This CEOs best tip for raising venture capital

MPW Insider is an online community where the biggest names in business and beyond answer timely career and leadership questions. Today’s answer for: How do you get buy in for a new idea? is written by Carolyn Rodz, CEO of Market Mentor.

The statistics are overwhelming: women receive a meager 5% of venture capital money, which is even more shocking considering that women CEO’s in the Fortune 1000 drive three times the returns as S&P enterprises run predominantly by men. I’ve spoken to a lot of investors about why this is the case, and they repeatedly tell me that because they have limited funds to distribute, they only put their money behind the person who presents the best growth opportunity. This decision is based largely on two factors: who has the skill set to best execute their plan and who has the most believable plan.

Essentially, this means a lot of funding decisions are based on how effective an entrepreneur is at selling themselves. When all else is equal, a VC is going to go with which ever entrepreneur who pounds their fist on the table louder. They invest in the person who evokes the most confidence by believing, without a doubt, that their idea is worthy of the attention and commitment.

We have a rule at Market Mentor in relation to presenting proposals to external partners: before formally sharing an idea, you must have both a personal commitment to the idea, and the credibility to present such an idea. This means a team member who knows nothing about funding cannot propose an investment to our equity partners because they can’t be seen as a credible source of information. Similarly, our finance experts can’t pitch a project that they don’t personally believe is a good investment, because they can’t be entirely truthful in their presentation. Both approaches dilute the reputation of our team as a whole. It’s a rule that makes perfect sense on paper, but is extraordinarily difficult to live by in reality.

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Commitment can mean a lot of different things, but as a young company, standing behind an idea often requires pulling scarce human resources into a project, risking incredible amounts of cash, and putting our credibility on the line. When I ask team members if they are committed to a project, what I am really asking is, “Do you believe so strongly in this idea that you’re willing to put all of our jobs on the line?” Considering our team is entrepreneurial by nature, the answer is often yes, but placing that level of importance on a project incentivizes our team to pull together, focus and execute to the very best of their ability. It allows even the failures to become learning experiences, and should things start to move off course, encourages us to explore ways to mitigate risks.

The second part of this rule mandates credibility. We are very transparent regarding the roles within our team, and clearly acknowledge the areas of expertise we each hold. Often, though the idea may have been born from one mind, it is better presented and more deeply cultivated, by another. As a result, we’ve learned to respect the expertise of our colleagues, and continuously develop our our own talents. This isn’t to say that ideas aren’t welcome by anyone and everyone; we are a company based on and surrounded by innovation. But when it comes to thinking bigger, and external stakeholders must believe in our concepts in order for them to become reality, we take careful steps to present our ideas as effectively as possible.

Read all responses to the MPW Insider question: How do you get buy in for a new idea?