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TechCrunch blogger Mike Arrington starts venture fund

September 1, 2011 |  4:43 pm

Arrington

There are few scribes in Silicon Valley who wield as much power as Michael Arrington.

Now he's wielding a lot of money too. (And probably even more power.)

The colorful founder of TechCrunch, who built a mini media empire in Silicon Valley that he sold to AOL a year ago, is raising a $20-million venture capital fund to invest in early-stage technology companies with Patrick Gallagher of VantagePoint Venture Partners.

Called the CrunchFund, it will aim to make investments of between $100,000 and $200,000 in young companies alongside other firms, Arrington said in an interview. The fund will not lead or price a round of funding, he said.

Investors in the CrunchFund read like a who's who of Silicon Valley: Accel Partners, Austin Ventures, Kleiner Perkins Caufield & Byers, Greylock Partners, Redpoint Ventures, Sequoia Capital, the founding partners of Andreessen Horowitz, each of the general partners of Benchmark Capital, angel investor Ron Conway, Russian financier Yuri Milner and Internet entrepreneur Kevin Rose. The fund is also financed by Arrington employer AOL. He says it's oversubscribed and is not accepting any additional investors.

"It's [expletive] awesome," Arrington said.

And, like many things that Arrington does, it's controversial,because Arrington will be running a prominent venture fund with golden connections that invests in start-ups that TechCrunch covers. That role will also give him even more access to Silicon Valley's power brokers and influence over which start-ups get funded and which ones don't.

Gizmodo offered this headline in response: "AOL: You've Got Conflicts."

Arrington says he has taken on a new role at TechCrunch as the founding editor and writer and will no longer serve as the site's de facto editor in chief. He says TechCrunch will disclose his investments every time it covers one of his start-ups and he pledged that his investments will not influence TechCrunch's coverage.

"I never signed up to be a journalist or for journalistic rules," said Arrington, who is fond of saying that he holds himself to higher standards of disclosure and transparency. "I believe transparency is key to keeping reader trust. I think we have done that and we will continue to do that."

That is the same position that Arrington has taken for some time. It has not persuaded his critics.

Arrington was an angel investor before starting TechCrunch in 2005. He stopped investing in start-ups in 2009 after coming under fire for conflicts of interest. Earlier this year, he started investing in start-ups again such as the new venture from Napster founder Shawn Fanning and Digg creator Rose.

That led to a noisy dust-up with All Things D's Kara Swisher (Arrington called her the "chief whiner.") It turns out that AOL's code of employee conduct prohibits reporters at media sites from investing in the companies they write about -- all except Arrington.

Swisher's reaction to Arrington's latest announcement: "Hopelessly troubled AOL's new biz plan is apparently taking egregious conflicts of interests to a new level." She also suggested it be renamed "ConflictOfInterest Ventures."

Some in Silicon Valley welcomed the news. Tweeted Arrington cohort, former PayPal exec and investor Dave McClure: "whoa! congrats & welcome 2 the party mike @arrington !!!" 

Arrington said a friend floated the idea of starting a venture fund in June. He approached AOL Chief Executive Tim Armstrong, who "enthusiastically agreed."

Even though he will be writing checks and dispensing advice, Arrington pledged to break as much news and be as tough on companies as he has in the past. He inserted a clause in the limited partnership agreement that gives him carte blanche to report on anything he learns except as an investor. 

"That," he said, "is going to piss some people off."

RELATED:

AOL is buying TechCrunch blog

TechCrunch's Mike Arrington shows his primary colors

His clout in Silicon Valley gets White House hopefuls talking

-- Jessica Guynn

Photo: Michael Arrington in 2008. Credit: Randi Lynn Beach / For The Times 

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