Michael Arrington Resigns From Techcrunch

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.

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.

http://www.whenwillmichaelquit.com/

So we begin another journey. I fully intend to stay with AOL for a very, very long time. And the entire team has big incentives to stay on board for at least three years.

However, I rather hope Michael's "dream" comes true instead: http://peterc.org/blog/2011/381-michael-arringtons-dreams-of... ;-)

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.

He can be polarizing, but his journalism and analysis have always seemed spot on to me.