Research presentation discussing how digital ventures use the endorsement economy. This was the keynote presentation at the 2018 Cool and Hot Vendor Forum at the University of Edinburgh

1. THE 2ND MOST IMPORTANT PITCH
How digital ventures must navigate
the ‘endorsement economy’
to scale
Neil Pollock, Duncan Chapple,
Suwen Chen, Fabio Rocha

2. YOU “AREN’T GOING ANYWHERE”
IF YOU’RE NOT RECOGNISED BY ONE OF THE 1000+
INDUSTRY ANALYST FIRMS
“Influencer relations”
who coach vendorsVendors who pitch
“[Chicago start-up] made the
Forrester Wave because the analysts
saw them as a disruptive
technology”.
“We really feel like we are far ahead
of SAP, Oracle or even IBM”.
“We’re doing all this stuff from
momentum that we’ve gained from
the Forrester Wave”
(interview with analyst relations agency)
“There's a little vendor up in Glasgow. Their
technology is as good or better than others
- but they aren't going anywhere”.
“They’re not on anybody’s Magic
Quadrant or Forrester Wave”.
“They will remain a small start-up until
they get onto one; it’s as simple as that”
(interview with industry analyst)

3. INDUSTRY ANALYST ENDORSEMENT
MATTERS
Forrester Wave
Chicago
Start-up
Chicago Start-up
Magic Quadrant

4. 12:45
Industry Analyst
Endorsement
Matters
Making it on to “lists”

5. Industry Analyst
Endorsement
Matters
They speak to (very) large
audiences of IT buyers

6. Industry analysts
influence nearly
60%
of all enterprise
software sales
Institute of Industry
Analyst Relations (IIAR)
study
(Dennington & Leforestier 2013)

7. INDUSTRY ANALYST IMPACT
Press/opinion influence
Written research
Recommendations to
tech buyers/investors

8. FAVOURED LATVIAN VENTURE EJECTED
FROM MAJOR PROCUREMENT CONTEST
“[Gartner] has a list of some 500 vendors of CRM, many of which [Gartner
analyst] meets on a regular basis to track the development of their
products. [Latvian_Start-up] is not on the list; he had not heard
of them”.
“Gartner said that with [Latvian_Start-Up] we would be taking a
risk”.
“Who would sign up to a company that no one has heard of?”
(Study of CRM solution procurement)

9. GROWING NUMBERS OF INDUSTRY
ANALYST FIRMS
The “Big Three”
700 medium sized
and "boutique firms"

10. ACCELERATING PACE OF DIGITAL INNOVATION,
MEANS INDUSTRY ANALYSTS NOW STUDY
START-UPS
 Appearance of ‘Apps’, means important
technological developments now come to
prominence quickly and outside large IT vendor
labs
 Industry analysts now devoting more resources
to tracking new digital ventures

11. GARTNER “COOL VENDORS”
“So our Cool Vendor reports are really vendors that
have been trading for 3 or 4 years, maybe 5,
unlisted. Most people haven’t got a clue who they
are, but we know that they have got some really
good customers. The customers say they are good,
and that is what we think is cool about them. They
have got something unique and they got real
customers”.
(interview with Gartner analyst)
Notable Cool Vendors: Box, Dropbox, Nest, Evernote, Cloudera,
Palantir, Instagram etc

12. ARAGON “HOT
VENDORS”

13. HFS “HOT VENDORS”

14. INDUSTRY ANALYSTS
INFLUENCE
INVESTOR
AUDIENCES
IDC Private Vendor Watch
Service
451 Research M&A
Knowledgebase
Ovum’s Investment Tracker

15. WHY THIS MATTERS FOR DIGITAL
VENTURES
Digital sector typified by vast numbers of innovative start-ups, many
of which will fail (Giardino et al. 2015)
Digital enterprises lack credibility at outset (Cusumano 2013)
Young enterprises suffer from ‘liability of newness’ (Stinchcombe
1965)
Buyers don’t want to buy a ‘lemon’ or end up an ‘angry
orphan’

16. WHY THIS MATTERS FOR THOSE
SUPPORTING DIGITAL VENTURES
UK recognised as amongst most vibrant places for creation of
digital start-ups (EDCI 2016)
However, its new enterprises are often unable to take the next
important step
“Too many start-ups start, but never scale” (Nesta 2016)
“UK lag[s] behind the US and other leading economies in the
extent to which our companies scale” (Scaleup Institute 2014)

