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02.22.12

Ethical or Not, Silicon Valley Bloggers Hit Up VCs for Angel Funds

It’s a win-win game: Bloggers write favorably about both sides’ portfolios, and everyone exits with 100x returns. Even social media maven Robert Scoble is getting in on the game. But whatever happened to journalistic integrity?

Trend alert: In Silicon Valley, popular bloggers are realizing that instead of trying to make a living by selling ads, they can instead hit up venture capitalists for money. As I described last week in a post on my personal blog, these savvy bloggers will use the money to create “angel funds,” which they in turn will use to make investments in small startup companies—which bloggers often hear about before the rest of the world. Those investments, if bloggers are smart and/or lucky, could end up being worth millions.

On the other end of this devil’s pact, the blogger-turned-angel-investor will also keep blogging, promoting the very companies he’s invested in to a huge audience of dedicated readers. From the perspective of the venture capitalists, the appeal is simple: They’re now in bed with an influencer who has an incentive to write nice things about the other companies in their portfolio. No promises, mind you, but that’s what the VCs are hoping for. And the amounts involved—a few hundred thousand dollars per investor—are tiny enough that VC firms consider them a small price to pay to gain an influential pal in the media, and early access to what could be the next Facebook.

The first to do this was Michael Arrington, formerly the editor of TechCrunch, a popular Silicon Valley blog. He raised $10 million from 20 Valley VCs (including the bigwigs at Kleiner Perkins, Greylock and Sequoia) and started CrunchFund, his own angel fund. He uses his popular personal blog, Uncrunched, to write about the companies he’s invested in, such as Airbnb, Inspirato and Path. Another spin on this is PandoDaily, a tech blog started by TechCrunch alumna Sarah Lacy, who raised $2.5 million by soliciting small investments from a bunch of the Valley’s best-known investors. Lacy admits that her investors are the same people whose companies she will often be writing about, but insists she won’t play favorites.

Now that those two have pulled it off, others want a piece of the action, too.

The latest candidate: Tech blogger Robert Scoble, whose Scobleizer blog has millions of readers and is focused on discovering cool new companies in Silicon Valley. Scoble first got famous as an in-house blogger at Microsoft, then he struck out on his own. Now he works for Rackspace, a tech company that underwrites his frenetic blogging, video-making and non-stop punditry on the Google+ social network.

Last week I got a call from a venture capitalist who said that recently he was offered the chance to participate in a fund-raising round for an angel fund involving Robert Scoble.

The VC described the pitch as one that is starting to sound familiar. Scoble sees lots of early-stage companies, and can promote them on a blog with a big audience. “There’s nothing ever said explicitly, but the implication is that ‘I’ll invest and I’ll blog and promote the companies I’m writing about,’” my VC source said. “The deal is that Scoble invests in XYZ company, and he makes sure they get a lot of press.”

My source declined the offer, partly because he thinks Scoble doesn’t really have that much influence. “I think there’s a mismatch between what goes on in his mind and reality,” my guy said.

I wrote to Scoble and asked him if he’s starting an angel fund. His response: “Hah. There is some bar talk about this but nothing official yet. I am interested but not anywhere close and certainly I wouldn’t be managing it.”

Traditional journalists cringe at this kind of “hacks for hire” business model, but from an utterly cynical perspective, it’s kind of brilliant—as long as you can get over the whole “ethics” thing.

So who would manage it? “I have no idea. It never got to that point. I doubt I would be more than a pretty face on any such fund,” Scoble responded.

Traditional journalists cringe at this kind of “hacks for hire” business model, but from an utterly cynical perspective, it’s kind of brilliant—as long as you can get over the whole “ethics” thing.

Remember, these guys are bloggers, not journalists. Why shouldn’t they use their blogs to get rich? It sure beats trying to make money selling those crappy little ads in the side column.

In a way, what these bloggers are really doing is creating a new kind of PR firm, one where the promoters get paid not in billable hours but in early-stage equity. If you’re a startup, this makes a lot of sense. Why pay a PR agency millions of dollars and hope they can get you some favorable coverage when you can just bring on an investor who will write the articles for you—and reach a bigger, more targeted audience than mainstream media outlets like the New York Times could ever do?

So: Godspeed, Robert Scoble. May the force be with you—and with all the other hacks for hire who will soon be following in your footsteps.