a16z Podcast - a16z Podcast: What Startups Should Know about Analyst Relations

Episode Date: February 1, 2017

In the age of the internet -- where information is freely available online, and connections between sellers and buyers of software products are visible on LinkedIn -- do analysts really matter? Do they play a role in decision-making for purchases from smaller vendors like tech startups, especially given the rise of the developer as a buyer? Or what if you're trying to create a new category ... do you need to be on a Gartner Magic Quadrant or Forrester Wave or similar? We answer these questions and more in this episode of the a16z Podcast, featuring former analysts, client managers, and/or product marketing veterans Stacy D'Amico (who joined a16z after a decade at Gartner), Michael King (director of enterprise product marketing at GitHub), and Aneel Lakhani, in conversation with Sharon Chang of the a16z market development team. The conversation covers everything startups should know about analyst relations, from why and how and when to engage with analysts to whether to consider pay-for-play (no!) or more boutique/niche analyst firms. Most importantly: given their limited resources but big market visions, how can startups get the most out of analyst relations?

Hi everyone, welcome to the A6 and Z podcast. I am Sonal. Today's episode is all about analyst relations, which is different from public relations, the topic we covered on another recent podcast. Where should analyst relations sit inside a startup or vendors as they're referred to in this episode? What if you're trying to create a category? Do analysts really matter anymore, especially in the age of the internet with all of the information we have available online? Or given trends like the rise of developers as buyers? This episode answers these questions and more. Moderated by product marketing veteran Sharon Chang on the A16 and Z market development team, the conversation also features Stacey Diamicoe from the market

development team, who prior to joining the firm was a client director at Gartner for over 10 years, Anil Lacani, who has been in both the product engineering and marketing worlds for almost 20 years, and is also a former analyst. And finally, we have Michael King, head of enterprise product marketing at GitHub, who besides being an analyst for 11 years, has also worked at a number of startups doing analyst relations. The conversation begins with Michael very basically and briefly defining what an analyst does. I think at the core, the analyst is talking to the people that you want to sell to. The analyst is talking to the people that are buying your technology or that are going to buy your technology every single day. Analysts, we know them today really came about because

there was a point in time in history where IBM was a firm that moved the markets the largest. And there was no information about what IBM was doing outside of IBM. And financial analysts couldn't get to that information. So Gartner started a practice around deriving information about IBM's actual position in the market by virtue of how it was interacting with customers, how it was interacting with other vendors, to give people an edge on understanding what IBM was doing and what it meant for the market. Now, brought in that to everybody. So an analyst fundamentally is someone who has a lot of qualitative data about vendors,

sellers of technology, interaction with customers, interaction with partners, how people buy, how different companies and products, fit into the marketplace, what's their relative value proposition? And the thing that they provide is access to this kind of qualitative information that is almost impossible to get otherwise. That history lesson comes from a time when the internet didn't exist. When you didn't have LinkedIn, I can now go on and quickly search to find somebody who may potentially be a current user. So how relevant is it? Yeah, I think an analyst when doing their job correctly, inserts themselves into this position in which the clients are coming to you,

and asking you questions, how should I buy something? Who should I talk to about buying something? Why should I buy it? How do I justify it? And then after they've bought it, I'm having problems. What should I do? I'm having these issues. How do I communicate that to the vendor? Or, you know, in a very bad case, I can't use this product anymore and I need to consider an alternative. They're taking all of this information from eight to ten hours of calls with clients every single day and they're synthesizing it and they're seeing patterns. To drill it down into why as a startup company, is this important to me? You're growing your company, your early stage, you might be disrupting the marketplace, and you're trying to get the word out on your company, why you're unique,

why you're different, why you're better. And so the analyst can be a conduit to help get the message, your message out to the people you're trying to sell to, the clients, your target audience. And this is something that's generally overlooked and unknown to a startup company. All they're thinking about, we want to influence the analyst. We want them to tell us, We want to be on, you know, in the upper right corner on a cool vendor report in the case of Gartner or in the upper right with the Forrester Wave. However, what they sometimes miss is that the analysts are speaking to their clients, their targets, their competitors, and they're able to provide that insight back to the startup. That's so invaluable because you can go and present, ta-da, here's what I've built, here's my messaging. And the analysts might say that's exactly what I'm hearing from the marketplace or they might say, I love it.