17. OUR GOAL
Collecting evidence to show:
 that those new digital ventures endorsed by
industry analysts receive a significant boost
and,
 where this form of backing is not
forthcoming, it becomes a block or
impediment to progress

18. MAJOR BOOST
Evidence that ventures
doing well on 2nd pitch:
 increase sales
 build growth and
visibility
 attracts talent
 and other things

19. MAJOR HURDLE
Evidence that ventures
unaware of 2nd pitch lose
out on:
 finding new customers
(Lakhani 2016)
 attracting further
investment (Hsu 2016)
 reaching international
markets (Priestley 2015)

20. BUILDING AWARENESS OF 2ND
PITCH
“We’re aware of the difficulty in scaling IT
companies in Scotland [but] haven't really
considered the role of analysts in putting some
of these companies on the stage”
Scottish policy maker responsible for venture scaling

21. BUILDING
AWARENESS
OF 2ND PITCH
The Scaleup Institute
(2014) highlights six
factors that hinder the
development process of
ventures, but no mention
of this 2nd pitch.

22. “THE PITCH”

23. SIMILARITIES
BETWEEN
PITCHES
GIVEN TO VC
AND
INDUSTRY
ANALYSTS,
BUT ALSO
IMPORTANT
DIFFERENCES
VC pitch
High stakes
Powerpoint
Mostly face-to-
face
One-off events
Individual
pitcher
Interaction
(high)
Valuation
Analyst
pitch
High stakes
Powerpoint
Increasingly
virtual
Multiple
pitches
Team who
pitches
Interaction
(unresponsive)
Valuation??

24. “Influencer relations”
who coach vendors
EMERGING 2ND PITCH
“INDUSTRY”
Pitchers
(tech entrepreneurs)
Coaches
(analyst relations agencies)
Analysts

25. 2nd pitch:
not just matter of
presenting but also
understanding analysts’
perspectives.
• New ventures must learn about
industry analysts and
‘taxonomies’ they use to
frame technology markets
12:45

26. “Entrepreneur starts a
company. It’s a
software firm. It’s
challenging the
incumbents. It’s been
relatively successful.
They believe they are
approaching the
problem in a
completely new way,
they feel like they are
a valuable,
viable, in fact,
superior option
in the space”
“They feel like the analysts
are under-
representing them
[in their rankings];
they find that they are”.
“It starts with “Hey, how
are you? I’m glad I have the
chance to talk to you” and
very quickly it goes to “I
don’t understand
why you don’t see
this”
“So at once they assault
[the analyst’s]
judgement, assault
their wisdom and
assault their integrity,
and I don’t give that
less than 30 minutes.
And this happens
every single time”
(interview, AH)
INFORMATION FROM ANALYST RELATIONS AGENCY
DESCRIBING HOW OPENING PITCH TYPICALLY GOES

27. ENDORSEMENT ECONOMY
 We are asking if analysts might do more
than just identify attractive start-ups but
go on to ‘recommend’ them.
 A line of enquiry will be thus to understand
what it means to endorse a venture,
including whether analysts also play an
active role talking about ventures in public
or recommending them privately to clients.

28. ANALYSTS
WILL TALK
ABOUT
START-UPS
“So one of the things I’d
encourage [digital start-ups] to
do is really just keep us
updated on interesting
projects you’re doing and new
things that are coming out that
we could potentially write
about”.
(observation of pitches)

29. ENDORSEMENT ECONOMY IS “UNEQUAL”
All major analyst firms
in North America (700+) Digital ventures in other parts of the world
have to work much harder
No analyst firms in Scotland

30. CERTAIN REGIONS MORE PREVALENT
IN ANALYST RESEARCH: WHY?
1. Research from finance suggests ‘home
biases’ not uncommon e.g. investors in financial markets
systematically “overweight the securities of their country” (Karolyi & Stulz
2003)
2. Ventures from certain regions communicate
more systematically with analyst firms and
have more nuanced understandings of their
importance and what they are looking for
(and this explains their prevalence in analyst
research)

31. OUR MISSION
1. To analyse the impacts of industry analyst endorsements on
the survival and growth of new digital ventures
2. To analyse the factors that lead to digital ventures receiving
these crucial endorsements and others not
3. To communicate our findings to practitioners, policymakers
academics and others
4. Working with industry partners, we will support digital
ventures in becoming ‘2nd-pitch ready', i.e. informed about
and prepared to meet the criteria for analyst endorsement