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500 Startups didn't tell investors about McClure situation

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500 Startups did not inform its limited partners of sexual harassment allegations against firm founder Dave McClure, nor that he had stepped down from running day-to-day operations of the firm, until after the situation was made public in early July by The New York Times. This is according to conversations with two limited partners – and from comments made by current 500 Startups CEO Christine Tsai, speaking confidentially on a recorded LP call that was obtained by Axios.

500 Startups declined to comment on what it did, or didn't, tell LPs (or when). So, let's go to the audiotape, which was recorded just a few days after this mess broke out into the open:

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  • "Many of you were disappointing with the way the messaging and perspectives were shared with you… And I deeply apologize for the trouble we have caused all of you."
  • "In late 2016 the management team was made aware of inappropriate comments that Dave had made to a potential investment team candidate, prior to her entering a formal interview process back in 2014. At the time we believed we addressed it appropriately with Dave. In April of this year we were informed of an incident involving Dave and an employee. Upon investigation we felt we needed to take significant action."
  • "The only person who had the legal authority to make Dave resign was Dave himself."
  • "We communicated this transition to our entire staff in an all-hands meeting and email in May. We did not disclose the reason for this transition to respect privacy. We told the team at this meeting of our intention to communicate this transition to our LPs and the general public later this year."
  • "In retrospect these moves were insufficient. We failed to anticipate that Dave would be so resistant to pulling back from the company in the way we had requested despite repeated, direct requests by me to disengage from day-to-day direct communications within the firm."
  • "We also failed to recognize the damage we'd be inflicting on ourselves, our business partners and the women who had come forward by allowing him to continue representing 500."
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