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Let’s Talk About Stealth Mode Startups

As I have mentioned in the past, I left VMware to join a stealth mode startup. In this post, I would like to describe my definition of a stealth startup, why you might consider it, the benefits and the consequences. Read on to learn more!

What is it?

Many people define stealth mode startup differently. My definition is very simple: any company which does not want to publicize who they or what they do. This is not to say a stealth startup will not tell anyone, just not everyone. It also does not mean the company does not have customers. A stealthy startup may have design partners / pilots / beta customers and these customers may even pay for the products/services being offered. A stealth mode startup typically comes out of stealth with a press release of some sort.

Why might you do it?

The reasons for why a company starts stealth are plentiful and include:

  • Industry changing technology
  • Unknown market fit or customer target
  • Afraid of someone stealing the idea
  • Need time to get the product right
  • To make it easier to pivot
  • Do not want to notify competitors
  • Nothing gained by being public

The benefits?

The benefits depend heavily on the reason why the company is stealth in the first place. With that said, most new/early companies will benefit from stealth mode as they likely do not have all the answers or technology they need to be successful and they gain little from being public. Some of the big benefits from being in stealth include:

  • If you are famous the media is not as involved — not a problem for the majority of us
  • Buys time to work on your technology — if this really is a gating factor
  • If you really think someone can steal the idea — ideas are a dime a dozen, but real innovation can at least be copied
  • If your startup really is revolutionary — change does not come easy so you need to be prepared
  • Time to get your house in order without being in the media — building a company is hard work

The risks?

The risk also depend on a variety of factors including how long the company remains stealth. Some of the big risks from being in stealth include:

  • Execution is the thing that matters — being in stealth does not ensure execution
  • Harder to get feedback and customers — increases likelihood of failure
  • May be harder to get talent and investment — though connections and experience go a long way in the early days
  • Unknown whether you will be able to compete — speaks to credibility, brand, differentiation and competition
  • Some companies believe a good product will prevail and spend too long on the product — more often than not your MVP can be even smaller
  • If the idea is not great then you may end of wasting time and money doing the wrong thing — speaks to market fit
  • Negative judgement can be passed if you remain stealth for too long — being underestimated can be huge advantage as well though
  • If things are going south it may not be apparent — could be too late to save a struggling company

Summary

While a stealth mode startup is not for everyone, they are pretty common in tech. In general you stay in stealth only as long as you need to. While timelines will vary, 1-2 years is pretty common. Like most things, there are benefits and risks in starting or staying in stealth. Be sure to do your research and ensure you are choosing to enter, stay, or exit stealth mode for the right reasons. Good luck and go execute!

© 2018, Steve Flanders. All rights reserved.

Published inStartup

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