Publications

- April 1, 2022: Vol. 9, Number 4

Profile: Erika Cramer, investment banker turned venture capitalist is betting women entrepreneurs can close the ‘equity gap’

by Mike Consol

This business startup didn’t take formation on the back of a napkin, it happened in the Picco Restaurant parking lot in Larkspur, Calif., in the bucket seats of Erika Cramer’s 2015 Audi A3 blue convertible. Cramer had just had dinner with Julie Castro Abrams, founder of the organization How Women Lead, and the two ladies would sit for another full hour discussing the concept of a gender-lens-focused venture capital firm.

“That sparked the whole idea,” says Cramer. “She said, ‘Do you want to start a venture capital firm together?’”

Considering that Cramer had recently sold her equity stake in Silver Lane Advisors, the women-owned investment banking firm she co-founded, and was now taking venture capital classes at UC Berkeley, curious to see if her investment banking skills would transition effectively to the VC space, the answer was an unequivocal and enthusiastic “yes.”

And so was born How Women Invest, spawned out of Abrams’ How Women Lead organization, whose network of 14,000 business and executive women would be integral to the new firm’s fundraising and advisory efforts.

How Women Lead, a national nonprofit organization, was founded by Abrams in 2015 with a mission of bringing together executive women capable of influencing the change they want to see through leadership, investment, and philanthropy. Phrased more bluntly, Women Who Lead is all about disrupting inequitable systems, and Abrams has built a reputation for successfully disrupting corporate boardrooms. Indeed, she has worked with the gubernatorial administration of Gavin Newsom in developing Senate Bill 826 mandating corporate board diversity.

Abrams initially came to Cramer’s attention in 2017 while the latter was organizing a corporate board education event for 100 Women in Finance. In the course of that effort, Cramer was told repeatedly she needed to talk with a woman named Julie Castro Abrams. In due time, Cramer would have that fateful dinner with Abrams.

“She has unique, rich and complementary experience to my own that makes this an amazing partnership,” Cramer says of Abrams. “While I come more from the financial services, asset management world, she comes from a different aspect, with a complementary network, high EQ and the ability to read people.”

BETWEEN BON JOVI AND THE BOSS

Cramer got cozy with the corridors of corporate America when her mother, who worked for years as an administrative assistant in the C-suite at Mercer, arranged summer internships at the company for her daughter following her junior and senior years of high school. Cramer worked in the mail room, as a receptionist, and in the corporate finance department, exposing her to high finance at a young age.

“I really loved the spreadsheets,” she says. “I looked at them as solving puzzles.”

Cramer hails from Marlboro, N.J., in the part of the state that she describes as sitting between where Bruce Springsteen (Asbury Park) and Jon Bon Jovi (Perth Amboy) were raised. She, her younger brother, and parents were surrounded by apple and peach orchards, at the time, though the agricultural character of Marlboro has since yielded to real estate developers.

She studied ballet for 12 years, including at the Joffrey Ballet, and spent four years as part of a modern dance troupe at West Virginia University.

“I was in love with that,” she reminisces.

Her Peruvian mother and German father were immigrants to the United States and brought fire and ice dispositions, respectively, to the household.

When she headed to West Virginia University to study finance — fired by her experiences at Mercer — she found herself in an orientation session with her parents. The parent of another student asked Cramer: “If your father is from Germany and your mother is from Peru, what does that make you?” Cramer’s reply: “That makes me American.”

She recalls her father’s face beaming with pride at his daughter’s poised response and sense of self. It was the kind of poise and fortitude she would need, heading into the male-dominated world of finance.

“Even in college I was the only girl in my financial classes,” she says.

Her two favorite classes were options trading and mergers and acquisitions, going the M&A route post-graduation when she joined the New York City-based investment banking boutique Berkshire Capital (now Berkshire Global Advisors), as employee number six. Cramer spent 10 years at Berkshire, starting as an administrative assistant and working her way to partner by age 26 while earning her MBA by night.

