TechCrunch's New Venture Fund Is One Big Conflict of Interest

AOL is helping to finance the company it covers

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TechCrunch founder Michael Arrington is launching a venture capital fund, partially with money from his employer AOL, and he doesn't even care if people think it's a conflict of interest. TechCrunch regularly covers the type of startups that new $20 million CrunchFund will invest in as well as the venture capital firms that are supporting the fund.

"I don't claim to be a journalist," Arrington told The New York Times. "I hold myself to higher standards of transparency and disclosure."

AOL chief executive Tim Armstrong echoed this sentiment. "TechCrunch is a different property and they have different standards," said Armstrong in an interview with The Times, which notes that AOL's other media properties like The Huffington Post are prohibited in investing in companies they cover. "We have a traditional understanding of journalism with the exception of TechCrunch, which is different but is transparent about it."

Nevertheless, the journalism community does not seem so far pleased. When the news broke, Kara Swisher who covers Silicon Valley for AllThingsD tweeted "Hopelessly troubled AOL's new biz plan is apparently taking egregious conflicts of interests to a new level." She followed up by describing the situation as "a giant, corrupt Silicon Valley pig pile."

Arrington's past adventures in venture capital have also proved somewhat controversial. Dan Primack at Fortune reports:

Arrington, a onetime Silicon Valley attorney, was an occasional angel investor before founding TechCrunch in 2005. He subsequently did a few more deals, but in 2009 stopped investing after being accused one too many times of having a conflict of interest. After all, how were TechCrunch readers to judge the coverage that Arrington's portfolio companies did, or didn't, receive?

Good question. However, the real scrutiny would come from the Federal Trade Commission, who polices this sort of thing, but the regulator's recent history stacks up in Arrington's favor. Last month, Ashton Kutcher--pictured with Arrington above--used a guest editing stint at Details to prop up several companies that he invests in, and after a public outcry over a conflict of interest, the F.T.C. chose not to investigate.

This article is from the archive of our partner The Wire.