This image was lost some time after publication.

The investors at Insight Venture Partners, already wealthy, got richer yet when they invested personally in Photobucket, a photo-sharing site now owned by News Corp. Insight's cofounders Jeff Horing and Jerry Murdock made $5 million apiece. Their limited-partner investors, including Yale's endowment and California's state retirement fund, did not get a chance to invest in the deal. Controversial? Yes — to someone who I suspect bore a grudge against Insight, and peddled this story to every outlet he could find, including Valleywag.Insight is a private equity firm that makes some late-stage venture-capital investments; Its average deal size is $35 million. Insight's partners invested $3 million in Photobucket in 2005, when it had 3 employees and no revenues; they collectively made an estimated $60 million when News Corp. bought the company last year. A few weeks ago, someone pointed me to the Wikipedia page for Photobucket. An anonymous editor had added a paragraph to the entry accusing Photobucket's venture-capital backers of forming a "shell company" and "cherrypicking" the Photobucket investment to keep it out of the hands of Insight's own investors. This much is true: Insight's partners formed a Delaware corporation called IVP/PB Investment LLC. The vehicle's name appears in Photobucket's Reg. D, a publicly available form filed with the Securities and Exchange Commission. If Insight's partners were trying to hide the deal, they could have done a much better job of it. The name alone suggests that IVP's partners had no concerns about people finding out about their investment. Venture capitalists, in the classic way that the rich get richer, get pitched business deals all the time, of all sorts — real estate, small businesses, and, yes, startups. Sometimes they invest in companies on which their partners decide to pass, or of which its limited partners disapprove. Tim Draper of Draper Fisher Jurvetson is famous for doing this. Photobucket was far too small, and far too young, for Insight to invest in, the VCs I've talked to agree. And why would they actively seek to piss off the college endowments and retirement funds on which they rely to raise future pools of cash? There are questions about this deal — but they have more to do with how much time Horing, Murdock, and other Insight partners spent on Photobucket. Horing told the Wall Street Journal that his firm collectively spent 15 hours on Photobucket — including pitching the startup, unsuccessfully, to Benchmark Capital and Kleiner Perkins for follow-on investment rounds. 15 hours work for $60 million? I'm in the wrong business. But that hardly seems like enough to concern Insight's backers. The deal has raised someone's ire, though. TechCrunch, PaidContent, the Journal, and, yes, Valleywag, were among the tipster's targets. Yes, I should have written this one up sooner — but I was fascinated by the question of who wanted to get Insight, and why. I'm still at a loss. Insight has a low profile in the industry; as a late-stage investor, based in New York, it rarely dabbles in Silicon Valley's splashy younger startups. (Its sexiest investment is SkinnyCorp, the Chicago-based parent company of Threadless, a website which sells T-shirts.) So: A spurned entrepreneur? A rival venture capitalist who lost a deal to Insight? It's useful to keep in mind that venture capitalists can make a lot of money on side deals — deals they heard about in the course of doing their day jobs. 'Twas ever thus. The person who thinks he ratted out Insight, though? He'd like you to believe that some venture capitalists are so venal and so foolish as to torpedo their entire careers over a tiny deal that happened to turn out well. Insight's opponent, whoever he is, underestimated the firm's intelligence — and some reporters' intelligence, too. (Illustration by the Wall Street Journal)