But rather than a green apple, you should have made it red. Those little tweaks can really help. That information can really help as you take your product to market. But in the age of the internet, where many of the companies that we're talking to are selling straight to developers, developers aren't going to pick up the phone and call Gardner. If you are not selling to the enterprise, however you choose to define enterprise, you'll find that analysts don't hold a lot of sway. But what you will find that is surprising is even if you're selling to modern technology-driven engineering-driven companies, many of their procurement departments, if they're big enough to have procurement departments, and if they're big, they have procurement departments, work with analysts to figure out how to get leverage in contracts and who's paying what in the marketplace and which contract terms are negotiable and which you can push on. So if you're selling to anyone of any size or large dollar amounts, inevitably analysts become important as influencers throughout your deal cycle. But is the proclamation department actually talking to the analyst or are they just getting a copy of the report and they're able to then say, look, the one we want to buy is here in this placement?

They're talking to analysts because one thing you will learn when dealing with analysts is the most useful and important stuff. if you can get out of an analyst, comes over the phone or in person, never on paper. That was mind-blowing. I didn't realize that part. Yeah, we used to have a saying that 10% of what the analyst knows finds its way onto the reports. Oh, yeah. Yeah. For all the companies who were actually signing licensed contracts with an analyst firm, I always recommend don't just buy access to the written reports.

Always make sure you've got inquiry access, allowing them to actually get on the phone with an analyst and ask any questions and have that two-way dialogue, typically over a 30 to 45-minute. call. There's other ways to access your account executive should be bringing analysts to you when they're in town visiting for lunch and learns, for, you know, face-to-face with your executives, for just that, you know, relationship building and that Q&A. When I joined Gartner 15, 16 years ago, people were telling me, well, Gartner's not going to exist in five years because the Internet's going to hold all the information you ever need to know. Well, people aren't calling bloggers and they aren't calling tech reporters and not calling

LinkedIn and saying, hey, you know, I'm considering these two products and these are my requirements. What do you think? Which one is the best one for me? It's not customized. And it's also the perspective. They're not giving you something that they're thinking about or they've been noodling over for a couple of weeks.

They're actually taking the synthesis, the 100 conversations they've had about your specific product and saying, okay, great, this is why I think you need to make these improvements. And so this is why I think that you're going to lose market share to X, Y, Z vendor, because they're doing that one thing that everyone's asking me about. And so it is a perspective that you don't get anywhere else. With developers, developers don't read Gartner reports. Right. However, developers have bosses. Oftentimes they have CIOs.

They have CEOs. Whether you're a technology company or you're a very, very large insurance company who's building four or five mobile applications or something. something else like that, you have developers working for you, and those guys aren't talking to Gardner, but their bosses are, and the procurement departments are, and their CIOs are, and all of the people sort of sitting on top of them are. So if your developer comes in and says, we want to use X, and they look at the magic quadrant, or they have a conversation with the analysts and they go, who, then you're in a worse position than your competitor who has had that conversation. And not only that, even if you start with a sales model that's top of the funnel, starting with

developers, eventually when you want to get into the enterprise and get those very large deals, startup companies do want to grow their revenue and become that big global player. It becomes so important for the people who are signing those massive, potentially multi-million dollar contracts to know who you are. And oftentimes they do ask your tier one analyst firm. The other thing is when you go global. Yeah. I mean, anytime you're looking at a market maturity curve, right, your early adopters probably aren't talking to analyst firms to get advice. In fact, your analyst firms are oftentimes talking to those early adopters to understand where the market's going, which is fine. But as you start to get into the later,

adopters or the middle adopters, and you want to sell into those guys, they're more risk-averse. They're a little bit more likely to run a vendor bake-off or other things like that. So they're going to call Gartner and say, what are those things I should evaluate in that bake-off? Who are the people I should invite to that bake-off? So this brings me to a point that I have to talk about, which is category creation. If you're trying to create a brand-new category, then the analysts are focused more. You set yourself not on the early adopters, but those were mid-market or exist. existing users. Is that still relevant? Yes, it's definitely still relevant. Anybody can make

something up. The question is, are you making up something that's going to stick and you're making up something that has legs? Now, an analyst might not help you figure out what the right thing is or what the right category name is, but they'll definitely tell you what the wrong things are. Because besides telling you what's going out on out there in a marketplace, and besides knowing what everybody else is doing and what everybody else wants to call their thing, analysts also, by definition, have to have a historical perspective of what's gone on in their particular slice of the industry, who's tried one in the past,

what has and has not worked. Many folks will not be successful in creating categories, so they're going to be competing in traditional categories as well as attempting to create new ones. It's imperative to understand what's not working in the category

that you are currently competing in and how when you create the new category, you create distance between those two markets. There's another piece of it, too, that is if you're creating a category and you're the loan competitor in a category, then it's not really a category. It's not really a market.

