TechCrunch founder Michael Arrington is resigning as editor of the popular technology blog, and will run a $20 million venture-capital fund backed by TechCrunch-owner AOL Inc. and several venture-capital firms.
Mr. Arrington "will run the fund and will continue to write for TechCrunch, but will have no editorial oversight," said an AOL spokesman. Erick Schonfeld, who has served as co-editor in New York, will become interim editor while AOL searches for a replacement for Mr. Arrington, the spokesman said. AOL purchased the site last year.
Mr. Arrington's new fund, called CrunchFund, closed Thursday with $20 million, according to people familiar with the matter. AOL leads the limited-partner group, which includes a long roster of venture firms that kicked in $1 million each: Austin Ventures, Kleiner Perkins Caufield & Byers, Greylock Partners, Redpoint Ventures and Sequoia Capital.
Several individuals contributed money, including Marc Andreessen and Ben Horowitz of the venture firm Andreessen Horowitz; general partners at Benchmark Capital; angel investors Ron Conway and Kevin Rose; and Yuri Milner of Russian firm DST Global.
It isn't immediately clear what is the fate of AOL's venture-capital arm, AOL Ventures, which has made recent seed investments in start-ups such as spam-defense company Impermium and price-tracking service Shopobot.
Mr. Arrington's partner in the fund is Patrick Gallagher, who has been a partner at VantagePoint Capital Partners since 2008.
Mr. Arrington wasn't immediately available for comment. He posted a message on Twitter after news of the fund broke: "slow news day."
Mr. Arrington, a former lawyer who is known to be well connected in Silicon Valley, started TechCrunch in 2005. The site built up a following for its coverage of young tech companies.
Long an angel investor himself, Mr. Arrington announced on TechCrunch in 2009 that he would stop making investments in start-ups due to a perceived conflict as both publisher and investor. It's "a weak point that competitors and disgruntled entrepreneurs use to attack our credibility," he wrote at the time.
But in April this year, after AOL acquired TechCrunch, Mr. Arrington announced he was investing in start-ups again, while also becoming a limited partner in venture funds Benchmark Capital and SoftTechVC.
Mr. Arrington has often said that transparency and full disclosure keep things above-board when his blog writes about companies he has some financial stake in.
Google specifically allows this behavior for paid content. It is called "First Click Free" which allows your paid content to be indexed provided you allow at least the first click from search results to be freely-accessible to users. Afterwards, you can ask that they sign up/subscribe.
>Mr. Arrington has often said that transparency and full disclosure keep things above-board when his blog writes about companies he has some financial stake in.
Isn't this sort of thinking half-bullshit? It's certainly more ethical than writing a glowing review of some startup without revealing you have a stake in it (which borders on criminal), but the truly ethical course of action is to not write about it at all.
A statement admitting you are biased doesn't negate your bias, and leaving it to your readers to decide if you're sincere or full of shit doesn't make for good writing.
You don't get to pick and choose which ethics you adhere to. Arrington's dodge has always been "I'm not a journalist," so he shouldn't have to adhere to journalistic ethics. But if you report on news, you're a reporter, simple as that. It doesn't matter whether your news organization was founded 150 years ago or 5 years ago, or whether you publish with electrons or dead trees. Journalistic ethics are there for a reason, particularly in business journalism.
I mean, I'd like to exempt myself from the cumbersome ethical restrictions pertaining to murder and robbery, but simply declaring I'm above all that doesn't make it so.
Jon Stewart is also a journalist. Saying he's not doesn't make it not so.
But unless Stewart was elected to the Senate when I wasn't paying attention, he doesn't have the ethical conflict that someone who reports on the technology business while simultaneously investing in it has.
(I'll pre-empt your next likely counterpoint by pointing out that having a point of view is not the same as an ethical conflict of interest, and that opinion has always had a place in the discipline of journalism.)
