Sagar Gupta of Anson Fund Management LP joined the board of U.S. call center software company Five9 Inc. (FIVN) in December — a rare activist portfolio manager installation at a targeted company.

The addition, though, puts a spotlight on Gupta’s exclusive investment focus on corporations in telecom, media and technology. Like many other activist investors, Gupta developed a sector specialization over the years. He and other activists with sector expertise insist that their industry concentration helps them identify share-price improvement propositions. At the same time, they gain critical credibility with executives, directors, bankers, sponsors, analysts and others in the specialized ecosystem.

“Having deep industry knowledge enables you to spot ideas faster and helps you generate a high-quality set of recommendations to create value and newer and creative ideas because you know the space,” said Gupta, who’s building out Anson’s TMT activism strategy. “If you have a strong record in an industry, you have a lot of credibility with the issuer because they can see what you’ve done at their peers. Your engagement will move along faster and be more effective even with a small position.”

Gupta, in recent months, has targeted Twilio Inc. (TWLO), Globalstar Inc. (GSAT) and Lionsgate Studios Corp. (LION), among others. Insurgent funds sometimes are themselves sector-specific, such as Land & Buildings Investment Management LLC’s Jonathan Litt, which concentrates exclusively on real estate or Biglari Capital’s Sardar Biglari, who specializes in restaurants, and has launched campaigns at Cracker Barrel Old Country Store Inc. (CBRL), El Pollo Loco Holdings Inc. (LOCO) and Jack in the Box Inc. (JACK).

While large activists such as Elliott Management Corp. or Jana Partners LLC also employ sector specialists, activist funds with specific industry expertise can have an advantage. They understand the key drivers for a particular industry, said Waheed Hassan of ZMH Advisors.

“If there’s an M&A thesis, they know who all the possible strategic and PE buyers would be,” he said. “Understanding a sector allows you to be more nuanced in your thesis and helps you better articulate a value proposition.”

Activists with sector expertise also develop connections to sector-focused investment bankers, financing sources, sell-side analysts, consultants, lawyers, regulatory counsel and other specialized institutional investors.

“The more these third parties view your campaigns as thoughtful and well-informed, the more likely they’ll listen with an open ear in your next campaign,” said Lauren Gojkovich, who founded LDG Advisory LLC to advise activists. “If you can build up trust with these important players in the network, that’s a positive.”

Activists who don’t have a track record in a particular industry and just bring a mathematical model to management and boards aren’t likely to have much success. “If an investor has deep sector knowledge and a long investment record they command more credibility,” ZMH’s Hassan said, adding “all of these pieces need to work together to ensure positive outcomes.”

Investing in financial institutions, for example, requires a special skill set, one that Joseph Stilwell’s Stilwell Value LLC and Driver Management Co., founded by Abbott Cooper, have come to tackle head-on

“Often the investor needs to get approval from bank regulators, and must develop a strategy to win support of retail shareholders who tend to be more management friendly. There are many nuances to that sector,” Hassan said.

Other funds focus their activism in one sector, too. HG Vora Capital Management LLC’s Parag Vora is known for agitating at casinos and gaming companies, which have particularly complex restrictions on director contests. And Caligan Partners LP focuses on the biotech and pharmaceutical space, which come with its own sets of regulatory challenges, jargon and international restrictions.

Building a track record is also important to win the backing of sell-side analysts.

“If you’ve had success with previous campaigns, you’ll have more credibility with outside analysts in the sector. They will take you at face value,” said Gojkovich, who advises activists.

Alternatively, activists who don’t receive a positive reception for their campaigns with analysts often will have a tougher time gaining traction with institutional investors.