Employee email claims 500 Startups leadership delayed acknowledging McClure’s harassment, as new allegations surface

An email circulated to 500 Startups staffers by its Mountain View accelerator lead and partner Elizabeth Yin makes several claims that contradict the narrative presented by leadership so far. In the email, Yin resigns effective Friday, citing the lack of transparency and ‘several untruths’ presented by 500 Leadership.

This email makes claims that there were allegations yet to be put forth, something supported by a blog post from entrepreneur and founder Cheryl Yeoh today that makes claims of sexual assault.

Yin’s Letter

We verified that the email is genuine. When we reached out, Yin declined to comment.

Among the specific claims in her email are that 500 Leadership did not inform the organization that changes it made in leadership in May were as a result of sexual harassment claims against co-founder Dave McClure.

The memo, reproduced below, includes several strong claims, including that 500 Startups did not inform staff that McClure was no longer being involved in day-to-day operations until the NYT article was published, even though a blog post by 500’s Christine Tsai on June 30th says that management changes were made in May following the revelation of claims against McClure.

500 Startups denied this claim in a statement, saying, “we took the matter seriously and immediately initiated an internal investigation which resulted in the replacement of Mr. McClure by Christine Tsai as CEO. In May we held a company-wide all hands call and sent an email afterwards that same day notifying the team that Dave had stepped down from day-to-day management of 500.”

Yin also says that 500 Leadership did not inform the staff that the changes made to leadership roles in May were as a result of sexual harassment claims against McClure and that McClure continued to be involved in many day-to-day operations including Slack channels, PowerPoint decks, and company launches – even as many staff remained unaware of his reduction in role.

“Throughout the CEO transition Mr. McClure remained at 500 to fulfill his legal responsibilities to the funds as a General Partner,” responds 500 Startups in its statement. “Due to the sensitivity of personnel issues and the privacy of all involved, the investigation was kept confidential.”

Yin also states that the management team denied any sexual assault happened in the company’s #general Slack channel at 500 on Friday, June 30th and in the #500VC channel that there was “no formal finding of harassment” on Friday June 30th. She has provided screenshots that appear to corroborate this in her email. 

Yin also says that the claims of “unwanted physical contact” which triggered the May changes (which are separate from the incidents involving Proday founder Sarah Kunst that were reported by The New York Times)  were not disclosed to staff until a Saturday, July 1st all-hands meeting.

Yin claims that the decision for McClure to resign was based on the fact that there was an additional 500 founder who was about to make additional claims of sexual assault — a fact revealed on an all-hands call on Saturday.

New allegations

Those claims appear to be supported by a post by Cheryl Yeoh today on her blog.

What started out to be an innocent night of just jamming and hanging out at my new apartment turned into a nightmare episode that has been haunting me for the past 3 years. Dave kept pouring scotch into my glass before I finished drinking throughout the night, and hours into the night way past midnight, suddenly, everyone except Dave decided to order an Uber. They all promptly left, and left Dave there with me. I was quite confused by how that happened so quickly.

I quickly asked if Dave wanted to order an Uber and leave like the rest of them but he said no. Perplexed, I offered him to crash on the couch or the guest room and proceeded to show him the guest room. Then I went into my own bedroom but Dave followed me there, and that’s when he first propositioned to sleep with me. I said no. I reminded Dave that he knew my then-boyfriend and that we’d just talked about him earlier that night.

At this point, I led him to the door and told him he needs to leave. On the way out, he pushed himself onto me to the point where I was backed into a corner, made contact to kiss me, and said something along the lines of “Just one night, please just this one time.” Then he told me how he really likes strong and smart women like me. Disgusted and outraged, I said no firmly again, pushed him away and made sure he was out my door.

Once he was gone, still in shock and in tears, I immediately called my boyfriend at the time and told him what had just happened. I was rather inebriated at the time, and couldn’t shake off thoughts of what might have happened if I had been any more drunk and helpless, or had let him stay in my apartment. The fact that I had to say no multiple times, and that he had push himself onto me and kissed me without my consent was way more than crossing the line of inappropriateness. It’s sexual assault.

A 500 Startups spokesperson gave the following response to TechCrunch:

“We appreciate Cheryl speaking up and realize 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.”

Background

This letter comes the same day as the news that McClure has resigned as general partner of 500 Startups.

I will just include the summary here from that article earlier today:

Over the past week, McClure has been at the center of a storm of trouble for 500. A New York Times article outlined incidences of sexual misconduct including unwanted advances on founder Sarah Kunst. After the article, McClure published a public mea culpa admitting to multiple incidences of inappropriate behavior towards women in his position at 500. Just last night, 500 Startups had to apologize to its Australian partner LaunchVic for not disclosing its internal investigation into sexual harassment claims against McClure.

500 Startups supplied the following statement to TechCrunch in response to the letter:

In April our management team learned of allegations related to inappropriate behavior by Dave McClure. We took the matter seriously and immediately initiated an internal investigation which resulted in the replacement of Mr. McClure by Christine Tsai as CEO. In May we held a company-wide all hands call and sent an email afterwards that same day notifying the team that Dave had stepped down from day-to-day management of 500. Throughout the CEO transition Mr. McClure remained at 500 to fulfill his legal responsibilities to the funds as a General Partner. Due to the sensitivity of personnel issues and the privacy of all involved, the investigation was kept confidential.

