Despite the commitment to continue helping fundraising efforts, 500 Canada will not make follow-on investments to its 38 portfolio companies
Managing partners at 500 Startups’ Canada-focussed venture capital (VC) arm 500 Canada have announced that the fund will terminate investment period following recent sexual harassment scandals involving 500 Startups founder Dave McClure, according to a report by BetaKit.
Announced in an internal letter send to founders of its portfolio companies, 500 Canada said that it will make no follow-on investments to the 38 companies that it has invested or committed to invest in.
However, the firm stated their commitment to continue helping the companies in future fundraising efforts.
It will also be making no new investments and no new calls for capital, though it is still undetermined if 500 Canada will pursue a new fund following the termination.
Despite having had confirmed the decision, 500 Canada gave no official comment.
Also Read: Khailee Ng ‘angry and sad’ about Dave McClure scandal, but will continue to support 500 Startups
500 Canada was in the process of securing “imminent commitment” from Canadian institutional LPs when the sexual harassment reports by entrepreneurs in Silicon Valley and Asia surfaced, followed by Dave McClure’s resignation.
Each of the targetted LPs eventually informed 500 Canada that they would not make an investment if McClure continued to exercise any form of control or receive economic benefit from the Canada Fund, which he was on the board of directors of.
500 Canada had also renegotiated its relationship with 500 Startups but was unable to reach agreement, so it was decided that the fund will be axed.
The two parties are still negotiating about spinning down the fund; the official termination of the Canada Fund investment period is expected to happen in end of September.
500 Canada will reduce management fees and make keep on a reduced staff to manage investments, though no decision has been made on who is going to manage wind-down.
Also Read: ‘Disappointing and shocking’, say 500 Startups venture partners about Dave McClure saga
Launched in March 2016 under the leadership of Simply Audiobooks founder Sanjay Singhal, 500 Canada raised funds from investors such as Globalive Capital, W Investments, and TWG.
The termination is being perceived negatively by Canadian startup investment ecosystem; an anonymous VC expressed their concern about the “very little” number of pre-seed capital in the country.
Apart from the scandal involving Dave McClure, 500 Startups’ name was also involved in another sexual harassment when TechCrunch reporter Catherine Shu came out as a survivor of assaults conducted by venture partner Tristan Pollock.
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