3 August 2021

You are probably familiar with the "Dragons’ Den" moment when a business venture seeking a breakthrough pitches to investors for funding. You may be less familiar with what tech start-ups need to do next — pitch to industry analysts who help determine if their products are worth buying.
A women with a computer in front of her and speaking with a man beside her

New research by academics including Neil Pollock and Duncan Chapple of the University of Edinburgh Business School reveals that many tech ventures are still falling at this hurdle.

The findings come from dozens of interviews with current and ex-analysts, and entrepreneurs beginning their industry analyst interactions, along with data from conferences, blogs, analyst reports, and websites.

Today, there are more than 700 analyst organisations worldwide. The scale of the industry is hinted by Gartner and Forrester, which together employ one quarter of all analysts and generate $5 billion in revenue. These firms make the bulk of their money by selling research and services to help technology buyers understand the market of offerings and the specific capabilities of ventures.

Professor Pollock gives an example of how some potentially promising firms fall foul of the analyst hurdle:

"One anecdote that perhaps shows that UK ventures poorly understand these second pitches was when we observed the contrasting fortunes of two promising enterprises: one from Glasgow and the other Chicago. Though the Scottish venture's technology was considered as good as or better than its competitors, we were told by industry insiders that it was unlikely to prosper.

"The US venture, by contrast, was already competing favourably for deals against the software giants. A significant difference was that the Chicago venture had, from the outset, pitched to industry analysts and had then appeared in important industry rankings and reports. In contrast, the Glasgow venture had little or no conception about how to pitch to analysts or even who the individual analysts were for its specific technology offering."

Analyst firms are overwhelmed with briefing requests from up-and-coming enterprises. The largest analyst firm, Gartner, for instance, reports that its analysts sit through 12,000 briefings every year, and if the venture wants to maintain analyst interest, it must brief them every few months.

Professor Pollock explains why it is important to brief regularly:

"We are in the age of the attention economy, and new digital ventures are competing alongside many other promising ventures worldwide for the scarce attention of the analyst. Those who interact more frequently with analysts — and keep them updated on their activities through pitches — stay fresh in the analyst's mind when they are compiling rankings, writing reports, and talking to technology buyers.”

Analysts interviewed as part of the research spoke of how entrepreneurs like to talk about trying to change the world, so are shocked when an analyst expresses scepticism.

To quote one analyst:

"Scepticism about either their strategy or their market... is to call their baby ugly!"

Professor Pollock says tech firms need to get better at understanding analysts:

"Hype is a common feature of the digital sector. All vendors will hype their products during these pitches to stand out. But, of course, analysts recognise this and know how to get around it.

"It is often unclear to newer ventures what the analyst is looking for during the pitch. They then pitch to the analyst something that worked well with the investor. But a pitch that worked well with an early audience does not necessarily extend to a later-stage audience.

"Our research suggests that it is often those who do some research first or seek advice from second-pitch specialists who tend to do better. These specialists offer advice on how to construct the pitch through to finding the right analysts. Indeed, it is typical for a venture to have to brief several different analysts in a firm before finding an analyst interested in them."

Ultimately, if more start-ups adapt their pitching style, we could see more tech ventures taking off.

Professor Pollock again:

"These pitches are essential. They form a crucial part of the processes of scaling and internationalising. For example, suppose UK digital ventures were to invest more time learning about industry analysts, including developing more nuanced understandings of the required pitches. In that case, our research suggests they could find new customers, attract further investment, and reach international markets.

"And even though these second pitches are increasingly performed online, it is typical for interactions to spill out of the pitch setting as analysts look to have extended face-to-face interactions with entrepreneurs. Those benefitting from analyst coverage told us of the importance of building good old fashioned 'relationships'. The personal and charismatic aspects of the entrepreneur are not unimportant, but they will not clinch the deal in the second pitch.

"The industry analyst is much more interested in questions around the products offered. Successful ventures told us it was necessary to 'interest' the analyst so that they become 'passionate' about the product and even go on to 'champion' and 'evangelise' them with others in the industry."

So it seems amid all the talk of automation in the economy, human judgement is still required for technology to succeed.

The full research paper is published in the Organization Studies journal: