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Michael Arrington at the Naked Truth event in Seattle. (Randy Stewart photo)

Michael Arrington, the flame-throwing founder and co-editor of TechCrunch, is starting his own venture capital fund. The $20 million CrunchFund includes backing from AOL — which purchased TechCrunch last year — as well as venture capitalists at firms such as Kleiner Perkins Caufield & Byers, Sequoia Capital and Greylock Partners. TechCrunch covers many of those venture capital firms as well as their portfolio companies, which leads The New York Times to note that it is the “latest example of Mr. Arrington’s casting aside one of traditional journalism’s cardinal rules.”

Arrington says he’s not a journalist, and therefore should not be held to the same rules that many technology writers at media companies adhere to. He also notes that he publicly discloses any potential conflicts.

Arrington took heat early in his career for bankrolling companies that TechCrunch covered, but the practice was curtailed in 2009, reports Dan Primack at PEHub.com. However, five months ago, Arrington updated his investment policy to disclose that he was once again bankrolling startups and investing directly in venture capital firms.

In his typical tone, Arrington wrote:

“Other tech press will make hay out of this because they don’t like the fact that we are, simply, a lot better than them. That’s fine, but when you read their coverage remember that they’re our direct competitors, even though they won’t “disclose” that particular conflict of interest. Luckily they don’t get to make the rules we operate under. We do, and you, as readers, can choose to accept those rules and read, or not and leave.”

The technology press has already piled on Arrington. In a story titled “AOL: You’ve Got Conflicts,” Gizmodo writes that Arrington is “notorious for trading access for coverage.”

Since many of you will wonder what GeekWire’s position is on this topic, let me be clear. We do not directly invest in the companies we cover. I say “directly” because we may have some cash tied up in a mutual fund somewhere that has some Microsoft, Amazon or Expedia stock. But, frankly, I don’t even know. I am too busy building GeekWire to think about investing in individual stocks, let alone  startups.

When there is a potential conflict in our reporting, we disclose it. Arrington and his reporters also disclose the technology writer’s conflicts, including a recent piece in which Arrington’s executive assistant was asked to do certain tasks submitted through Zaarly. (One of Arrington’s recent investments).

AOL is making an exception to its policies to accommodate Arrington, with AOL CEO Tim Armstrong telling The Times that TechCrunch is a “different property.”

UPDATE: According to a report by Business Insider, Arrington is stepping down from his editorial duties at TechCrunch. He will still offer occasional unpaid blog posts to TechCrunch as long as they fall within the company’s blogging guidelines, but he will no longer report to AOL’s Arianna Huffington. That’s a bit of a change from what was first reported by The New York Times and other media outlets, which suggested that Arrington would have a more formal role at TechCrunch and still report to Huffington. So, did something change in the past 12 hours or did the Times just miss the mark with its story? Anyway, it seems that this is a more sound policy. But, as Henry Blodget notes, it is an end of an era if Arrington truly is moving on from TechCrunch.

What do you think? Is TechCrunch any different than other online media properties? Should journalists/bloggers/writers/reporters/editors be able to invest in the companies that they cover as long as they disclose it? Or is this an age-old rule of journalism that should not be broken?

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