Profile: Bonnie Kraus, Crane Venture Partners
The Drawdown (TDD): You qualified as a chartered accountant with Arthur Andersen, spent your early career in BDO, before moving to Better Capital (PE) and finally Crane Venture Partners (VC). What attracted you from the service provider side of the market to a GP? And ultimately from PE to VC?
Bonnie Kraus (BK): People say you make your own luck, but my career path wasn’t planned. It looks like the result of a series of happy coincidences. When I graduated, Malaysia was going through a very bad recession and there weren’t many options available. I applied to Arthur Andersen, got offered a job and figured let’s go for it and joined the transaction services team.
When I was about to qualify, the company was going through a restructure. As a result, I was TUPE’d across to BDO. Understandably I was angry and resentful, but I was young. At the time, I didn’t realise the move was a good thing. Once I’d moved across, I thoroughly enjoyed the projects I worked on, had a great team of people and ended up staying.
Fast forward a few years, a former partner at the firm left to co-found Better Capital with Jon Moulton (ex-Alchemy). He soon realised he needed someone with my profile and asked me to join. I initially joined to help with portfolio management but the responsibilities and scope grew and eventually I became the de-facto COO at Better Capital.
Sadly, Better Capital wasn't able to raise a third fund. Having been with the business since the early days, I was determined to stay till it’s wound up, so I’m currently a consultant for the firm.
Given those circumstances, in 2018, I had to look at other options. I was interviewing with a global VC fund, but I had no idea what VC was. I went through my LinkedIn connections, hoping to speak to someone who could give me an idiot’s guide to VC and met with Krishna Visvanathan (ex-DFJ Esprit), who graciously spent an hour mentoring me. At the end he said, “Let me take you out to lunch after your interview because I’m actually raising my own VC fund.” And the rest, as they say, is history.
TDD: You joined Crane three years after the firm was launched. What was the operational set up?
BK: Prior to me joining, the business was just Krishna and Scott Sage working out of coffee shops, investing their life savings and a small pot of money from friends and family.
I inherited a legal structure that was much too complex for the AUM and size at the time, but other than that, I pretty much started with a clean slate.
TDD: What does your COO role entail?
BK: In my role there’s no such thing as a typical day - that would be boring! When people ask me what I do, my favourite line is, “I keep my team out of jail”. Fundamentally, I’m responsible for everything that’s non-investment related. My co-founders (Krishna and Scott) run the investment side, and I run the back office.
TDD: What are the key differences between Better Capital’s finance/operations functions and Crane’s?
BK: From a purely operational perspective, I don’t see much difference between PE and VC. Both businesses raise and deploy capital and have processes to manage the safekeeping of assets, compliance and fund governance.
However, Better Capital’s funds were publicly listed on the premium segment of the London Stock Exchange. When I first joined the firm, not only did I have to quickly learn how funds operate and how to manage the back office, I also had to learn how to run the back office of a public company.
TDD: What’s Crane’s tech stack?
BK: As investors of enterprise software, we naturally like tech! I’d be lying if I said I don’t love Excel, but it has a lot of limitations, so we are currently looking at how we can integrate our processes.
We use a tool called Next Matter. It automates processes for people like me who don’t know how to code but want to get rid of as many manual processes as possible. We use it across a wide range of functions, from investment checklists, recording meeting minutes, collating compliance attestations from our people and collating data from our portfolio companies.
Managing FX and hedging used to be time consuming. Crane now works with Neo, a cash management software, saving me time, money and I have more visibility. It does however mean I’m disappointing many legacy FX providers out there!
TDD: PE is currently on its own journey to transform its tech. What could PE learn from VC?
BK: While I think VC might be slightly ahead of PE with its own digital transformation, I don’t think it’s there just yet.
Overall, it comes down to peoples’ attitudes and desire to change. Why would people change something they already feel is working? I think CFOs and COOs could be braver and try to embrace change because they are the centre of their PE ecosystem. They can hugely influence the executive team as well as their people across the firm.
TDD: Crane closed its second fund on $140m in May - what was your role in this?
BK: The key takeaway is having your house in good order at all times. Fundraising is such an intense period so if you can anticipate LP questions and get the data room populated premarketing, then it is just topping and tailing when the marketing phase begins.
I was the main driver on the legals and the primary person for operational due diligence. As an emerging manager, prospective LPs get a certain level of comfort if you’re able to respond to their queries promptly and concisely. It signals to them that despite being a small fund and small team, we’re ready and can handle their business.
TDD: What are your key focuses for the next six to 12 months?
BK: More digitalisation! Crane will be applying for its full scope AIFM licence in Q1 2023, so we need to have another hard look at our current systems, processes and tech stack to see what’s no longer fit-for-purpose. The full scope licence will put us under much more scrutiny. We want to be compliant but we want to do it in such a way that we’re efficient, hopefully automated and don’t take on more manual processes.
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In addition to her COO role at Crane, Kraus is also an angel investor. “I have lots of admiration for tech entrepreneurs and want to be able to support them in my own way.” Typically Kraus backs businesses with an impact angle, which have a founder from an underrepresented community. What sets Kraus apart from other angel investors is her ability to support them with any operational challenges. “I’m an accountant at heart. I consider myself as the person these founders can bounce ideas with, on their business plans, financial models and so on. I like to maintain a collaborative approach with the operational side where possible.”
Furthermore, Kraus also gives her time to prospective GPs who are looking to set up their first fund and need pragmatic advice.