New Strongroom AI owner offloads Member Benefits Australia

Pharmacy and health-tech entrepreneur Joe Zhou has taken a key step to simplify the operations of embattled software startup Strongroom AI which he acquired for $3 million in June, offloading its subsidiary Member Benefits Australia (MBA) yesterday for an undisclosed sum to the Pharmacy Guild of Australia.

MBA, a loyalty and rewards platform founded by Divesh Sanghvi, was acquired by Strongroom AI in March 2024 - exactly a year before venture capital fund EVP would announce a $17 million investment in Strongroom at a $70 million valuation, only to detect irregularities in its finances within weeks.

This led EVP to call in the police, and Strongroom AI was placed in administration by the end of March this year.

As a health practitioner Zhou was already familiar with Strongroom AI and its utility in harnessing data and technology to avoid drug mismanagement, and the human and societal toll of drug overdoses. He had already purchased $1 million worth of debt in the company, and EVP offered him a $1 million loan to assist with the $3 million acquisition.

"Our core fundamentals are about tackling substance abuse and addiction and solving substance use overdose," Zhou tells Business News Australia.

"I think previously Strongroom was trying to expand in too many different verticals and too many different markets, and that didn’t make sense.

"Our renewed focus really is to try to cut away the distractions, with a singular focus of solving the world’s addiction problems. The strategic sale allows us to refocus our resources on what we set out to do."

Zhou owns a couple of pharmacies and a health clinic in Brisbane, and for many years has spearheaded several health-tech ventures including the co-founding of Chemist2U Australia which he exited in 2021.

Following that exit, he started Aceso Group with the goal of advancing chronic disease management for complex and specialised conditions.

"That one's grown really well – in three-and-a-half years we've bootstrapped it to $25 million annual revenue. Pharmaceutical and tech has always been something that I really enjoy," he says.

"With Strongroom I use the product myself. I know the industry and the product inside out. That's why I was happy to take the risk," he says.

"The amount of people that die from drug overdoses globally just increases…Strongroom has got lots of market penetration in providing a SaaS (Software as a Service) platform for those patients."

He says getting rid of a wholly owned subsidiary like MBA was a major decision, after Strongroom itself had "come a long way" over the past three months.

"We’ve had very little churn, customers are extremely sticky, we’re growing organically, the team’s happy, and customers are happy now - we were dealing with a lot of upset people initially, so we’ve addressed all that," says Zhou, a former Australia's Top 100 Young Entrepreneurs lister and the 2022 winner of the Brisbane Young Entrepreneur Award in the Health & Medicine category.

"The mission's back on track and our product has a realigned focus on what we’re going to build - over the next few months you’re going to see our products become a lot simpler and a lot better."

Pharmacy Guild of Australia executive director Gerard Benedet says the acquisition of MBA is about "reinvesting in our members and offering existing customers and clients even greater benefits".

"MBA aligns perfectly with our mission to support community pharmacies with innovative, cost-saving, and value-enhancing services," Benedet says.

The guild says all existing MBA staff, customer and supplier partnerships are ongoing, while the acquisition will also enable new opportunities for collaboration and innovation across member offerings, industries and suppliers. 

MBA will continue to operate as a standalone business.

"Member Benefits Australia offers strong discounts, incentives and rewards to its members. I’m delighted to be leading this talented team as we unlock the potential of this strong multichannel platform," says MBA interim CEO Sam Irvine.

"My focus will be on building on the strong use and growing database of users, delivering more partnerships and deepening relationships with our existing clients."

Zhou thanks the guild for a smooth transaction, noting his confidence that MBA has "found its strongest home within an organisation that has consistently championed its members for nearly a century".

"We are excited to continue supporting and collaborating with Guild initiatives and look forward to future opportunities to work together in advancing our shared mission of harm minimisation, substance abuse prevention, and addiction recovery," he says.