It's basically just one vendor doing something strange. Right. I always say the three Cs, customers, customers, customers. The analysts are going to go to where they see the market going. So you may be early. You've got to be patient. This is something that's disruptive. And you need to remember how the analysts learn,

and they learn from their clients, the end users. You've got to look at it as a sales campaign. You need to get them the right information. related to the successes you're having in the marketplace, get your clients on the phone with them to talk about the success in the using of the software, and be persistent and consistent and build relationships and understand and listen, listen to the feedback they're giving to you. Don't just try to sell them on things and oversell them,

but actually have that trusted relationship and that two-way dialogue where you're sharing information. Because honestly, you're helping the analysts learn about the market as well. I mean, that leads naturally into one of the things that analysts do, which is what they provide for the end user is in a very practical perspective decision support. I am trying to make a decision. How do I make this decision? The analyst helps you determine what you're buying criteria are. What is the category of solution that will solve this set of abstract problems that you have? What are the things you should think about when picking a solution?

What are the things you should think about when picking a vendor or a partner? Because you might have three people who are selling you the same exact thing with the same exact descriptions, which functionally look like they work the same exact way, even in a bakeoff, and you might have some minor performance differences. But the analyst will tell you, hey, this particular vendor has sold into 10 other CIOs or CTOs or VP engineerings who look just like you, and here's their experience. And this is experience that is not written down anywhere and that you have no other means of accessing. It sounds like you're talking about setting the criteria.

And we come from the Mark Cranny School of Sales, where the only person who should be setting the criteria is the startup and that sales team. So if you as a startup sales team intend to set the criteria, then you better control all the means by which the customer gets their criteria. And that's not just you. It's never just you. Under no situation on earth, will it be only you? Right. And if your criteria that you are helping set agrees 90% with the criteria they get from the analyst, it's a lot more valuable and we listen to a lot better. Which I think goes back to a point that we talked about earlier, which is, you know, how do you, what kind of relationship do you have with analysts?

Is it one way? Is it two way? This always comes up. The question around, when should we engage with analysts and how should we engage with analysts? I think what Stacey was saying earlier about having a relationship with an analyst. Analyst isn't just blasting them with your message and your sales and hammering them over the head. I mean, I've sat with a few CEOs of both startups and very large companies who on one side of the clients and analysts were attempting to sell me the entire time or sitting next to them as part of their product marketing team. They tried to sell the analyst the entire time. And that's not how it works, not in a good relationship.

Right. You need to be authentic. They know. I saw it all in 10 years because I was able to sit at the table with clients. with analysts and saw, you know, successful relationships and, you know, less successful relationships. And one of the things that I observed was, you know, it's okay to, you know, admit that there might be an area that you're still working on and that the analyst is hearing about that may be seen as an opportunity for your company. And that's okay to admit that.

And what's so great about it and what the analysts actually really appreciate is when you acknowledge, yeah, you know, we're aware of that and we're working on that. And what advice would you have for us? Because they love being a part of building your company. They really do. I mean, they like helping. And that's an indirect way of actually influencing you will is get the analyst involved in your roadmap. All of these analysts, they love technology. They do it because they love technology. And so if they can be involved in that conversation about, hey, you know what, this is something we're working on. It doesn't work great right now. What do you think? That's really super exciting. I mean, then, like, as an analyst, I just remember that feeling you'd get when someone

would be like, hey, we took some of your advice and this made its way into the product. It's like, oh, that's the best thing. Yeah. Vaniel, you said you don't control, so if you don't control all the information at a startup, you want to get your message out there across all the different channels. What should we be doing? You do marketing. No, really. I mean, I don't understand why it seems to be the case that everything outside of advertisement in SEM and SEO and digital media is for some reason no longer considered part of marketing for startups, but you still do public relations. You still talk to journalists.

