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The sexual harassment scandal that has led to the official resignation of founding partner Dave McClure from 500 Startups raises the question of what kind of future the firm can have without him.
It doesn’t appear 500 Startups is off to a very good start in terms of handling the situation, which became public last Friday as part of a larger New York Times story about sexual harassment in Silicon Valley.
A blog post on June 30 from CEO Christine Tsai said management changes had been made and that McClure had stepped out of daily operations as the charges came to light. Then McClure wrote a long apology that seemed to draw mix reactions.
But the stories they told about the timeline and disclosures didn’t sync with the account of partner Elizabeth Yin, according to an email obtained by TechCrunch. Yin resigned as other accusations of harassment against McClure surfaced, notably in a blog post by entrepreneur Cheryl Yeoh.
The acceleration of the story culminated in McClure officially resigning while also pleading with the larger startup community to not turn its back on 500 Startups.
— Dave McClure (@davemcclure) July 3, 2017
Though nobody thinks 500 Startups is going to collapse overnight, the manner of McClure’s departure still raises the question of whether the firm can survive over time in the wake of this controversy.
The answer matters tremendously because of the size and reach of the firm McClure started in 2010. Its team page lists 63 people in roles ranging from the three managing partners to local and regional venture partners around the world. And the company says it has a total staff of 150. In terms of its investments, the firm has a massive footprint now, and it’s those founders who find themselves caught in the middle.
500 Startups runs a series of startup programs and accelerators, but it has also invested $350 million into 1,800 startups through four funds and 13 micro funds. Those companies are no doubt wondering what all this means to them in terms of reputation and association. At the same time, founders around the world will now have to carefully determine whether there is a risk in applying for one of these programs or seeking investment from the firm.
And while a great deal of money is already committed, 500 Startups is going to have to prove to future investors that it has managed to separate itself both operationally and also reputationally from McClure.
That latter will be a particular challenge, because as McClure likes to say, his value and 500 Startups’ value both lay in their vast connections and mentoring relationships.
The firm will now find out just how strong some of those ties are and how much they transcend McClure’s star power and long reach. Because, despite the size of 500 Startups, from the outside it still certainly seemed like McClure was at the center of the firm and was very much its public face.
Just last year, I interviewed him twice on stage at the Web Summit in Lisbon. He’s been on a reality TV show, is a ubiquitous presence at conferences, and is one of the most quotable figures in Silicon Valley for journalists. I first personally interviewed him when I was a reporter at the San Jose Mercury News for a story that named him one of the 10 most influential people in Silicon Valley.
In an email interview at the time, before he formally started 500 Startups, I asked him to explain what he did because he seemed to be doing so many things. At the time, this included running an investment fund for Facebook and investing like mad as an angel, thanks to a windfall from his time at PayPal.
“I aim to combine all the things I do in a comprehensive and holistic fashion that benefits startups and the people who make them grow,” he wrote.
He built 500 Startups around that philosophy and it had succeeded perhaps beyond even his wildest fantasies. As CEO, Tsai must prove that the foundation is solid enough to keep 500 Startups standing without its most important cornerstone.
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