A new class of recruiter hunting for top venture and fintech talent have a trick up their collective sleeve: creating funds to invest in the companies for which they’re doing searches, rather than collecting fees.
The hybrid recruiting-investment model has been tapped by Intersection Growth Partners to complete searches for firms like Andreesen Horowitz and Coinbase.
Here’s how it works: Rather than simply performing an executive search or allocating capital to a company, the organizations using this model roll their search fees into the investments they make in a target company. This ties recruiters to the executives for longer periods of time, changing both search and investment incentives.
At the same time, allocators can benefit from the recruiting model: they can access unique or preferential deal structures.
“We created this model that focuses on alignment,” said Trevor Price, the founder and chief executive officer of Oxeon Partners, which pioneered this business blueprint. “We decoupled the art of executive search from compensation. Everyone at our firm owns equity in every single company we create.”
Oxeon recruits executives for healthcare companies, while the venture firm it merged with in 2018, Town Hall Ventures, can invest in those companies.
Intersection Growth Partners has been implementing a similar model in the financial technology and cryptocurrency industries. One of the firm’s co-founders, Scott Fletcher, is a longtime friend of Price’s and drew inspiration from him when setting up the business.
Along with Fletcher, co-founders Elizabeth Anderson and Hugh Norton-Smith started the firm in 2019 and have since completed some major searches.
The firm’s clients include Circle, a payments technology company. Intersection led the firm’s recent $470 million pre-IPO investment round and has helped the company find executives including a chief financial officer, chief compliance officer, chief risk officer, chief marketing officer, chief product officer, and head of investor relations.
“On the search side, the biggest issue founders and entrepreneurs have is finding talent,” Fletcher said. “It is super competitive, particularly in crypto, which is nascent and booming. These founders are kept up at night worried about talent.”
Intersection’s other clients include venture firm Andreesen Horowitz, roboadvisor Betterment, digital asset platform Anchorage Digital, and crypto platform Coinbase, he added. According to Price, working with these companies positions Intersection to access top talent.
“It’s the brand association that gives you more access to talk to the better executives,” Price said. “If you work with organizations like Andreessen Horowitz, who is not taking that phone call? If they don’t, they’re probably not the person you want to talk to in the first place.”
Intersection does not perform searches for companies it can’t invest in. When it does invest, the firm tries to roll its search fees into the capital it provides, Fletcher said. In his view, this model helps to not only aid long-term alignment, but it also helps the organization and its investors access attractive venture investments.
“In venture investing, the hardest part is getting access,” Fletcher said. “This is not 1978 Silicon Valley where you’re trying to find two guys in a garage building the first computer. Everyone knows where the good deals are, the challenge is getting into those deals.”
According to a person familiar with the matter, Intersection has plans to raise its second fund in the coming months. The firm’s first fundraise was a friends and family round, with investors like fintech operators and global macro hedge fund leaders. That fund has invested nearly three-quarters of its capital.
Oxeon, too, is in the midst of deploying capital. In September 2018, the firm closed on a fund that had capital from 7 of the largest 10 health plans, institutional investors, and CEOs, Price said.
The firm has since evolved past the recruiter-investor model. The firm set up a venture studio inside the executive search team. If Oxeon can’t find a company that it wants to invest in, Price and his team create it from scratch. They’ve done this eight times and have exited two of those investments.
According to Price, part of the value of this structure is the data his team can gather through the recruiting conversations they have with industry executives. At Oxeon, his team keeps a database of information learned through those conversations, which is then used for the investment team’s deal sourcing, diligence, and value creation efforts, he said.
As for what’s next for Intersection? “We’re going to put more effort and energy and resources into the fund side of the business as the business scales,” Fletcher said.