Michael Arrington of TechCrunch has decided to start angel investing again…
In 2009 the accusations of conflicts of interest by our competitors became somewhat distracting, and for a couple of years I discontinued investing in startups completely.
That policy has now changed. Over the last several months I have begun investing actively again. We’ve noted these investments in Shawn Fanning’s new startup and in Kevin Rose’snew startup.
I have also become a limited partner in two venture funds, Benchmark Capital and SoftTech VC. I am considering investments in a few other venture funds and a couple of startups as well, but have nothing further to announce yet.
and people are making a big deal out of it…
Arrington says "I think that this will all be fine," because he plans to disclose everything. But his conflicts have already illustrated how reporting financial tech news tends to be in fundamental opposition to participating in tech finance: Rather than reporting on Napster creator Shawn Fanning's new startup "Yo" when he heard about it, Arrington jumped in as an investor. Only when one of his reporters uncovered the story independently, as Arrington describes it, did TechCrunch publish the news that the site's own editor had known for some time. And that is the flaw with trying to mitigate conflicts with disclosure: You can't disclose when you're sitting on information; otherwise you are, by definition, not sitting on the information. Likewise, it's hard to see how TechCrunch is going to disclose when it doesn'tcover a competitor of one of Arrington's companies (Twitter, maybe?).
The problem with isolating financial gain as a serious conflict of interest is it ignores all the other conflicts that are just as likely to cause a bias.
The most obvious of these is personal relationships. The valley you read about in blogs is really just a series of relationships between the media and those founders who are lucky enough to interact with them. There are tons of other startups that will never personally meet a TechCrunch author and as a consequence will be lumped into the thousands of startups begging for coverage by e-mail (and getting none).
Even where a personal relationship isn’t present things like location play a huge factor in coverage. Is there anyone reading this who honestly thinks a startup in Chicago would get as much coverage as one on Market Street? If so you’re fooling yourself.
In fact I’d argue financial bias is the least of all biases. Because people acknowledge it’s wrong so they actively resist it. That’s not true of other biases.
You’d never see someone like Mike Arrington write a post disclosing his friendship with Loic Le Meur because as a society we don’t see anything wrong with “helping a friend”. Yet the second he invests in Seesmic he feels the need to disclose it.
But isn’t a personal relationship just as likely to cause a someone to view a startup favorably?
So all the talk about Arrington’s investments hurting TechCrunch is much ado about nothing. In the end a media outlet’s only guard against bias is to actively resist it from where ever it comes and the only factor a reader should consider is whether they believe that outlet is capable of resisting it.