AOL, MySpace bosses' bloody VC mergerVenture capitalists sell themselves as friends to entrepreneurs, and talk about how they're going into business together. Isn't it useful to know how they treat the people they're actually in business with? The tale of the formation of Velocity Interactive Group is instructive in that regard. Former AOL CEO Jonathan Miller and ex-News Corp. executive Ross Levinsohn, who oversaw MySpace, raised eyebrows when they switched VC teams last December. The full story is even more cutthroat than we imagined.

When Microsoft set Facebook's value at $15 billion last fall, Miller and Levinsohn's plans to acquire four startups and roll them into one blog publishing company suddenly got a lot more expensive. Too expensive. So much so that funding partner General Atlantic dropped out. That turn of events left Miller and Levinsohn ready to listen to ComVentures cofounder Roland Van der Meer. Van der Meer offered them spots on a five-man team leading a new venture capital firm focused on digital media. Miller and Levinsohn agreed to join. Problem was: There were already five ComVentures partners. Two would have to go. Van der Meer decided to ax Michael Rolnick and Jeb Miller.

On the morning of December 17, the ComVentures partners gathered for their usual Monday morning meeting. Rolnick and Miller took their seats, coffees in hand, according to PEHub. Then Van der Meer told them they were out.

"They were blindsided," one VC told PEHub. "There was no reason to treat people that way... Rolnick had been there nine years. This isn't a giant company doing layoffs, it's a small partnership. It was simply wrong."

That's just business, right? Well, according to PEHub, investors aren't happy about how the shakeup went down either. They feel it makes the firm seem unstable.

One investor said:

Levinsohn and Miller are impressive guys, but it's tough for me even if I want to invest with them. To do so, I have to believe that this entire team is going to still be together in five years, and I just can't trust that. Either Levinsohn and Miller will decide to leave because they aren't VCs at heart, or Roland will fire them for some reason or another. Either way, it's too risky.

(Photo by ahhhh)