“I remember when I got my first big bonus check at Berkshire, I remember how freeing that was for me because I didn’t come from much money. It allowed me to take a little risk.”

Berkshire Capital is also the place she met Doug Cramer — son of a money manager who co-founded the firm Cramer Rosenthal McGlynn, sold to Wilmington Trust in the late 1990s — whom she consented to marry.

As professional life bore down on Cramer, she became a triathlete after realizing she needed to burn energy to tame her frenetic mind, spending her time running, cycling and swimming.

“That’s my sanity, it’s where I collect my thoughts, my ideas and I get out my frustrations,” she says. “If I don’t get my workout in, I am not fun to be around. It gives me the discipline and sanity I need to work and balance my family life.”

That family life, in addition to husband Doug now includes two daughters, Rachel and Jessica, 21 and 22, respectively.

It was a difficult decision to leave Berkshire Capital, where she had mentors like Bruce Cameron. She left the firm for U.S. Trust when she became curious about what companies looked like from the inside, after M&A deals got done. It was at U.S. Trust (now Bank of America Private Bank) where she made the acquaintance of Maribeth Rahe (a January 2016 Real Assets Adviser cover profile, though she was at Fort Washington Investment Advisors at the time) and Jeff Maurer (now chairman of Evercore Wealth Management), both of whom she counts as mentors.

Shortly after a C-suite reorganization at U.S. Trust, Cramer left to join her husband in building his private placement firm, raising institutional capital for alternative investment products.

DREAMLESS NIGHTS

By 2007, Cramer was scratching at her entrepreneurial itch, deciding to return to her M&A roots by reconnecting with former Berkshire Capital colleague Elizabeth Nesvold. The two partnered and brought their ambitions to full realization in the form of Silver Lane Advisors, a women-owned investment banking firm that completed more than 100 transactions ranging from $20 million to $1 billion in deal value before its sale to Raymond James Financial.

“It was a seven-day commitment,” says Cramer. “We viewed ourselves as not really being able to make mistakes.”

That latter notion was formed, in part, during her stint as a board director at Atlanta Life Insurance Co., the country’s oldest African American financial institution, founded by an emancipated slave around 115 years ago. Its chairman, Roosevelt Giles, told Cramer: “White people always get a second chance, black people don’t.”

“That always resonated with me,” says Cramer. “I think that’s why women always seek to be perfectionists. That’s why Liz and I wouldn’t deliver subpar work to any client, and we were super careful about every form of communication that left our email system. We built Silver Lane, we brought on other partners and became known as the go-to place for wealth management M&As. We were known as ‘the ladies at Silver Lane.’”

The workload, given the stress and frenzy of that environment, was enormous. Cramer slept little, even maintaining an exercise schedule that included meeting with her White Plains, N.Y., biking crew at 5 a.m. for a 30-mile ride, wearing headlamps before showering and reporting to work.

Financially, the effort paid off, as Silver Lane Advisors posted a sevenfold revenue increase before Cramer opted to sell her equity stake to her partners in 2018, and they subsequently sold their interests to Raymond James in January 2019.

“Once I retired from Silver Lane, I had to learn how to sleep again. I had stopped dreaming.”

ACCESS AND EXPOSURE

Flush with the queen’s ransom she earned from the sale of Silver Lane Advisors, Cramer started investing.

“That’s how most wealth is made in this country, through liquidity events of owning your own business. It’s the American dream.”

That is how Cramer and Abrams hope to close the male/female “equity gap,” funding women-owned startup companies and helping them achieve their own liquidity events through M&As or taking them public through SPACs or traditional IPOs.

By Cramer’s own assessment, it will be a steep hill to climb: “I think the statistic is that in all the years of the existence of the New York Stock Exchange, only 20 companies have gone public that were founded by a woman. Twenty — in all its history,” she repeats for emphasis. “Female founders have not had the same access to capital that male founders have had. We are a gender-lens-focused venture firm, and our vision is to be the go-to place for female founders to seek capital all along their capital-raising
continuum.”

