500 Startups’ Australia accelerator program is axed by its partner before it even launched

500 Startups continues to feel the impact of a sexual harassment scandal involving its co-founder and former managing partner Dave McClure. Two weeks after the closure of its Canada-based fund, its maiden venture in Australia is getting the chop before it even began.

The U.S. firm doesn’t have a dedicated fund in Australia, but it did announce an accelerator program — 500 Melbourne — in May in partnership with LaunchVic, a $60 million entrepreneurship scheme backed by the government of Victoria, Australia’s second most populous state. Now, however, LaunchVic has terminated its partnership with the VC firm.

The relationship had certainly gotten tense over the past month, since McClure resigned from 500 Startups in early July after a number of women came forward with sexual harassment allegations against him. LaunchVic put the firm “on notice” last month after it was kept in the dark over the claims against McClure, who had traveled to Australia to front the launch of 500 Melbourne despite the fact that he had taken a back seat at the firm following an internal investigation into the claims.

LaunchVic said it wanted to see a “change in culture” at the firm if the project was to go ahead, but the final straw seems to have been the resignation of 500 Melbourne head Rachael Neumann. Neumann quit the firm because she believes that “this is simply not the right time for 500 to launch in Australia.”

She explained on Twitter that she had traveled to the U.S. to meet with 500 Startups’ leadership over its Australia plan, but following discussions made a decision to leave.

“While I am deeply disappointed at how this has ended, I feel confident in LaunchVic’s strong course of action over the past month to give 500 Startups an opportunity to show leadership to improve culture in the startup sector and fix the issues at hand,” LaunchVic CEO Dr Kate Cornick said in a statement.

“Unfortunately, as we’ve expressed to 500 Startups, that without Rachael Neumann at the
helm we don’t believe it will work,” Dr Cornick added.

“500 strongly believes in the future of the Australian tech sector, but now is not the right time to move forward with this new partnership. We look forward to future opportunities down the road,” a spokesperson for 500 Startups said via email.

The dissolving of the partnership won’t impact LaunchVic’s overall budget. A representative of the organization clarified to TechCrunch that the grant of over $2 million that it originally pledged to 500 Melbourne will not be allocated to the project or 500 Startups itself.

LaunchVic will instead use the grant to develop a different accelerator project that maintains links to the global and local startup community.