David Carr, TechCrunch, the Red Sox and CrunchFund

The short version of the long story in what has transpired within TechCrunch is their editor Michael Arrington announced CrunchFund to invest in startups, originally with AOLs full support (and $$$). There was a public outcry with one of the largest personalities in the startup world having the potential to influence the companies he invests in. Earlier this year, Arrington announced he would invest in certain companies that he writes about (with disclosure of his investment) but a full fund has created a larger issue.

David Carr wrote a long article hashing out his opinion on the conflict of interest, which was followed up by two rebuttals (one and two) from writers on the TechCrunch staff. Paul Carr from TechCrunch (in article number two) writes, "In particular, Mike (Arrington) is delighting in the irony of a New York Times writer attacking TechCrunch for a lack of disclosure when the Times regularly covers the Boston Red Sox without disclosing that they have a minority stake in the team." It seems unusual for Arrington to delight in this supposed irony. The comparision between the coverage of a sports team and a partial ownership of a team to the coverage of startups and a partial ownership of a company falls flat upon any real analysis. Conceivably the only way a company like the New York Times could influence a team is by increasing their coverage and therefore awareness and then potentially valuation. The issue with this in terms of the Red Sox is 1. NYT maintains little to no power in the world of sports coverage and 2. Fan size, TV market, wins and losses are the ultimate drivers of valuation for a team. Conversely TechCrunch has an enormous amount of power and influence over public perception of small companies (I called a company for a meeting last week based on exposure from a TechCrunch article) and valuation for these companies is initially driven in large part by perception of potential and less on wins and losses (P/L).

It appears likely that Arrington will officially stepdown soon and I admittedly know nothing about the TechCrunch culture, how their specific editorial process works or more generally about working at a news organization. The rebuttal articles do, however, come across as myopic and naive.

Pete Rose claims he only gambled on his own teams to win. It didn't matter. Rose broke a sacred rule in baseball by having a financially vested stake in the outcome of a game beyond his employment. In the AJ Daulerio/TMZ world, journalistic standards have obviously shifted quite a bit but regardless of the editorial process at TechCrunch and the autonomy their writers have, it does seem too conflicted to have the head of TechCrunch betting on his own teams.