You still go to events. You still repeat your message. You have your two or three points, and you repeat them over and over again in every venue and every channel that you have to make sure that anywhere a potential customer of yours turns, they hear the same message about you. And you substantiate that with your content marketing,

and you do a lot more of the analyst relations side of listening. If the analysts are all saying X, And you're saying why? There's a lot more of them having more conversations with more of your customers than you're going to be able to. And unvarnished feedback, because sometimes the clients aren't always giving you the straight story, so to speak, not to say that they're not telling you the truth. From a vendor's side, every interaction we have with the analyst is precious.

We want to come showing the most amount of progress, the most number of customers using our product. And so it's very difficult to be able to. show any weakness in that because we're fearful that it will go in and affect, you know, where we appear in the wave and the report six months down the road. But the weakness actually helps. Being able to say, we're not sure how to fix that problem or being able to say we know this is a problem helps. It helps because it makes every other interaction that happens after that point truthful and authentic. The person having that conversation is

now more comfortable because you've admitted that we don't have the answer to everything. And that to me, I think as an analyst, was always a very humbling experience. When someone would say to you, hey, I don't know. And they would kind of bring you. That's right. They bring you, they sort of bring you into the fold. And for what it's worth, an analyst bullshit detector is very highly tuned. They always know. Or they find out. Do you have to engage with the gardeners and foresters to make analyst relations really work for you, or are there smaller firms that fit the bill as well? Yeah, I mean, I think the question that I get a lot is, how many analyst firms do I need to work with? I mean, because there are the big firms, and then there's lots of boutique

firms that are very narrowly focused on a single market or on even a single technology. And I think the answer is it depends. If your market is well covered or markets are well covered by the analysts, then you're probably better off from an ROI. perspective investing with the larger analyst firms. But there are markets. I mean, the one that I always think about is the optics market many, many years ago, that neither Gartner or Forrester anyone else was really covering. And so you had a couple of niche companies come out and really, really focus on that space and deliver value to customers who are buying that narrow slice of technology. It also depends what your goals are, who your target audience is, and the reach you're

trying to get within those constituencies, but also, you know, what's the deliverable you're looking for? Because there's the larger guys, they don't always do the custom work that you're looking for. So you may need to go to more boutique company to get that special report accomplished or that data

that you're looking for. The one thing I would add to that is like PR, there are journalists that have specific beats that are magazines or outlets or channels that have specific areas of coverage and people with expertise in those areas. So it's the same thing analysts. There are firms that have general coverage, that firms that have specific coverage, there are analysts who are generalists and analysts

who are specific. You should target the ones that either can provide you useful market feedback or ones that talk to your customer base or your market segment. If you are interested in a market that you are not yet playing in, that's another great opportunity to talk to an analyst or to a smaller firm that maybe covers that space because lots of people tend to focus on, this is what I do, so these are who I need to talk to, but there are adjacent markets that may be interesting for you to look at. So let's talk about where does analyst relations fit into an organization? Is it an offshoot of PR all the way to who should also be involved in dealing with analysts? Is it only the

analyst relations manager should sales ever be involved? Product managers? Most startups aren't going to have an AR manager. They're probably not even going to have a large diversified marketing organization. So my advice typically is that in the very early stages at the beginning, it should be run out of product because what you're really informing people about, and getting feedback on is the product and its positioning and its world, you know, where it stands in the market. And then if you get around to having product marketing, run it out of product marketing. Try not to ever run it out of PR if you can help it.

Why is that? Because if you run it out of PR, you will get what you measure. PR is an outbound function. Analyst relations done right is a two-way street. You're receiving information back from the analysts about their customers and their client conversations and all of the inquiries they're getting. And those can and should help shape the product. Whether you think the analyst is awesome or not so great,

the analyst's opinion about your product, the analyst's opinion about your pricing, the analyst's opinion about your marketing, is a reflection of the market, not of that particular analyst bent or how they woke up that morning. And so, again, I agree, have it sit in the product group

