Itâ€™s tough being a journalist, especially if youâ€™re covering technology and living in Silicon Valley, because it seems as if everyone around you is getting fabulously rich while youâ€™re stuck in a job that will never, ever make you wealthy. Whatâ€™s worse is that all these people who are getting rich donâ€™t seem to be any brighter than you are and in fact many of them donâ€™t seem very bright at all. So of course you get jealous. And then you start thinking maybe you could find a way to cash in on this gold rush. But how do you make gobs of money when your only marketable skill involves writing blog posts?
This is the conundrum, but lately Iâ€™ve been thinking of a business plan that sounds like it could work. First you establish yourself as an â€œinfluencerâ€ by posting a lot of noisy stuff on a blog and building an audience. Then you need to â€œmonetizeâ€ your influence. You tell all the VCs in the Valley that you are starting an â€œangel fund,â€ and you ask each one to give you, say, $500,000. They go along because (a) $500,000 is pocket change to these guys â€” so small, in fact, that they donâ€™t care if they lose every penny of it; and (b) youâ€™re an influential hack and they donâ€™t want to piss you off; and (c) they figure you can maybe write nice things about their portfolio companies, which would be especially useful if/when one of their portfolio companies gets caught up in some scandal; and (d) if any independent journalists write something critical about one of the VCâ€™s portfolio companies, you can can use your influential personal blog to savagely attack those journalists and try to discredit them.
So you raise $10 million or $20 million, and now youâ€™re an â€œangel investor.â€ Step two is you go around to startups and tell them youâ€™d really like to invest in their companies. Not big investments â€” maybe $100,000. They donâ€™t need your money; they can raise money from anyone, and usually youâ€™re one of 10 or 20 small investors in a round. But the value you add is that youâ€™re an â€œinfluencerâ€ and can be helpful when it comes to getting good press or offsetting bad press. (See paragraph above.)
You might think of this as a new kind of PR, only youâ€™re way meaner and more effective than a PR flack, and instead of getting paid in billable hours, youâ€™re taking payment in angel-round equity, which in a few years should be worth 10-100x whatever those billable hours would have been worth.
In fact this is a new version of an old racket that used to be practiced in the tech space by guys who called themselves â€œindependent analysts.â€ Their deal, back in the day, was this: â€œPay seven figures a year to buy a corporate subscription to my newsletter and Iâ€™ll say nice things about your company, and when the press needs a quote, Iâ€™ll be there to puff you up. Or, donâ€™t buy a subscription and I will bash you relentlessly.â€ Most big companies paid up and considered it a cost of doing business.
Well, this is the model I was thinking about, but it turns out someone beat me to it â€” itâ€™s called CrunchFund, and in the past few days weâ€™ve seen the machine in action, and it is indeed a beautiful thing.
Michael Arringtonâ€™s blog post leads to a FBI investigation into price fixing and collusion among angel investors. I have a lot of respect for Arrington for doing this, taking a stand against friends is never easy but heâ€™s right, what those angel investors was doing (if true), was wrong and I would be enraged (although not shocked) if I was running an early stage start up and got taken advantage by these vultures.