Second Most Important Pitch: How Digital Start-Ups Must Navigate the Endorsement Economy To Scale, 2018-2022

Our research uncovered an evaluation hurdle that plays a major, but unacknowledged, role in the growth and scaling of new digital start-ups. Much has been written about the new venture's first pitch to investors. For nascent digital enterprises, however, we identified a vital subsequent step where they must make a further pitch to industry analysts, theorised as the "second most important pitch". These firms, like Gartner, IDC, Forrester, etc., advise technology adopters on what new products are worth buying. Yet, as our research revealed, many start-ups struggle with this second pitch. Our research found that ventures pitched something that had worked well previously with the investor without realising these pitches were very different. Indeed, many industry analysts we interviewed told us they were extremely keen to learn about new ventures' innovative products. Still, the ventures did not know how to talk to them and would waste their time. This is because the analyst pitches differ from the investor pitch in several ways. For instance, if the venture wants to maintain analyst interest, it must brief them every few months. New companies are competing alongside other promising companies worldwide for the scarce attention of analysts. Those who interact more frequently with analysts - and keep them updated - stay fresh in the analyst's mind when they are compiling rankings, writing reports, and talking to technology buyers. Moreover, whereas in the investor pitch, it is said that the potential funder is "betting on the jockey, not on the horse'", second pitches are different. The industry analyst is much more interested in the products offered. Successful companies told us it was also necessary to make the analysts passionate about their products so that they would champion them with others in the industry. Our study found that making it onto an industry analyst ranking or becoming a "Gartner Cool Vendor" was only part of what could be gained from these pitches. The industry analyst might also talk up the venture with clients and others, advocate for it during client meetings, and give spontaneous feedback to help it foreground its more innovative attributes. Our research theorises this second pitch as a new kind of pitch: a "valorising pitch". Scholars have identified several different kinds of pitch types to date. Still, none directly reflect the dynamics and audience identified here - of the valorising pitch - which we define as a device a digital start-up uses to enrol an industry analyst to help build market presence. Our research highlights how ventures would engage the industry analyst to overcome the damaging aspects of being an unknown quantity in the market. Valorisation appeared as powerful as other influences that stem from the formal evaluation system, such as industry analyst rankings, and ventures that proactively leveraged this valorisation appeared more likely to engage potential customers and other resource providers.

The UK is one of the leaders in promising new digital ventures worldwide. However, there are concerns that many will fail. The aim of this project is to foster a discussion around a pivotal evaluative hurdle that influences the ability of new digital ventures to prosper. One thus far unrecognised factor influencing whether a new digital venture can grow is the backing of industry analysts. There is anecdotal evidence that those ventures endorsed by these important market actors receive a significant boost and, conversely, where this form of backing is not forthcoming, it becomes a block or impediment to progress: analysts wield influence over technology adopters and investors regarding their choice of technology vendors. We term this hurdle the 'second most important pitch'. We will analyse the 'pitches' made by new digital ventures to analyst firms and investigate how the analysts subsequently assess the venture's viability and potential as compared to other players. While much has been written about the first equity pitch a start-up will make to an investor, little is known about how ventures make these second important pitches to analysts to win their endorsement. Understanding just what is expected in these second pitches and how they are evaluated will make a key contribution to academics, policymakers and those directing and supporting digital ventures. To analyse these pitches we draw on the emerging specialism of 'Valuation Studies' (which is the application to market situations of analytical techniques borrowed from Science and Technology Studies, Sociology of Finance, and Economic Sociology). We will extend this current work through conceptualising these pitches as part of an 'endorsement economy'. This idea captures not only that market actors provide assurances about the viability or value of a venture, but how/whether they play a key role in helping to realise that value through 'championing' a venture. This conceptualisation also lays the groundwork for a potential new area of study within Digital Entrepreneurship. Using a qualitative methodology, we will directly observe how digital enterprises prepare for and give pitches and thereby provide the first 'naturalised' study of this kind of pitch (most existing research on investment pitches tends to be based on televised 'pitching competitions' or other similar events). We will also conduct semi-structured interviews to understand a. the processes assessors use to make sense of the pitches and assess the start-ups, and b. how they may then go on to recommend or publicise these ventures to others.