After MG Siegler's announcement yesterday that the CrunchFund general partner was moving onto greener, more re$$$ourceful pastures at Google Ventures, questions about the future of the conflicted fund grew louder. But according to Dan Primack's crystal ball, detractors should put down their knives for now, thanks to the potential of good returns.

That may not be enough to silence others investors, like the one who told Valleywag yesterday that CrunchFund was "a mess," adding, "They invest in whatever they can get access to, whenever." Limited partners like AOL, which put in $8 million, as well as other LPs like Ron Conway and Marc Andreessen and firms like Kleiner Perkins and Sequoia invested in CrunchFund in the hopes of getting portfolio companies a nice blogging boost, the theory goes. And it's no skin off their LP's backs, said our source, to throw them a $25,000 to $50,000 bone in a $100 million round and slap their logo up there, speculating that CrunchFund investors, just "give them a mini allocation of their share" in a round.

But Michael Arrington's firm seems to have course corrected since then, reports Primack (emphasis ours):

For AOL, the original commitment was seen as a way to keep its key talent happy. For the VCs, it was a way to ensure coverage for portfolio companies on TechCrunch (or, on the flip side, ensure a lack of negative coverage on TechCrunch). No one I spoke with at the time really talked about return expectations, although no one doubted Arrington's access to hot entrepreneurs.

And it may have been a good thing too, because CrunchFund's initial investment strategy resembled Dave McClure on deer antler spray. Sometimes it would pump just $10,000 into a new startup, and other times would invest well under $1 million in later-stage companies valued at $1 billion or more. Ultimately, however, Arrington and company settled on a sweet spot of between $100,000 and $500,000 for early-stage companies — which makes more sense for a $27 million micro-VC fund.

Crunchfund still has half of its capital to spend. Of the 80 companies its invested in, ten have had liquidity events including acqui-hires, bringing its current internal rate of return to 20 percent to 30 percent. According to Primack that means CrunchFund, which still has money to burn, should be able to raise a second fund, despite Siegler's abrupt departure, which came as a surprise to LPs and portfolio companies alike.

A CrunchFund investor breaks down how cronyism and perception keeps the whole system chugging along:

Neither Arrington nor Gallagher returned requests for comment on this story, but a CrunchFund investor summed it up like this: "A lot of venture capital is about who you know and what people think about you, but only because we all believe that has an impact on performance. If CrunchFund ultimately generates good returns, he'll get the money [for a second fund]. But it's still too early to send him another check, or to tell him to kiss off — even though there are probably people who want to do both."

"A lot of venture capital is about who you know and what people think about you." Keep that in mind next time you read some highflautin breakdown of a VC's investment philosophy.