Original URL: http://www.theregister.co.uk/2013/04/29/eu_webtastic_conflict_of_interest/

Judge of EU beauty contest for 'sexy' startups is VC backer of winner

'Oh dear', says EC after Steelie Neelie blush gush

By Andrew Orlowski

Posted in Small Biz, 29th April 2013 08:04 GMT

Comment The European Commission has sponsored an award in which a VC was part of a panel that gave the top prize to one of his firm's investments. The first ever Europioneers Awards, presented by EC Vice-President Neelie Kroes, crowned the founders of two European startups, SwiftKey and SoundCloud, as "Young European Tech Entrepreneurs of the Year" and "European Tech Entrepreneurs of the Year" respectively.

The small judging panel included a VC, Saul Klein of Index Ventures, whose company just happens to be an investor in SoundCloud. Index shared in a $10m funding round in SoundCloud two years ago. This means Klein’s firm [portfolio] benefits substantially from the profits of any sale in its stake in the venture, so it would be in his interest to hype it to the heavens.

“Oh dear,” said an EU spokesperson when we called to point out the potential conflict of interest.

Two of the other judges were journalists - the Guardian’s Charles Arthur, and WiReD’s Olivia Solon - along with hardy Silicon Roundabout perennial Mike Butcher, without whom no web startup judging panel is ever complete. Butcher is an investor in TechHub, a property business active in the London web bubble, and is also an advisor to a crowd-funding startup and numerous informal public bodies. He also lobbies for the reform of legal protection for creators, via a Google-sponsored organisation called Coadec. Amazon CTO Werner Vogels and Antti Vilpponen (of Finnish hosting company Upcloud) completed the panel.

We asked the European Commission if Klein - formerly chief exec of LoveFilm and marketing and e-commerce boss at Skype - had recused himself from judging the award, and whether it had put any conflict-of-interest guidelines in place for the judges – and why any VCs should be judging in the first place.

"Saul Klein didn't recuse himself and wasn't asked to," EC spokesman Ryan Heath told us. "To recuse [oneself] from one of two categories would render involvement a little pointless".

"There were 908 nominees, and I am sure all of the judges and many of the public have some connection in one way or another to one of the nominees. That's what happens in a relatively small and close-knit start-up scene.

"What matters more is that the process was transparent and the fact that the finalists were selected by the public rather than the final judging panel."

He explained that there had been 908 nominees, with 10 finalists selected by the public.

We also asked Klein for comment, but he hadn't got back to us at the time of publication. We'll update if we hear more.

The new awards are part of “the Commission's six-part plan to accelerate, connect and celebrate local entrepreneurship ecosystems in Europe, so that tech startups not only start in Europe, but stay in Europe,” and Kroes was clearly excited as she announced the winners:

“They show us that it's sexy and enriching to be your own boss, to create your own job,” said the Commissioner.

If conflicts of interest are unavoidable, then perhaps it might be an idea to avoid appointing venture capitalists in the first place. Involving a more diverse spectrum of technology experts might actually improve the quality of what is a "close-knit scene" - rather than perpetuate the lack of diversity. ®

Bootnotes

1. SoundCloud has already drawn criticism for its bizarre and regressive revenue strategy. Rather than rewarding the creators who provide its raw material, and draw an audience to the site, it shakes them down instead. No matter how popular a stream, the musician or DJ will be out of pocket.

2. Index Ventures has provided a home for No 10 policy advisor Rohan Silva, who helped create the Silicon Roundabout "tech hub", and will join the company in June.