or preferably the product marketing team, if you have one of those. Oftentimes I find involving the PR team can be helpful because they're in charge of a lot of the outbound communication, but you always want to have product in the conversations. Bring in leaders of sales team so they can reflect back to the analyst what they're hearing in the market and provide value back to the analyst themselves. The other thing, too, analyst reports and feedback and quotes can be used in marketing messaging. So whether it's a reprint on a report or a quote in a press release, these are ways that you can

help impact and actually, you know, arm the sales team with tools with that extra validation from these analysts firms as to why these companies should buy your product. And I think it's pulling together kind of the different elements that we talked about, right? I go back to what you said about setting the criteria. And if you're doing a great job in product marketing at an early startup, you're always thinking about what is the criteria that you want to set. And then what are the different ways that you can get that out to the market? And this becomes one of the channels that you should think about and build that authentic relationship where you get the feedback, the early insight into hearing from these customers from this

competitor, and they're all having this single complaint that I know you guys can address, and that becomes great competitive intelligence for you as you're building up that buying criteria. And it is a relationship, much like a sales relationship is, because you don't brief an analyst once and then they start writing about your category. You don't? That's not what happened. It would be nice to do. It made my job a lot easier. But it's multiple conversations.

It's them talking to a number of your clients. It's you participating in a research report that they do by providing some case studies or other things like that. And then over the course of a year or so, you've developed enough of a relationship where you trust them and they trust you. And they start bringing more and more of your viewpoint into their viewpoint. or maybe it comes together, you know, organically. It's not a pay and or brief and now you're going to start seeing coverage. And I've always told folks, you know, if you have to pay to be covered by an analyst from, then it's probably not worth it.

I've never seen a play for pay motion. If Gartner or Forrester or any of the reputable analyst companies were pay to play, don't you think the end users would have figured that out by now? I mean, they've been around for quite some time now. The other thing is just take a look at the magic quadrant for your specific space or the Forrester Way for your specific space. If the largest, most well-funded companies are the only ones in the leaders quadrant, you can guarantee that the IBMs and the HPs and the other very, very large technology companies are paying a lot more to Gartner than the smaller startups, mostly because they have many more interactions and many more products they want to talk about and other things like that and many more people to have seats. So if it were truly paid to play, then the largest companies paying Gartner or Forrester the most money would be the only ones in the upper right-hand quadrant. And I would bet they're not.

And I will also add to that some of the people paying the companies the most amount of money are the most pissed off. Yes, it was always the big telecommunications companies or the really big IT companies that would call up and have very heated conversations with you as an analyst because they weren't in that upper right-hand side. typically the vendor sales guys are the ones are the most guilty of thinking pay to play or they're the ones who are like, hey, why isn't Gartner saying good things about us? Didn't we brief them last week? Or we lost this deal because the client

said they talked to an analyst and they said to go a different direction which half the time isn't actually accurate. I've talked to analysts after some of those calls and that wasn't what was stated. They're just looking for an excuse as to why they lost the deal. Rather than cut the relationship with that firm or that technology provider, they're able to say,

well, you know, my boss talked to an analyst and they actually told us to go with this other company. By the end user's talking to the analyst, it expands the number of companies that they should even look at, right? It slows down your sales process. So it can, or it can help narrow the scope. Yeah. You know, and cut, you know, make the vendor list, right? If it's a good analyst conversation, then the analyst listens first and understands your requirements as an end user and then says, you know what, take those four in the top right-hand side out and include these three because your specific requirements, whether it's SOX compliance or HIPA compliance or something else, means that these are the vendors you should be talking to,

not these other ones. Okay. So the easy way to measure the success of an analyst program is obviously your placement in a yearly report, but is that the right way to do it? Stacey's shaking her head at me. You know, I counsel a lot of companies on analyst relations, and a lot of the time they say, you know, should we have a license with an analyst firm or with a number of analysts firms and how should we be measuring the value of this relationship?

