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“According to a report on TechCrunch, citing unnamed sources, Google Ventures has pulled its $100,000 investment from women’s lifestyle site Bustle.com, “after deeming the startup out of touch with its values.”

Specifically, TechCrunch claims that it was a series of controversial posts written by founder Bryan Goldberg here on Pando that “were the straws that broke Bustle’s Google backing.”

(Although TechCrunch did not name its source, Google Ventures GP MG Siegler is a former TechCrunch employee, and a current contributor to the site. Siegler’s dual role was not disclosed in the TechCrunch post and a request for comment from TechCrunch co-editor Alexia Tsotsis [~1hr ago] was declined, citing source confidentiality. Pando has confirmed that the Google Ventures partner most involved in the Bustle deal was former Digg founder, Kevin Rose.)

[Update, March 8th: TechCrunch founder Michael Arrington has commented on Tsotsis’ story, suggesting that the leak did come from inside Google Ventures. Wrote Arrington: “I get why Google would want to uninvest in this person, but what’s inexcusable is that they made sure everyone knew about it afterwards by leaking it here. He’ll probably never be able to raise money again with this hanging over him. Google could have acted far more professionally by doing this without the press.”]

If TechCrunch’s report were accurate, the move – a VC fund backed by a company with a $408 billion market cap pulling a $100,000 investment from a startup —  would be almost unprecedented.

In earlier eras of Silicon Valley – those not overrun with capital and incubators and populated by blogs, Twitter accounts, AngelList, sites like Secret and the Funded– it wasn’t particularly remarkable when a VC quietly pulled funding from a startup.

But now we are in a decidedly different era. This era is as much about a cult of the hacker founder as it is about Web 2.0 or mobile. Facebook is the biggest company of the generation, and its founding mythology has become a cautionary tale: Sean Parker was burned at Plaxo by Sequoia’s Mike Moritz and he made sure to seek revenge by ensuring Sequoia did not get a shot at investing in Facebook.

VCs are constantly paranoid about losing out on deals. Most every VC I’ve spoken with — even ones in deals worth hundreds of millions of dollars which are clearly flailing– have told me that reputationally the game has changed and that asking for money to be returned is a wildly short-sighted, boneheaded move that could kill entrepreneur-to-entrepreneur word of mouth for an entire (start up) generation.

There’s also the additional wrinkle here that Bustle is a media company. An investor getting a reputation for pulling funding from an editorial company because they don’t approve of the founder’s public statements is a really good way to ensure you don’t get to invest in a lot of editorial companies.

Also, Goldberg isn’t exactly a fresh-faced unknown kid. He was a co-founder of Bleacher Report– one of three new media exits in the hundreds of millions of dollars. And that was a five year slog. Bustle is only seven months old. Hardly any time to assess what it even is.

While Goldberg is controversial, his statements — about female-focussed blogs, about gentrification in Silicon Valley, and a host of other subjects — are somewhat old news by now. More to the point: Bustle has been pretty much exactly what Goldberg described it would be. So reports that Google Ventures had suddenly “deem[ed] the startup out of touch with its values” simply don’t pass a basic smell test.

While neither Google Ventures or Goldberg would comment on the record for this story [we initially contacted both ~2 hours ago], we’ve learned more details on the transaction and the relationship between the two parties, which has indeed been tense. The truth behind TechCrunch’s claims is certainly strange, and not exactly a common occurrence in the Valley, but it’s not quite as strange as Tsotsis would have her readers believe.

The story, as we currently understand it, is this: Google Ventures invested $100,000 in Bustle’s seed round– about the smallest check the firm can write. When it came time to raise a Series A, other investors in the syndicate advised Goldberg that he’d be wise to get a “media investor,” so he began talks with Time Warner. The terms were highly advantageous given Bustle’s age and size and, of course, Goldberg knew Time Warner, having sold Bleacher Report to them a year or so earlier.

When Goldberg reached out to Google Ventures’ Kevin Rose to tell him about the potential deal, Rose was offended that Goldberg hadn’t come to Google for a right of first refusal. Indeed, it was rookie investor management error on Goldberg’s part. Big funds invest in the seed round with the understanding they’ll get the chance to do the series A. Funds like Google Ventures don’t make money unless they can write larger checks and own 20% or more of a company. That’s the venture model.

Which is not to say that Goldberg’s public statements helped his case. After the Bustle launch, several of the company’s investors were reported to be angered by the controversy surrounding the company. This only made tensions with Google Ventures worse.

With Bustle and Google Ventures’ relationship strained, other investors suggested Goldberg just buy out Google Ventures’ stake. Goldberg readily agreed and bought out the investment with his own cash. Moreover, our understanding is that, legally, Google Venture could not pull out their investment unilaterally.

So, yes. It’s true that Goldberg made a mistake with the Series A, and true that Bustle has become a controversial company, largely due to Goldberg’s own statements. But if it seems unthinkable that Google would risk a PR catastrophe by unilaterally pulling $100,000 from a company, well, that’s because it didn’t happen.

With additional reporting by Michael Carney.

[Photo credit: Stewart Butterfield. (Creative Commons.)]