The letter in full:

Dear 500,

Mon, Jul 3, 2017 at 12:04 PM I wanted to let you all know that this Friday is my last day at 500 Startups. It has been a crazy journey ­­ first from being a founder and now an investor here. Thank you for taking the chance on me; I will never forget that.

But some of you may be wondering why I would choose to leave in the middle of my maternity leave. It’s become clear to me over the last month that I can no longer be part of this organization. The actions that 500 has undertaken have deviated from its mission, and I can no longer continue to represent this organization.

Specifically, I’ve had a lot of sleepless nights and deep frustration with the lack of transparency and several untruths that I believe everyone who chooses to represent 500 should be aware of.

In April of this year, one of our colleagues confided in me that she had been sexually assaulted (unwanted forced physical contact) by Dave and later harassed by him (unwanted verbal comments). I was completely surprised given all of his work he had done over the years to support female founders and female investors here at 500. And I was angry ­­ very angry at what he had done. Here was someone I knew well and cared deeply about who was a victim of sexual assault by Dave, someone I thought I knew well. I did not believe that this could happen at 500. In my shock, it took me a couple of weeks to encourage and support her decision to report the incident to HR. In retrospect, as I allude to here, I wish I had pushed her to email HR immediately after she told me.

Given the asymmetric power dynamics in this situation, my colleague was nervous about being in the limelight. So going the internal route to push for change seemed like the best option. After all, last summer, when there was a similar sexual assault situation between two different co­workers, I was heartened to see that 500 Startups did the right thing ­­ taking swift appropriate action and communicating the situation to everyone internally quickly. So, when our colleague reported Dave to HR in April, I had full faith that the management team would again do the right thing. This was obviously a trickier situation, but after keeping tabs on this closely, I was impressed when the management team came to a decision in mid May. In less than a month, this decision was moving in the right direction: Christine mentioned to me that Dave was to step down from the management team and day­to­day operations. This outcome, had it been executed well, would have been satisfactory to me. Power dynamics are the key to sexual harassment / sexual assault, and removing Dave from a position of power seemed like the right course of action.

But in the last month, it’s been clear to me that this decision had not been fully executed nor communicated transparently. Though I’ve been on maternity leave during this entire time, I’ve stayed abreast with the situation. This started with the letter we all received on May 25, which cited company growth reasons for changes in management roles and did not even say that Dave was stepping down off the management team. This did not sit well with me, but I was assured that eventually the team would know that he was no longer on the management team or in day-­to-­day operations.

However, as time progressed, it became clear that he was still involved with 500 Startups on a day­-to­-day basis. He continued to be vocal and active in all 500 Startups Slack channels, influencing key business decisions. Despite having no official management power, it was obvious that 500 staff weren’t completely aware of the gravity of the situation and continued to be deferential and even supportive of him. The business development powerpoint deck that we were showing to potential partners still had Dave’s face on it, suggesting that he was still an integral part of 500 Startups’ day-­to-­day operations ­­ and even was still operating day­-to-­day. I continued to actively question why Dave was still day-­to-­day and constantly asked when all of 500 staff would be told clearly about what was happening. But my prodding yielded no results. In the last month, I’ve been extremely frustrated that most employees at 500 Startups did not know 1) about what was really happening w/ the change of roles and 2) why this was happening (at least at a high level ­ that Dave had acted inappropriately).

It wasn’t until Friday, when the New York Times published this article, that so many employees at this organization learned for the first time why Dave was no longer operating day­-to-­day. Several press reports implied that Sarah Kunst was the reason for this, but I knew that it was because of the sexual assault on our colleague that had brought this about.
Shortly after, others on the management team denied that any sexual assault happened or even that there was even a “formal finding of harassment” here at 500:

(1) 6:09PM Friday June 30. (2) 11:50PM Friday June 30.

On Saturday morning, during our team leads call prior to the all-­hands meeting, I was angry that the management team disingenuously latched onto a cat that was already out of the bag ­­ Sarah Kunst’s case ­ ­ as the excuse for these internal investigations and changes. After my prodding, it took nearly 40 minutes for the management team to reveal that Dave had initiated “unwanted physical contact” on our colleague and that was the incident which had brought about supposed changes to the 500 Startups management structure and organization and not Sarah.

Today, Dave just resigned from everything ­­ management, GP status, etc. But as I learned from our all­ hands call, this change happened only because there is a 500 founder who is supposedly about to publish a detailed post about how Dave sexually assaulted her.

I believe in the mission of 500 Startups, and I’m hopeful that everything is now moving in the right direction. But, I cannot support the lack of transparency and propagation of misinformation at the management level at this company. And, I’m gravely disappointed that these now seemingly positive outcomes are only coming about because of pressure from the press and public rather than out of doing the right thing. For these reasons, on Saturday, July 1, 2017 I submitted my resignation from 500 Startups effective this Friday.

500 Startups has an amazing mission and strong commitment to diversity. This company has given so many of us a chance in either entrepreneurship and/or venture when others closed their doors. I hope you
can find the courage and be #500STRONG to uphold that mission and do the right thing for the sake of doing the right thing rather than from external pressures.

With a heavy heart, thank you for the memories, friendships and learnings across the last 2 years.