Of Bubbles and TechCrunch Investing Policy

You know you are on your way to a Bubble when investors in startup companies use their media arms to write about those companies (anyone recall Messrs Blodgett and Meeker last time round?). Latest play in this space is TechCrunch editor Mike Arrington, who has defended covering the stuff he is investing in:

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’s new 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.

Lest anyone forget, after the dotcom bust Investment Banks and their Analysts were forced apart, as it seemed the "Chinese Walls" between them had been paper-thin to the point of transparent, leading to certain - ah - over-estimations of companies' values in the analysts' coverage. Now, Kara Swisher points out that leopards don't change spots so to an extent you know what you are getting with Mr Arrington....

While I was first irked–because it was an appalling show to many of us cranky standards-insisting whiners–I soon realized Arrington had made a good argument about who he is and, frankly, who he has always been. In other words, it’s a kind of there-he-goes-again thing, vaguely icky but hardly surprising and completely genuine.

However, it would seem that TechCrunch owner AOL is a tad concerned as well, as it seems no other AOL editors are allowed to make investments in subjects they cover. (I assume that applies to other TechCrunchies as well?)

To me it's never mind the ethics, look at the economics - its just a classic case of Bubble behaviour. In normal times, any news organ investing in the companies it covers would probaby be roughly treated (as TechCrunch was in fact, so Mr Arrington stopped in the late 'Noughties). In Bubble times, however, these basics are tossed overboards as everyone jumps on the yellow brick road (just look at the comments on the TechCrunch piece, Gecko would be proud ).

Update - Ya gotta admire him - Mr Arrington comes back swinging, pointing out that people in the Meedja have all sorts of non investment special relationships they don't disclose. Two wrongs clearly make it alright.....