Famed venture capitalist clashes with old, new media in fight over TechCrunch

Tina Nguyen Contributor
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Venture capitalist Michael Arrington, founder of the technology blog TechCrunch and recent AOL rabble-rouser, may no longer be the editor of one of AOL-Huffington Post’s hottest online properties due to a byzantine ethical conflict with Arianna Huffington and her company.

Following last week’s announcement that Arrington was starting a partially AOL-backed venture fund, questions arose over the ethics of Arrington writing about the startups and companies he would fund. TechCrunch itself started as an Arrington side project in 2005, but grew over the years into one of the most prominent technology news and reviews blogs on the Internet. AOL purchased the company in 2010.

CrunchFund, the group in question, has some of the top venture capital groups and heavyweight players in Silicon Valley on its board, including Sequoia Capital, Accel Partners, and the founding partners of Andreesen Horowitz.

The New York Times reports that Arrington presented this project to his bosses at AOL, which promptly invested $10 million in his fund. In a press release announcing the formation of CrunchFund last Thursday, AOL chief executive Tim Armstrong made exceptions for the fund: “We have a traditional understanding of journalism with the exception of TechCrunch, which is different but is transparent about it.”

These comments — rather than the simple action of backing the fund itself — set off a firestorm of confusion, contradicting statements, and a vigorous TechCrunch defense of its editor.

Now a complicated and at times baffling debate exists over whether TechCrunch could fairly cover companies funded by its own editor-in-chief. (RELATED: Newspaper Guild adds firepower to Huffington Post strike)

On September 1 the company announced — without Arrington’s knowledge — that he would be demoted to a contributing position while retaining operational control of CrunchFund. The following day saw a statement from Huffington herself that Arrington had been removed from AOL altogether. AOL announced hours later that Arrington was now an employee in its business division.

TechCrunch writer Paul Carr vented his rage against AOL for misrepresenting the blog’s editorial system. “The first time most staffers heard about the fund, and AOL’s involvement in it, was when it was announced in the Times,” he added. “Those of us who did have prior knowledge of the fund urged that it be renamed to avoid the appearance of conflict … Ultimately, though, the name remained unchanged.”

As for the allegations of unethical behavior, Carr and other TechCrunch writers found the prospect “laughable.”

“For. Fuck’s. Sake,” wrote Carr. “For TechCrunch to have the moral standing to call out a company — for ethical violations as with ‘Scamville‘; or just plain dumbfuckeryas with Airbnb — it’s vital that our own house is seen to be spotless.”

On Monday TechCrunch writer MG Siegler explained the distance between the blog’s writers and editors. “If Mike tried to get me to write some unreasonable post about a company he had invested in, I would laugh at him. But he would never do that.”

New York Times media critic David Carr, however, pointed out that Arrington has a history of using the TechCrunch brand as leverage for financial gain. Carr cited an incident in May where Arrington announced that companies feeding scoops to TechCrunch would receive favorable coverage. All other companies, as one source who was present put it, “would be cut off.”

The Atlantic’s Alexis Madrigal writes that even in the world of trade publications, ethical standards needed to be maintained: “The market for information is predicated on the trustworthiness of that information. The back-and-forth is what creates the perception of that trust or lack thereof.”

For now, AOL remains silent after Arrington posted a bold ultimatum Tuesday afternoon on TechCrunch, with a picture of the Spartan army from the movie “300” splashed above it: AOL must either reaffirm the company’s editorial independence or sell the company back to the original shareholders. “If AOL cannot accept either of these options, and no other creative solution can be found, I cannot be a part of TechCrunch going forward.”

Exhibiting some of his famous tongue-in-cheek humor, Arrington apologized for the “corny” movie image: “It just reflects exactly how we feel right now. And if this ends up being my last post on TechCrunch, that image is a cool way to exit.”