If you know you're not going to have a great placement in an analyst report, why even bother engaging with them? Well, I'd say two things to that. First and foremost, when you're interacting with analysts, it's not always about the placement on the report. It's about the advice that the analyst is going to give the client when they call and their perception of you as a vendor of technology. Isn't the report a reflection of what they think about you? The report is a reflection of a general snapshot of what a large majority of companies might value this specific technology vendor for a wide variety of

different purposes. Across the entire marketplace of options. And if you actually read the criteria and you talk to the analyst, they're not telling the world to go with the upper most right technology provider. They are just showing you the landscape of the marketplace related to that topic area. And by saying, you know, I'm not going to participate in this piece of research, you're effectively going, I'm going to let other vendors and clients that are not happy with our product do all of the speaking for us. They're setting the criteria on your behalf. That's right. You refuse to set the criteria. And can an analyst include you anyway? They will. They will. Absolutely will. I can remember a number of times that we're not

going to participate in the support. Actually, you are going to participate in this report. You're just choosing not to sell anything of your own. It's better to be on the report than not on the report. There's getting written up, but there's also, are you getting useful and valuable feedback in your product and in your positioning that moves deals forward and gets you more customers? And finally, are they influencing your buyers or the people you care about? I have had plenty of situations where, as someone working analyst relations, I have not been written up. They never talked about me as far as I know. But then all of a sudden, I get customers who show up and say, hey, I didn't know you existed until so-and-so analysts mentioned you.

So all of the things that we just talked about, those are great ways to have a relationship with the analyst. but to the startup CEO who believes that everybody should be buying their product, they don't need a third party to tell anyone who should be buying the product. How do you justify the expense of going to create this relationship, write the check, and have to invest in this? How do you measure it? Typically, an analyst contract is going to be anywhere between 50 and 100K for a subscription to an analyst firm. That's one relatively small deal.

So if that analyst recommends one customer, if one deal goes your way as opposed to your competitor's way, it's a valuable investment. I would say influence rather than recommends because they don't really endorse. Influence is a deal to get it closed. Again, it's a long-term relationship. As you create a relationship with analysts and provide more detail and grow your company, there's going to be different goals at all of those different stages in your life cycle of working with analysts.

Let's do a round of parting advice or startups. A tactical tidbit that I learned from you, Stacey, that I didn't know before is you don't have to be a customer to ask for time with an analyst. That's right. You can use the vendor briefing program where you can submit a request to speak to an analyst. The one thing to know is that under those types of engagements, it's an hour, be prepared, it's an introduction, and it's also sharing information with the analysts. you're not going to hear feedback back because that comes with being a paid customer. But I'll tell you what, there are a number of startup companies that are just leveraging the vendor briefing programs with analyst firms. And they're having great success in terms of the analysts being familiar and reaching out to them and even being included in reports.

Yeah, creating awareness. The one downside I'd say to only using the briefing is you can't ask what I think is the most important question to ask an analyst, which is let's just say I'm a client and I'm asking you if I should buy your product or my competitor's product. or what you think about our product, what would you say? So you know when your customer calls up the analyst what they're going to say about you. Your pros, your cons, what's good, what kind of price point you should be paying. Not knowing all of that is kind of scary. You should always ask the analyst what they think of your product if you were a customer. My one piece of advice is to always play the long game.

do some research before you talk to analysts and work on a campaign of influence, not a campaign of getting some defined concrete result tomorrow. I wanted to add one thing. I used to tell my clients when I worked at Gartner, engage early and often, you know, and I would say that to our portfolio. Don't just buy a seat and then not talk to analysts. You need to actually use it and to listen to them and then come back to them and say, hey, great advice.

We did this after we spoke with you and it's working. and just keeping that two-way dialogue going on an ongoing and, you know, frequent basis. As an AR-Pro, I mean, one of the things you should always provide to everybody on the call, your CEO, your sales folks, anybody who's going to be on the call of an analyst, you know, who the analyst is, what they've written and what you guys talked about last time, no matter what, always have everybody in the room with that. And you know, you need to remember, how do the analysts learn? They learn because of you. So it's okay to push back. If they're putting out a report with some data, then it's not correct or you feel like, you know, you can add something to that the best. way they're going to learn is for you to provide them and to push back and to give them the data points. They likely won't change it, but just to have that conversation and be candid about that is going to be valuable further down the line. And they might ask the question differently next time. Yeah, yeah. Or they may change it. Or they may change it. So I would say from a product marketing

perspective, you know, get started and don't be afraid, right? Go into it exposing who you are and use it as a channel to set your criteria, but also be open and hear that feedback. And it becomes a forcing function to align a lot of different teams from product management, engineering, sales, all together to really have influence. Thank you. Stacey, Mike, Anil, glad to talk to you all. Yeah, that's great. Thank you. Thank you.