Silicon Valley's problems with sexism prompted the Victorian Government to pull out of a AU$2.9 Million deal with a US company to promote tech start-ups in the state.

LaunchVic Executive Director Dr. Kate McCornick on Thursday confirmed that the deal with 500 Startups is off.  It was announced in March.  "While I am deeply disappointed with 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." 

McCornick said that LaunchVic's board acted after 500 startups Melbourne leader Rachel Neumann bailed out on Thursday morning.  Neumann spent time at 500 Startups home base in Silicon Valley and lost confidence in the company's ability to attract and nurture tech startups in VIC.

500 Startups has been fighting to rebuild its reputation since last month's bombshell New York Times report that detailed multiple sexual harassment allegations against founder Dave McClure.  A job applicant said she got a Facebook message in which McClure started he was "getting confused figuring out whether to hire you or hit on you". 

Malaysian entrepreneur Cheryl Yeoh wrote on her blog that McClure repeatedly propositioned her, and at one function backed her into a corner and forcibly kissed her. 

McClure admitted he had behaved inappropriately with numerous women, wrote a piece called "I'm a creep and I'm sorry" in which he neither denies nor defends what he did, and resigned from the company.  McClure insisted the new management team did not know what he was doing.

LaunchVic isn't ruling out working with 500 Startups again, but only after the company purges itself of the problem of sexual harassment in tech startups.