Abrams told Cramer she would have “no problem” raising $10 million for their new venture firm’s maiden fund, banking on the backing of the thousands of female executives connected to How Women Lead. Indeed, the first fund raised by How Women Invest was raised almost entirely from women investors, and 90 percent of them turned out to be first-time investors in alternative assets. What’s more, nearly half of the female investors are women of color.

They structured the fund with a $10 million limit, based on the revised rules of the Jobs Act, which allows for a maximum of 249 limited partners, provided the fund is $10 million or smaller. That gave the firm the ability to offer a minimum investment of just $25,000, keeping it within the financial grasp of accredited high-net-worth investors. The fund was oversubscribed within seven months of fund raising.

“That is what’s most unique about our fund structure, we provide access. Our minimum investment is $25,000 for an accredited investor,” says Cramer, “whereas most venture funds hold minimums of $250,000.”

The plan for the second fund and beyond is to observe the $10 million limit to preserve access for smaller scale investors.

“This is truly unique in the marketplace,” says Cramer. “We bring our limited partners into the venture investment process: they source deal flow for us, they serve as subject matter experts for us, and they prospectively serve as our board members or advisers. I look at our LPs as our extended research team.”

It is the sprawling 14,000-person How Women Lead network that feeds into How Women Invest that makes the firm distinctive from traditional VC firms.

“What we want to do is provide access and exposure for women,” says Cramer. “Less than 2 percent of venture capital dollars are committed to purely female-founded companies, [as distinct from male/female founded companies]. There is this wealth equity gap between men and women, and we view using venture capital as one of the means for remedying the discrepancy.”

Capital from the firm’s two funds invest from pre-seed to series B funding. Like traditional VC firms, the organization is targeting disruptive, tech-enabled companies that are beyond proof-of-concept and capable of the kind of scalability and development that meets the funds’ five- to seven-year timeframe for a liquidity event, such as an acquisition or IPO. Naturally, the company founder is also run through a series of screens: Do they have the ingredients for success? How to assemble and manage a team? How to prioritize the many activities required to build a business? Is the target market large enough? Do they understand financial management?

“We see ourselves as strategic capital,” she explains. “Through our board representation, founders can access our network for support to grow their businesses.”

In other words, intellectual capital in addition to financial capital.

A ratio of about one in 30 companies that present a business plan gets funded. Nine have been funded thus far. Founders under consideration for funding are run through four touchpoints: pitch day; a meeting with the advisory council, where they demo their product or service; a two-hour finance meeting, where the founder details their financial model, including their all-important burn rate and go-to-market strategy; and a meeting with the general partner to define the highest needs that How Women Invest can resource or supplement.

“The financial model is going to tell us everything we need to know about how the founder is thinking about building their business,” says Cramer, “including when their next financial raise will need to occur.”

First-round checks range between $100,000 and $1 million, reserving significant capital for follow-on rounds. Fund I will be concentrated on 10 to 12 companies, while Fund II will underwrite 35 to 50 companies.

BACK IN BALANCE

Contrary to her grinding workload while building and operating Silver Lane Advisors, today Cramer keeps a tight control over her schedule, aiming to maintain a work/life balance, even pointing to her daughters, and crediting their generation with a broadened definition of success. She now strives for a full eight hours of sleep each night.

And, yes, Cramer’s dreams have returned — so much so that she references a recurring dream in which she is outfitting a house, and there are often people in the house — family members, business partners, past mentors.

“It is always my house; not the house I live in now, but there are elements of the future home I might desire.”

And, yes, Cramer still drives the 2015 Audi A3 convertible that served as the incubator where she and Abrams hatched the idea for How Women Invest. Given the Audi’s track record and Cramer’s abiding drive to use investment capital to foster change, she is likely to keep the vehicle around for a good, long time.

 

Mike Consol (m.consol@irei.com) is editor of Real Assets Adviser. Follow him on Twitter (@mikeconsol) and LinkedIn (linkedIn.com/in/mikeconsol) to read his latest postings.

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