VC backed Cash4Gold (real name Albar Metals), the upstart mail-order gold buyer shown quite often on late night commercials recently upped the ante with a SuperBowl Ad featuring financially troubled celebrities Ed McMahon and MC Hammer.

However, despite all the publicity, numerous complaints on the company’s business practices are beginning to surface.   VentureBeat recently outlined a post on Consumerist describing the company’s business practices from an ex-employee. Let’s just say the comments are pretty disturbing. This follows another account where a blogger whose unflattering internet post of a Cash4Gold exchange was offered several thousand dollars to alter his post so his story didn’t rank so high when Googling “Cash4Gold”, (comes up #2).

Dan Primack at Private Equity Hub noted a month ago that venture firms Highland Capital Partners (tagline Building Great Companies Together) and General Catalyst dumped $40 million into the company, although neither firm has publicly acknowledged the investment. At MIT’s December Venture Capital Conference Dan noted David Fialkow of General Catalyst stating;

“Me and [Highland’s Paul Maeder] here invested in a company we haven’t talked about yet, where these two entrepreneurs are making $1 million a week. They’re not doing anything technical, they’re just innovative… The reality is that great entrepreneurs figure out how to make money.”

I’m not sure why a company making $1 million a week with a simple business model would need a $40 million cash infusion, (other than the founders perhaps seeing the end and wanting to partially cashout, oh, and that Superbowl ad), but it does beg the question if both VC outfits were perfectly fine profiting from Cash4Gold’s innovative business model. I assume their due diligence process uncovered at least one complaint.

Who know’s what the future holds for Cash4Gold, but unless the company can turnaround its image by turning around its business practices, I don’t see a happy ending.

What’s interesting though is had Cash4Gold not appeared so seemingly greedy (allegedly offering 1/3 the value of your gold), this company probably had a long-term shot.

When it comes down to it, Cash4Gold’s business model is no different than hugely successful change converter Coinstar. The only difference is the fee. Coinstar’s fee is 8.9% and is easily found on the company’s website. Cash4Gold’s fee may be unavailable on its website, but is increasingly easy to find on other’s.