That's true. Arrington has also never shied away from using his site to try and destroy people he had a personal vendetta with. I don't believe there was ever a hint of journalistic integrity involved at TC, it has always felt like a deeply personal and opinionated blog. While there is nothing wrong with this in of itself, the problem was that Arrington is extremely well-connected and influential - which made Techcrunch effectively a tool designed to bully people. TC's attitude has never been friendly either, I can't recall a single interaction with me or anyone else where TC staff have not behaved like total dicks.
Strictly speaking, writing something negative would be biased the other way, while writing nothing is neutral. But I see your point that not allowing the fact of it to change your behavior at all is the perfectly ethical solution. It is also impossible for humans to accomplish (and moreover to even know for certain they've accomplished it), so it's a moot point. There is also something to be said for avoiding even the appearance of impropriety, which yours doesn't address.
The title is sensational. He's just relinquishing editorial responsibilities and not all writing privileges so he can run a AOL-funded venture capital fund. The question is will he be able to leverage his connections and influence to perform as a capable fund manager?
His connections will come in handy, his judgement remains to be seen. It'll be interesting to see how much journalistic independence TC maintains, and how favourably his startups are covered compared to his competitors. I never got the impression that Arrington was the kind of guy to play fast and loose with ethics, but I could very well see him refraining from pulling an Arrington on his own startups, in the way he has on others.
AOL = TechCrunch and AOL = CrunchFund (as it is AOL's capital seeding the fund)
So even if the fund had a different name, and Arrington doesn't work for AOL directly, there is still a conflict of interest. As Paul Carr said in his article, are TC journalists likely to write a really negative piece on a CrunchFund company knowing that Tim Armstrong ultimately runs both?
Would the Wall Street Journal or the New Times start an investment fund and invest in the exact companies they are reporting on? IMHO they would not, as they realise their core business's need for independence.
If AOL want to follow through on their strategy "AOL is planning on being the largest high quality content producer for digital media." they need to realise that they are a media business and so need to follow the same rules basic rules for good journalism as every one else in their industry.
IMHO this is a very poor decision by Armstrong. For another glamorous dabble in the VC world where he will probably make about 10% ($2M) per annum, he could be betting the entire AOL business.
Not much upside and a whooooole lotta downside = bad trade.
I've got a draft article I was writing for my blog arguing that Arrington should resign because his conflicts of interest make his role as editor of TC untenable.
Among other reasons I was arguing that Arrington has to disclaim his investment in any article about a competing firm, however since his investment in SV Angels he's now invested in a number of firms which are in stealth mode, which means in practical terms that it's impossible for him to meet his obligations.
Well publish it then and post it here! Just change the byline to "I'm glad Arrington resigned..." and all the same arguments follow. A lot of the stories that frontpage on HN seem to be opinionated follow-ups to recent news events.
Maybe he had a one year period starting from when the acquisition deal was inked rather than when it was announced? Maybe he has a few weeks of vacation time to keep him officially at techcrunch for the rest of the year even though he's not actually there?
It's close enough that there's probably some details which make up the difference.
I think he is. Leaving TechCrunch that is. If I'm reading the article correctly, he will be full-time at CrunchFund and serve as a contributor to TC (like Vivek Wadhwa and Rocky Agarwal does from time to time).
Companies investing in other companies always strikes me as weird, and investing in a venture capital seems even weirder.
Companies have a fiscal responsibility to deliver as much money as possible to their shareholders, do they not? So if AOL is giving Arrington a few million dollars, that's money AOL shareholders are not seeing; it's only justifiable if AOL thinks Arrington will use the money to outperform the market (otherwise just invest in the market or return to shareholders) or there will be some friends-with-benefits deal worth millions to make up for Arrington's lack of edge. Neither one seems all that likely.
When AOL acquired TC, I get the feeling that the clock had started counting down for Michael Arrington. Not because AOL wanted to get rid of him, but more because of his need to be disruptive which was being reined in to some extent. The "loose" cannon tag is well earned to some extent.Should be interesting to see some of Arrington's larger investments as a VC.
Didn't he report some alleged collusion last year among some silicon valley angels? Perhaps he feels this is his way of competing and creating a true angel market. I'm interested to see where this goes, more startup money can only be good for us!