For years, TechCrunch had been a major technology news site and a must-stop for high tech entrepreneurs. It had a well-known conference for startups. In the fall of 2010, site founder and owner Michael Arrington sold the company to AOL for tens of millions of dollars while extracting a promise that TechCrunch would retain editorial independence.
Within a year, the entire operation would be in turmoil. A number of people at TechCrunch would chafe at having Arianna Huffington as a boss. Arrington would get permission to invest in the companies the publication covered. Then he and AOL CEO Tim Armstrong agreed to set up a venture capital investment division called CrunchFund while Arrington would remain in a writing role, all without Huffington knowing. When she found out, she fired Arrington.
And then things got really squirrelly. Some of the TechCrunch writers went on at length about how good the site was and that AOL was destroying it and endangering the future of technology journalism, which was supposed to be the same as TechCrunch. It got so ridiculous that Newsweek technology editor Dan Lyons called it a clown show.
How did things get so bad? Through a series of business gaffes that were exactly the sort of things that can happen to businesses and entrepreneurs that find themselves wildly successful.
1. Don't Buy Into the Hype
It's great to feel on top of the world. TechCrunch had gained a strong reputation and most everyone there seemed to embrace the status and assume that they and the organization were every bit as important as people said. (One of the writers who eventually would join Arrington as a venture capitalist, MG Siegler, wrote an ode to his own greatness that sounded like he had studied at the Charlie Sheen School of Winning.)
However, reality always has a tendency to return and deliver a lesson in humility. That is never truer than when you begin to believe your own press. The minute you do, you make yourself, not your customers or your business, the center of attention. That's enough to unbalance anyone.
2. Conflicts of Interest are Bad
To some degree, any successful manager breaks rules. Otherwise, you only follow what others have done, which means you're never innovative and don't have big breakthroughs. But there are principles of business that always apply. Cross them at your peril.
One of them is to avoid conflicts of interest. It's a charge that TechCrunch often heard in the past, particularly when Arrington would personally invest in startups, which was most of the blog's existence. His stance was that disclosing everything removed the problem because it made it visible.
But conflicts of interest exist outside the journalistic ethos. When you have them in business, you've laid the groundwork for disaster. By insisting that TechCrunch would have independence from AOL, Arrington created just that dynamic. It meant that eventually egos would clash.
3. Assume that Your Sold Baby is Still Yours
Close to the conflict of interest problem was the fact that Arrington made the classic mistake of selling his company, taking a position with the acquirer, and then trying to act as though he was still independent.
For example, he wrote a blog post on TechCrunch about AOL's expense reimbursement policy and its process of using a third party firm to verify expenses. When you've sold the company, you're now an employee. You can't spend $1,500 in hotel, meal, and taxi expenses for a single trip, as Arrington said that he did, and find it unreasonable that the people footing the tab might have some questions.
The demands that AOL have no control over TechCrunch were unrealistic. When you take the money for the acquisition, you give up the right to chafe under someone else's management.
TechCruch will recover, mostly because some of the larger egos are out the door. But things never should have reached the point they did, and some smarter management decisions and practices could have kept the organization in better check.
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