a meeting in November last year a banker was acting “on instructions” from Breakthrough Victoria and KPRx when he said that if Seer’s board failed to accept an investment offer from the two organisations in exchange for a $0 valuation, it was prepared to “block other investments and cause the company to go into administration”.

Dr Freestone has claimed he was unfairly sacked on March 27, and is seeking compensation in lost wages and superannuation.

Originally published as Blame game over ‘severe financial difficulties’, as Vic state venture capital court fight heats up