This is the piece in The Register that got Tim Oren so upset he slammed it without linking recently:
Japanese VC and tech socialite Joi Ito [Hates reading books – Lunch – Lunch – Segway – Lunch – Lunch – Fawning Parody – World Blogging Forum!]) has spent months hyping the couple who started the Movable Type weblogging software Ben and Mena [buys banjo]Trott.
The cute, but strangely synthetic twosome were showered with advanced publicity in the form of flights and lunches and “party games” (the latter is filed under “Humor / Leadership and Entrepreneurship” ), before Ito’s company invested in Movable Type last week.
Will we be able to trust Ito’s ongoing research analysis about his investment?
We shall see.
It seems to me that extra-cozy relationships between Venture Capitalists, Investment Bankers, and analysts are central to Spitzer’s investigation, but you’ll have to read both articles to see why that’s worth saying.
UPDATE: Tim Oren responds (in comments) with this:
My point is that said clueless journo segued straight from a screed about Elliot Spitzer and Wall Street analysts into carping about Joi’s investment. A public market analyst who presents some facade of impartiality has an obligation to act in accordance, which some number of them obviously blew off, no quarrrel there. Venture capital is a different function. Our fudiciary duty is to our investors. There is no public market in our holdings or funds, and you couldn’t trade on a plug from me or Joi if you wanted. A bit of free PR to the buying market (or other VCs) is one of the values we can provide to both portfolio companies and investors, and there is no violation of public trust in doing so. If there was any risk, it wasn’t to the public, it was to Joi’s fund itself since there might be some plausible circumstances it which his postings would draw competitive investment bids, a fact which he pointed out.
Come the lucky and wished for day when one of our investments goes public, we will have the same quiet period obligations as officers and other shareholders. Until then, we’re not violating any obligations by waxing enthusiastic about either markets or companies, though I do believe that being explicit about what we’re doing is both honorable and reasonable (the main point of the post you linked).
Trying to jump from bent analysts and i-banks, to an investment by a first round fund (Iocated in JAPAN, for pity’s sake), is such a distortion that is has to be willful. Said journo either doesn’t understand the industry, or doesn’t give a damn about accuracy. I smell an ox being gored or an agenda being pursued. As I said, that doesn’t exactly impart credibility to his other writings.
Fair enough on the facts. Thing is, anyone reading Oren’s “Due Diligence” blog has no doubt that Tim’s a VC and not a journalist, analyst, or industry pundit, but it’s much less clear to readers of the Ito blog what Joi’s business is. Ito writes about lunches with journalists, hosts “happenings” in support of “Emergent Democracy”, and issues garden-variety leftist attacks on capitalist influence on Japanese government, so it’s not entirely unfair to hold Ito to journalistic standards; he may not be one, but he plays one on the web. That being said, his praising of Six Apart followed by his investment in the firm doesn’t offend me on “conflict of interest” grounds. It looks to me more like a case of buttering up the principles by promising to make them into stars before walking off with a huge chunk of equity for a song, but that’s simply speculation on my part as I don’t have the facts to back it up.
One thing that is clear, or should be, is that Ito’s a smarmy character with a history of association with questionable, bubble-icious ventures such as Infoseek and PSI. Why a maker of personal blogging software needs venture capital at all is an open question in my book as well.
My point is that said clueless journo segued straight from a screed about Elliot Spitzer and Wall Street analysts into carping about Joi’s investment. A public market analyst who presents some facade of impartiality has an obligation to act in accordance, which some number of them obviously blew off, no quarrrel there. Venture capital is a different function. Our fudiciary duty is to our investors. There is no public market in our holdings or funds, and you couldn’t trade on a plug from me or Joi if you wanted. A bit of free PR to the buying market (or other VCs) is one of the values we can provide to both portfolio companies and investors, and there is no violation of public trust in doing so. If there was any risk, it wasn’t to the public, it was to Joi’s fund itself since there might be some plausible circumstances it which his postings would draw competitive investment bids, a fact which he pointed out.
Come the lucky and wished for day when one of our investments goes public, we will have the same quiet period obligations as officers and other shareholders. Until then, we’re not violating any obligations by waxing enthusiastic about either markets or companies, though I do believe that being explicit about what we’re doing is both honorable and reasonable (the main point of the post you linked).
Trying to jump from bent analysts and i-banks, to an investment by a first round fund (Iocated in JAPAN, for pity’s sake), is such a distortion that is has to be willful. Said journo either doesn’t understand the industry, or doesn’t give a damn about accuracy. I smell an ox being gored or an agenda being pursued. As I said, that doesn’t exactly impart credibility to his other writings.
Sorry, Tim, but while your facts may be straight, they ain’t the reality on the street. VCs have attained the status that they have plumped for — Investment Gods. To downplay yall’s influence and invoke legal technicalities about quiet periods is playing both sides of the street. First-rounders stand to gain more, sooner, than any other form of investor out there.
Which is not to say it’s not perfectly legal and acceptable to most parties involved, myself included. The umbrage you take, though, is a managed facade of bullshit. Don’t piss on my boots and tell me it’s raining.
Rubbish, Mr. Chaffin. Do you actually know what a first round VC is? Our money goes in first and if we exit with everyone else, if at all, not exactly ‘gaining sooner’. You might look up ‘pay to play’, ‘cram down’ and ‘down round’ for another dose of reality. (Last I checked my Investment Godhead has not arrived, though I’m now waiting anxiously.)
Richard is exactly on target with his (current) last point. It’s an open question whether blogging/web services are an appropriate target for venture capital, either in requiring enough funding to make it necessary, or having enough barrier to entry potential to make a successful competitive position and exit possible. Joi’s Neoteny has put a bet down. We’ll all get to see how it plays out – this may be the most ‘public’ private capital investment in history…
Holler all you want, but you and your profession are now saddled with the oracular status your peers sought from the biz mags and the general public over the last few years, and you bloody well know it. Your influence on investors is not something I just dreamed up. Again, this isn’t a problem for me — it’s the pretending that it ain’t so that bugs me endlessly.