500 Startups Roller Coaster Ride Isn’t Nearly Over, 500 Canada To Shut Down
Earlier this summer McClure, the founder of 500 Startups was accused of sexual harassment. He quickly took to the venture capital community and his personal blog to take full responsibility for his actions and announce to the world that he was a creep. At the same time he immediately stepped down from his day to day duties as CEO of 500 Startups turning over the reigns to co-founder and right hand, Christina Tsai.
While remorseful and sincere, McClure from a distance and 500 up close and personal had one mission and that was to stop the bleeding and try and more forward with the global efforts to accelerate, and spur innovation and startups. That’s done through a network of accelerators and funds across the globe.
Tuesday was a big day for 500. Their “batch 21” was set to graduate, it’s Demo Day, typically one of the most well attended demo days in the world of startups. We’ve been to over a dozen of them ourselves.
This would be the first demo day without McClure.
Tuesday, as batch 21 was making last minute changes to their pitches, multiple news outlets started reporting that 500 Canada was over, at least temporarily. Canadian startup news site BetaKit obtained a letter which said that they were in the process of securing $25 million in “imminent commitments” from Canadian institutional LPs and other investors. However the recent sexual harassment scandal involving McClure has basically “torpedoed” the fund raise. BetaKit reported that they’ve received confirmation that 500 Canada is shutting down but no official comment outside of that.
The letter, from 500 Canada’s managing partners says that they would not make an investment if McClure continued to exercise any form of control or receive economic benefit from the Canada Fund for which McClure is a member of the investment committee and on the board of directors. BetaKit quotes a source as saying that the investments were on hold as long as “$1 of profit still went to McClure”.
All of this came amidst contract renegotiations between 500 Startups and the Canada Fund. The managing partners of the Canada Fund weren’t happy with the current arrangement where 500 Startups had some operational control and investment control. With the ensuing fall out from McClure’s sexual harassment scandal and the upheaval over the contract the decision was made to completely axe the fund.
38 500 Canada Companies Hang In The Balance
With the fund being completely axed there will be no more investments from the fund, period. This means there will be no more follow on funding for the startups in their portfolio, something that 500 startups backed companies have grown accustomed to. 500 Canada will reportedly help those companies secure follow on funding from other sources.
“It sucks for 38 Canadian startups,” said one Canadian founder, who wished to remain anonymous. “Each of them have 500k+ cheques to worry about on their next raises. That being said, this is a perfect time for Canadian VCs to prop up our ecosystem. If I were them, I would have 38 more meetings to book in the next 30 days, before those opportunities get lost to the US.”
“Dave McClure’s actions were inexcusable and tarnished a brand and movement that otherwise stood for many of the things that TWG values around supporting entrepreneurs and the early stage startup ecosystem. It is important to take a stand against McClure and other VCs’ behaviour and it is up to the LPs who control the money to take that hard position in support of those that have been harassed and mistreated.” Chris Eben Managing Partner at TWG told BetaKit in a statement, read the entire statement here.
This is the first of the 500 affiliated organizations to “shut down”. There’s a long road ahead of the organization that has always stood for furthering startups, innovation and entrepreneurship.