Discussion Paper of the Institute for Organisational Economics 3/2020

From Signalling to Endorsement
The Valorisation of Fledgling Digital Ventures

Milan Frederik Klus
March 2020



Despite extensive research on the liability of newness of young firms and what they can do to reduce information asymmetries, relatively little is known about how young digital ventures’ growth and scaling is affected by different forms of endorsement. With a focus on third-party endorsements from industry analysts, I approach this question using a two-stage research design. First, I empirically examine the connection between awards given by industry analysts and the funding of digital ventures. I use the example of the Cool Vendor award given by the analyst firm Gartner and focus on the fintech domain. Using semi-structured interviews, I then identify and explain different forms of endorsement from a digital venture perspective, thereby differentiating between pure market signals and more sophisticated mechanisms. This differentiation is presented in a conceptual framework, which I propose as a supplement to the signalling literature. This paper promotes a better understanding of what helps fledgling digital firms to develop and prosper.