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The Wall Street Journal posted a story today about investors Jeff Horing and Jerry Murdock from the firm Insight Venture Partners. It talks about how they went behind the backs of limited partners and personally invested in Photobucket back before News Corp. bought it and it really took off. The story seems to suggest some financial foul play, but not everybody views it this way.

"The Photobucket deal -- $3 million for a 20% stake in a social media company with "nominal" revenue -- wasn't the kind of deal IVP's LPs signed on for," explains Peter Kafka at Silicon Alley Insider. "Instead, the $3 billion fund generally makes late-stage investments of about $35 million in companies that that have upwards of $25 million in sales."

While Valleywag and others have similar takes on the matter, Donna Bogatin from Startup Chatter says Kafka's article "throws cold water on an informative account of the inner workings of venture capital funds." She is probably right in that this is a topic worth noting, but this particular case might be a poor example to shed light on it.

The WSJ article itself even quotes one of the firm's lawyers, "The investment was made in full compliance with the letter and spirit of all of Insight's agreements with its limited partners." Then there's the quote from the IVP investor that even downplays the story:

"Perhaps they should have told us about this, but it was such a small deal. Would we have wanted a piece of it in hindsight? Sure. But for every one of these successes, there are a hundred failures."

The article is somewhat interesting in the story about these guys getting lucky with Photobucket, but as a scandal it seems to be playing second fiddle to the motives of the story itself.