Venture firm co-founder resigns, partner quits over harassment scandal

A sexual harassment scandal sweeping the Silicon Valley startup world intensified on Monday as high-profile investor Dave McClure resigned from his firm, 500 Startups, while another partner quit in protest and a second female entrepreneur came forward with allegations of misconduct.

McClure’s resignation came after entrepreneur Sarah Kunst accused the investor of sexual harassment in a New York Times story published on Friday. 500 Startups initially responded by saying it had previously demoted McClure after an investigation.

“In best interest of @500Startups & at request co-founder @christine_tsai, I am resigning effective immediately,” McClure wrote on Twitter. The firm confirmed the resignation.

Also on Monday, Elizabeth Yin, who has been a partner with 500 Startups since October 2014, said in a note to colleagues that she had resigned from the firm on Saturday after members of the management team continued to deny misconduct on McClure’s behalf.

The turmoil at 500 Startups comes in the wake of a series of revelations about sexual harassment and discrimination against women and minorities in the tech industry. Uber CEO Travis Kalanick was forced to resign after an investigation prompted by the blog post of a female engineer, Susan Fowler, found a culture of sexism at the company. More than 20 Uber employees were also fired.

The venture firm Binary Capital faces an uncertain future after allegations of serial sexual harassment by partner Justin Caldbeck forced his resignation and that of his partner.

McClure's resignation from 500 Startups came just hours before a second entrepreneur affiliated with 500 Startups published a detailed account of her experiences with McClure.

Cheryl Sew Hoy, who sold a startup to Walmart Labs and was the founding CEO of the Malaysian Global Innovation and Creativity Centre, accused McClure of propositioning her several times and then pushing himself on her and kissing her without consent in 2014.

"It's not just inappropriate, it's assault," Sew Hoy wrote on her website.

McClure did not respond to a request for comment on Sew Hoy's allegations.

500 Startups said in a statement: “We appreciate Cheryl speaking up and realise how upsetting and painful it is for her to have gone through that experience and have the courage to speak up. We can only hope our efforts in changing 500 can help create a safe and effective platform for female founders around the world."

In a blog published Friday, 500 Startups Chief Executive Christine Tsai said that a decision to change the firm’s leadership had occurred “months ago” and that McClure’s role had “been limited.”

Yin, in her note, disputed Tsai's account.

“It’s become clear to me over the last month that I can no longer be part of this organisation,” Yin said in the note, which was obtained by Reuters. “The actions that 500 has undertaken have deviated from its mission, and I can no longer continue to represent this organisation.”

Yin confirmed the note in an email but offered no further comment.

In response to Yin's note, 500 Startups said that in April management had "learned of allegations related to inappropriate behaviour by" McClure. The firm investigated the incident and notified staff at an all-hands meeting that McClure would step down.

"Due to the sensitivity of personnel issues and the privacy of all involved, the investigation was kept confidential," the company statement said.