Start-ups need to evaluate analysts carefully

In a meeting today, with a US start-up looking to win clients in Europe’s financial sector, I went over a number of the factors that new firms need to consider about industry analysts. There’s some strong general guidance on this topic, which outlines some of the mistaken grounds for cautious engagement with the analyst community. However, it’s worth balancing that with a sober look at Porter’s five forces.

Clearly, analysts are able to help start-up to connect to clients, to refine their strategy and go-to-market tactics, and to shift the way that the media sense general opinion about the market. Many start-ups don’t see the reality of that opportunity, and often fail to understand that an analysts who doesn’t ‘get’ the vendor’s distinct position can still develop as a powerful business recommender.

However, start-ups need to match up their analyst relationships with their business strategy. In my meeting today, I argued that some start-ups business models mean that they need to be careful about educating only the analysts who are most influential on buyers. Educating analysts whose primary audiences are online, in the media or at competitive places in the supply chain could have a negative impact. Speaking with analysts who educate your competition, or which allow other market participants to get early warning of your solution, can simply increase the power of buyers, substitutes and those who would disintermediate your new solution.

For this firm, the right solution is to stay in stealth mode with most analysts and the broader market, while developing a handful of relationships with the analysts closest to their clients.

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