Should tech startups invest in analyst relations?

rocket-for-startups.jpgLast night I attended the Marketing SIG monthly meeting of the SDForum (an association for tech startups) because Dana Marks of Weber Shandwick and analyst Rob Enderle were talking about “Analyst Relations — It’s All About Influence.” It was a pretty interesting meeting. Rob was very candid and had a lot of funny stories about dealing with vendors that illustrated important issues.  The most salient point for me was that even in the 21st Century the IT industry analysts are still a mystery to a broad swath of the tech vendor community, especially startups. The questions that were asked by the attendees were to the point and reflected real concerns. Here are some examples: 
 
·  How do you know which analyst to bring in to talk to your executives when your product is crap? (This was in response to a comment by Rob, that AR/marketing folks can use analysts to diplomatically tell executives that there are problems with a new product when the execs are not listening to their staff.)
·  How do you develop a relationship with an analyst?
·  What makes a good analyst and AR for a Web 2.0 company?
·  When you’re forecasting the future, how does your mind work?
·  What is the ideal stage for startups to start working with the analysts or building relationships?
·  How much money should a startup budget for AR? 
 
Many analyst firms and other services firms ignore startups because they are difficult to fit into their research delivery and business models. However, with this blog and low cost services, SageCircle can easily provide some targeted information and suggestions to this very important part of our community. Check back for regular posts of interest to startups with the initial topics being the questions I heard last night. 
 
The first question I want to address is the last one about money. This is a favorite bugaboo of mine, because it encapsulates so much of the FUD around the analysts. Startups and new product groups at large companies often trap themselves into thinking they need to spend money with the analyst firms in order to obtain coverage. Thus, if they don’t have the money for an analyst contract, startups don’t even try to reach out to the analysts. This assumption is not only false, but also obscures what they really need to do: understand the analysts and their research positions and present their products within that context. For startups, the real currency to use with the analysts is information about an emerging tech market and access to your really smart people (or executives, if they happen to be the same people). Remember, while many analysts are focused on providing tactical recommendations about today’s issues, there are some analysts that are very interested in trends, technologies, and companies that nobody else is writing about. They are more than willing to listen to your briefings – if you are able to convince them quickly that you have something interesting to share with them. The cherry on top of the sundae for the startup is that the analyst will likely share some of their insights for free knowing that it is an investment in a potential future client.
 
Bottom Line: The currency is not money, but time.  Unfortunately that is generally just as hard to get at a startup as cash.  This means you need to be very targeted and concise so that you don’t waste the time of your executives or the time of your analysts.  
 
For more information on this question, check out SageNote™ AR151 “It’s Not the Money, but How You Present Your Product.” Please send an e-mail to info {at} sagecircle dot com for a copy. 
 
Question: Have you worked at a startup that worked with the analysts early on? If so, what was your experience? Please leave a comment. 
 
Do you know someone working at a startup? If so, please give them a heads up about this blog.

8 Responses

  1. Carter,
    Best wishes in the new endeavor! Love to see active discussion, debate and dialogue on an industry function that is incredibly important and valuable IMHO.

    While I was at a start-up in what was (at the time) the emerging management service provider space, we did engage analysts early and found that “information” was, indeed, our ticket to entry.

    The analysts need to have access to all the latest and greatest across the industry to ensure they are well informed and have new, meaningful things to convey to their client base. Resultingly, many were willing to trade a few inquiry hours for “a look under the covers” because they love getting in on the ground floor of a new trend or development.

    As we progressed through our planning, we did make small investments in some services, and developed a contractual relationship over time.

    It was time well spent for both parties because we both got something out of the exchange. We were able to do some effective market conditioning and positioning around a new space at the time, and some of the analysts were able to lead the charge on establishing a new market as well as developing a new client.

    Skip

  2. Hi Skip,

    Thanks for the best wishes. I’m hoping this going to be a fun ride. >>grin<<

    Great comment. It really is in the interest of everybody that info and market intelligence flows between startups and the analysts.

    Cheers, -carter j

  3. I agree with both of you. I’ve worked for two startups and our outreach to the analysts (even though we had no budget) was critical to our success. At one company, we had a major impact on the analyst’s perception of an emerging market that had much bigger players, simply by providing an analyst newly covering that space with interesting diagrams breaking down the categories of players and what they offered. But sadly many startups treat analysts like the press…. to be avoided!

  4. Hi Misti, Thanks! Good points.

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