CrunchTime for Arrington

Massive controversy in Silicon Valley this month, as an ex-tech sector investor who’s spent the last few years writing about tech sector investing shockingly decided to start investing in the tech sector.  Yes, First Round is of course referring to Michael Arrington, the highly quotable and well-connected founder of tech blog TechCrunch, who has apparently raised a $20 million venture capital fund – called, inevitably, CrunchFund – to invest in the kind of start-ups that he’s spent the last few years writing about.

Generally speaking, it’s considered rather bad form for journalists to invest in the companies they’re writing about. Most media outlets don’t allow it – including TechCrunch’s owner, US internet company AOL. And since TechCrunch is famously influential in this sector – a positive write-up can propel a previously obscure start-up to the big time – the potential for conflicts of interest seemed particularly high. So how did Arrington’s bosses register their utter disdain for this preposterous idea? By stumping up $10 million to become the cornerstone investor in the fund, of course!

Initially, it seemed as though Arrington’s new gig wouldn’t stop him writing for TechCrunch, as long as he was open about any conflicts. “TechCrunch is a different property and they have different standards,” AOL’s chief executive Tim Armstrong told The New York Times when the story broke. “We have a traditional understanding of journalism with the exception of TechCrunch, which is different but is transparent about it.” Believe it or not, this failed to diffuse the controversy, and before you could say ‘PR fiasco’, AOL’s editorial chief Arianna Huffington was busily making it very clear that Arrington would henceforth no longer be involved with TechCrunch in any form.

So will Arrington make a success of his new career? If he’s as good at making money for investors as he is at arguing with people on the internet, he won’t go too far wrong. And notwithstanding the thorny ethical issues, First Round can’t help but admire anyone in this line of work who can persuade investors to stump up that much cash.