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Endorsement economy

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Endorsement economy

  1. 1. ENDORSEMENT ECONOMY: VALUATION, AND THE 2ND MOST IMPORTANT PITCH DUNCAN CHAPPLE AND NEIL POLLOCK UNIVERSITY OF EDINBURGH 08:06 1
  2. 2. INDUSTRY ANALYST ENDORSEMENT MATTERS Forrester Wave Chicago Start-up Chicago Start-up Magic Quadrant 08:06 3
  3. 3. Industry analysts influence nearly 60% of all enterprise software sales Institute of Industry Analyst Relations (IIAR) study (Dennington & Leforestier 2013) 08:06 7
  4. 4. GROWING NUMBERS OF INDUSTRY ANALYST FIRMS The “Big Three” 700 medium sized and "boutique firms" 08:06 8
  5. 5. RESEARCH QUESTIONS What kind of ‘valuation’ is the pitch? -What are its major aspects? -What are the practices and skills start-ups use? -What techniques do analysts use to evaluate pitches? -What do start-ups and analysts get out of it? How is endorsement achieved through the pitch? 08:06 10
  6. 6. “Influencer relations” who coach vendors EMERGING 2ND PITCH “INDUSTRY” Pitchers (tech entrepreneurs) Coaches (analyst relations agencies) Analysts 08:06 11
  7. 7. SIMILARITIES BETWEEN PITCHES GIVEN TO VC AND ANALYSTS, BUT ALSO DIFFERENCES VC pitch High stakes Powerpoint Mostly face-to-face Affect (charisma, passion) Interaction (high) Individual pitcher One-off event Valuation??? Analyst pitch High stakes Powerpoint Increasingly virtual Affect (bad temper) Interaction (unresponsive) Team who pitches Multiple pitches Valuation??? 08:06 12
  8. 8. VALUATION STUDIES •Value not intrinsic •Different approaches to valuation: •Bourdieu (1993) ‘critics consecrate’ •‘Evaluative cultures’ (interactional, practices, materiality) (e.g. Lamont, MacKenzie, Espeland) •What matters not so much who actors are but how well they perform according to “established scale of valuation” (Aspers 2009) •Analysts are “frame-makers” (Beunza & Garud 2007) 08:06 14
  9. 9. “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 categories]; 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) HOW OPENING PITCH TYPICALLY GOES 08:06 16
  10. 10. “So you try to be there, be cheerful, make everyone at ease…Make sure the analyst is listened to”. TAKE HEAT OUT “[A] good practice is to be on Instant Messenger with your spokesperson if you can’t be in the same room [to] try to calm him down...”. “You need to moderate that. Make sure that the debate goes okay. If they start fighting you need to rebase it, so you need to stop, acknowledge that there is a disagreement, propose to move on to other subjects”. (LL, interview)08:06 17
  11. 11. IN LATER PITCHES, EVERYTHING CHANGES “Most analysts would just stay quiet, and they are just going to sit there during [the pitch, and] watch you move on to the next thing” (W post pitch analysis). Prepare pitcher for unresponsiveness: “If you hear silence on the other end of the line it’s a good thing. [The analyst] takes a lot of notes and he doesn't feel the need to say, uhuh uhuh uhuh. So, if you're making a point feel free to take a moment and pause and he'll catch up with you but if he doesn't seem extremely engaged, it’s actually the opposite” (comment Vk) 08:06 18
  12. 12. ANY COMMENTS WHATSOEVER SEIZED UPON After a pitch, a coacher discusses how: “I didn’t get anything; and I don’t know what to talk about next [in forthcoming pitches]”. “She did mention that the metric piece was the ‘holy grail’. Does that mean that she doesn’t believe it, or that we’re really onto something?” (Wy demo) 08:06 19
  13. 13. CALCULATIVE FRAMES “the hardware ones are the easiest I now realise, and a lot of that is to do with the fact there’s a lot of facts that can be put around hardware”. “When you get to services it becomes even more tricky because it becomes even more subjective about what your skills level is and how many skills you’ve got are the right type and how you’re competing and how you’re differentiating” (BB, webinar) “When you get to software it’s still technical but it gets a lot more subjective about what the pricing should be and what the channel partners are like”. Difficulty of evaluating A, Ease of measuring B An analyst says: 08:06 21
