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Venture Law Group lost half its partner ranks in its Kirkland, Wash., office Monday to Wilson Sonsini Goodrich & Rosati. The departures of Craig Sherman and Mark Handfelt mark the first time since November 2000 that a partner has left VLG. Over the past year and a half, the Menlo Park-based corporate boutique has shrunk its lawyer ranks by nearly 20 percent with layoffs, performance-related firings and demotions. It now has 75 lawyers, down from 93 in March 2000. But its partner ranks have held steady, even after the Internet bubble burst and the stock market started its tumble. Founded to take an aggressive investment role with startup technology clients and with a salary scheme that gives everyone at the firm a slice of its investment pool, the firm is more vulnerable than most law firms to changes in the market. As a result, the firm’s fortunes rise and fall with the stock market. Co-founder Craig Johnson said there’s no doubt the firm is feeling the pain of the current market and that its lawyers stand to make less money. “There’s no question people can earn more money at this time if they want to work at a traditional law firm,” Johnson said. “This is a time when you either have to believe in the future of the firm or you don’t. “I think in Craig and Mark’s case, the security of a larger firm with a more diversified practice was more appealing,” Johnson added. Johnson said in hindsight, there probably were signs the two were considering a move. He said he doesn’t see anything similar among the firm’s remaining 26 partners. For their part, neither Sherman nor Handfelt are talking. Sherman did not return calls for comment, and Handfelt declined to discuss his move. Sherman joined the firm from Perkins Coie in 1996, the same year VLG opened its Kirkland office. Handfelt joined the firm in 1999 from a now-defunct biotech client. Wilson managers aren’t talking either. Patrick Schultheis, Wilson’s managing partner in Kirkland, did not return calls for comment, and the firm’s spokeswoman said the firm had no comment. The hires are the second such raid Wilson has made on the regional outposts of Silicon Valley’s largest corporate boutiques. The firm in June lured two partners to its Austin office from the local satellite of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian. In the wake of the departures, Gunderson pulled the plug on its Austin office. Washington state, and Seattle in particular, has been hit hard by the drop-off in venture capital investment activity, which generates the firm’s bread and butter of startup company transactions. Money that VCs put into new companies dropped 68 percent in 2001, according to VentureOne, a San Francisco-based private equity research firm. And for the first half of 2002, investment activity was down by 39 percent from last year. John Robertson, the managing partner of VLG’s Kirkland office, said he is confident the remaining 10 lawyers in the office are committed to the firm’s focus. “This is the not the time to bail on the emerging company scene,” said Robertson. “This is the time to get deep in it.”

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