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Veteran VC firm buys executive search company

Bessemer Venture Partners, the country's oldest venture capital firm, acquires Lexington Partners to focus exclusively on finding staff for the businesses in its portfolio.

What do you give a technology start-up already flush with venture capital?

In the current environment where there is no shortage of cash for a nearly endless supply of tech companies, a chief executive would be a nice start, followed by staffing at every level.

Bessemer Venture Partners, the country's oldest venture firm, said today it has acquired an executive search company that will now focus exclusively on finding staffing for companies in Bessemer's portfolio.

The venture firm acquired Boston-based Lexington Partners for an undisclosed sum and renamed it the Bessemer Search Group.

Bessemer Search Group's three partners will also offer compensation consulting and human resource services.

The tight job market is putting a drag on the growth of some start-ups as a nearly insatiable demand for executives, programmers and engineers has made it almost impossible to get a company firing all its pistons. The labor situation is especially problematic in Silicon Valley, where, according to the Association of Bay Area Governments, there are 1.06 jobs for every employable resident.

"Having heard our entrepreneurs complaining that they couldn't get the best recruiters to respond to them in a timely and thoughtful way, we snapped up the recruiters we were most enthusiastic about employing," said David Cowan, a managing partner at Menlo Park, Calif.-based Bessemer Venture Partners. "We did this to guarantee a certain level of access and availability to those resources."

Some of the better-known companies funded by Bessemer include Sonus Networks, PSINet and Ciena.

"It is certainly true that the demand for recruiting services is very, very high right now, and that reflects a corollary demand for people to fill those jobs," said Marty Katz, a principal at compensation firm William Mercer International.

Venture firms are among the first to recruit the recruiters to work exclusively with their firms.

"If you're a VC and looking at the differentiating factors that have made your portfolio successful, it boils down to the people--not the technology but who you have in the controls," said Wayne Luke, an area managing partner at recruiting firm Heidrick & Struggles. "VC firms bring in a very experienced service professional as a partner."

Blue chip venture firm Benchmark Capital lured executive search hotshot Dave Beirne from Ramsey Beirne Associates, making him a partner at a firm famous for funding Palm, Red Hat and Ariba.

Bessemer was particularly interested in attracting Judy Sundue, who specializes in recruiting executives to the communications sector.

"Our entrepreneurs found it very difficult to get on her dance card," Cowan said. "She had every VC firm wooing her to do their CEO searches."

They finally got Sundue by making her a partner in the Bessemer Search Group.

Some tech firms have gone as far as acquiring entire companies, not for what products they make, but for the human capital.

"It is much cheaper to acquire a company with 250 software engineers and developers than it is to go out and hire one at a time through a recruiter," Katz said.