  14. 14. MORAL FRAMINGS “We are quite cynical, and the reason we are quite cynical is that most people are lying to us… So the question is how do you get behind the lies to find out what is really going on.” Analysts assume things dressed up 08:06 24
  15. 15. (escalating scale of endorsement) • Getting to pitch again • Physically meeting up • Analysts talk about start-up on stage • Write about them as an exemplar • Recommends them to a client • Analysts compete internally to have “their” start-up foregrounded • Entwined with analyst career WHAT IS SUCCESS IN THE 2ND PITCH? INCLUSION IN FRAMES 08:06 27
  16. 16. What is success in the 2nd Pitch? Inclusion in Frames (escalating scale of endorsement) • Getting to pitch again • Physically meeting up • Analysts talk about start-up on stage • Write about them as an exemplar • Recommends them to a client • Analysts compete internally to have “their” their start-up foregrounded • Entwined with analyst career ANALYSTS TALK ABOUT START- UPS ON STAGE “Case studies like this are really helpful for us…as you write reports we are always looking real examples. Everyone always talk theory, but very concrete examples of what people are doing it’s really important for our research. 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”. (analyst during a pitch)08:06 28
  17. 17. What is success in the 2nd Pitch? Inclusion in Frames (escalating scale of endorsement) • Getting to pitch again • Physically meeting up • Analysts talk about start-up on stage • Write about them as an exemplar • Recommends them to a client • Analysts compete internally to have “their” their start-up foregrounded • Entwined with analyst career • Do you recommend Cool Vendors to clients? • "…there is whole notion that if you are on somebody's radar then psychologically your name will bubble up in conversations more. So an analyst nominates and successfully publishes a vendor as a Cool Vendor well then there is a psychological buy- in to the business problem that they are trying to solve and the uniqueness that they bring. So they would come to the lips of the analyst a little more” (analyst webinar) 08:06 29
  18. 18. What is success in the 2nd Pitch? Inclusion in Frames (escalating scale of endorsement) • Getting to pitch again • Physically meeting up • Analysts talk about start-up on stage • Write about them as an exemplar • Recommends them to a client • Analysts compete internally to have “their” their start-up foregrounded • Entwined with analyst career “Let's say there are 10 analysts on a team and there only 5 vendors that are going to be written about and everybody is encouraged to submit a Cool Vendor. Well then there is going to be some back and forth saying my Cool Vendor is different and more unique or impactful than yours” (analyst webinar) 08:06 30
  19. 19. WHAT KIND OF VALUATION IS 2ND PITCH? • Interesting interaction (confrontational, then unresponsive). • Preparing for pitch requires contrasting techniques (calm things down, then draw analysts out) Techno-economic framings Looking for proof Treat pitch as ‘testimony’Calculative framings • Interesting verification process (assume start-up is lying, go back over testimony)Moral framings • tension between the analyst evaluating the start-up but also finding them a ‘interesting’ source for their research (escalating scale of endorsement)Inclusion in framings 08:06 31
  20. 20. ENDORSEMENT Endorsement – overlooked fundamental ingredient of market transactions The situated constitution of endorsement: How endorsement is achieved through the pitch and mediated by various frames Endorsement relates to an inherent problem (‘the liability of newness’) but allows the start-up to develop (scaling, internationalisation) 08:06 32
  21. 21. ENDORSEMENT + ECONOMY ▪Endorsements emerge out of “interactional arenas” (Sauder and Fine 2008) ▪Start-ups want to attract the analyst/Analysts looking for next big thing ▪Analysts talk about ventures in public and recommend them privately to clients. ▪“Invest” their relationships in the start-up (champion the venture) ▪Vatin (2013) distinguishes between valuation (as ‘assessment’ of value) and valorisation (as ‘production’ of value) 08:06 33

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