Ashton Kutcher stirred up some controversy this week and this time, it has nothing to do with his gig as Charlie Sheen’s new replacement on “Two and A Half Men.”
Kutcher guest-edited a special new online issue of Details Magazine in which he hypes four hot new internet startups. The problem? He fails to disclose he is personally invested in three: Airbnb, Foursquare and Flipboard (interestingly, the issue is only available on Flipboard and Facebook). By journalism standards, this is a big no-no. The bigger question is whether it constitutes a federal crime.
In an article in the New York Times yesterday, reporter Nick Bilton investigates whether Kutcher violated S.E.C. rules by failing to disclose. If Kutcher's portfolio companies file to go public anytime in the next month—a highly unlikely scenario—his conduct would violate the S.E.C.’s “quiet period” which expressly forbids stock issuers from discussing a company 30 days prior to filing. The Times piece included a bureaucratic albeit tantalizing quote from the Federal Trade Commission: “It’s certainly a possibility a case like this could be investigated.”
The chances of Kutcher getting punk'd by the S.E.C. over this are next to null. But it is an egregious example of an obnoxious and pervasive new phenomenon in start-up world: The Portfolio Pimp.
Kutcher Tweet-pimps his portfolio companies to his seven million Twitter followers all the time. So does nearly every venture capitalist and angel investor on Twitter. Super angel Chris Sacca, an active Twitter user and investor, often Tweets about his portfolio companies like hot streaming music site Turntable.fm. He is hardly the exception.
It’s not just on Twitter. Technology blog TechCrunch recently posted a fratastic video of founder Michael Arrington’s new assistant getting hazed via Zaarly, an app that lets users assign people tasks (often in exchange for cash). The video shows Zaarly users hazing Arrington’s assistant with various uncomfortable chores such as extracting honey from a beehive, teaching execs how to Dougie, and serenading his new boss in the middle of San Francisco’s Union Square. Only later, did I catch the fine print: “TechCrunch founder Michael Arrington is an investor in Zaarly.” Come to think of it, so is Ashton Kutcher.
In TechCrunch’s case, the conflict of interest was disclosed. To be fair, Twitter's 140 character-limit leaves little room for disclosure. Still, a few investors have begun to call attention to shameless portfolio promotion.
Technology investor turned influential blogger Paul Kedrosky did not mince Tweets recently: “I know it’s de rigueur that VCs tweet-pimp their portfolio in the most smarmy ways possible, but let’s dial it back to 6 or so.”
The S.E.C. may agree.