A stealth startup is a business that is founded and launched with secrecy and away from public glare.
Although, modern business wisdom suggests, that we make our business more visible even at the startup phase. Making yourself visible and heard even at early stage helps you get as many investors, employees, customers and create stronger prospects in the market.
However, some startup companies prefer to be ‘Stealth Startup/s’
Once the business is more established, usually after a couple of years, the startup will come out of stealth mode and invest in marketing and media relations like other companies.
Stealth mode can also be applied to specific aspects of the business: A new product might be kept secret, even from other employees, while it is developed.
Why to have stealth startup?
Keeping a business undercover might seem counterintuitive, but there are lots of potential benefits to this strategy.
Protecting your ideas
One of the core purposes of stealth mode is to give founders time to nurture and build a business without giving competitors a chance to react.
If your business is based around a unique idea, competitors who are already established could potentially steal that selling point and make a success of it before you can.
For example, if you came up with VR entertainment for airplane passengers, big companies in this space, like Meta or Sony, might build a copycat product and partner with airlines before you can find your feet.
Building a loyal customer base
Acquiring customers in stealth mode means it will be difficult for competitors to poach them when you finally come out of hiding, especially if you’ve nurtured those customer relationships.
Testing your product
You can use a small customer base to experiment with different ideas and work out kinks before your product is publicly available. This strategy is a lot like beta testing.
Securing investment
If you launch your business publicly with funding already secured, you may be in a good position to take on the competition.
On the flipside, if there are bigger players planning to enter your proposed market, a heralded launch could push them to announce their plans early, potentially chilling your investment prospects.
Protecting intellectual property (IP)
If your business is based around an invention, medicine, algorithm, software, or any kind of new technology, you need to legally protect it with a patent, copyright, or trademark.
Without this legal protection, your IP can be copied. Operating in stealth mode can protect your IP while you organize legal cover. That’s probably why health care and software are the stealthiest industries.
Staying focused
Building a business can be harder when there are eyes on you. Starting stealth gives you room to focus on essentials, like developing the product and building your core team, without the distraction and pressure of media attention and marketing campaigns.
Creating hype
Stealth startup mode can generate mystery and hype around a business, especially if high-profile investors or founders are involved, and create room for a “big reveal” when the business comes out of the shadows.
The cons of stealth mode
Operating in stealth startup mode presents a range of challenges, and some investors and founders are strongly against it. If you’re thinking of launching stealthily, there are some downsides to consider.
It takes longer to figure out product-market fit
The best way to determine market fit is to get feedback from your customers. That might involve customer surveys, keeping track of complaints, or talking to your sales team about lost sales. It might also include listening to feedback and commentary from the broader community.
If you are operating in stealth mode, you will get less feedback and it could take you longer to adjust and improve your offering.
You’ll lose out on community support
The biggest disadvantage of stealth mode is a “severe lack of feedback, help, and input from others.”
It limits your fundraising options
If you’re in stealth mode, you’ll miss out on potential funding opportunities that could arise from being in the public eye. Fundraising strategies like crowdfunding and joining an accelerator are off the table.
It might be harder to attract talent
Job seekers might be put off by applying and interviewing with only a vague idea of what the business is about. Without an established brand, it’s more difficult to prove your credibility to potential hires.
Stealth mode won’t necessarily protect you
If a major competitor really wants to find out what you’re up to, they might figure out a way to do so. If they’re powerful and well-established, they may still steal your idea and crush your business when you come out of stealth, no matter how much time you’ve taken to build a strong foundation.
A more positive way of thinking about this is, if your business idea is strong and well-executed, you might not need the protection of stealth mode. When you launch your new idea, you’ll have the first mover advantage by being first in the field.
You’ll delay brand-building
If you can only engage in limited publicity, you won’t be able to start building a brand until you emerge from stealth mode, meaning it might take longer to develop a reputation and expand your reach.
People might think you’re pretentious
There are plenty of commentators who are not big fans of stealth mode. Some see it as an unnecessary PR stunt, while others perceive stealth founders as being under the illusion that their idea is more special or exciting than it really is.
To Conclude on Stealth Startup
If you don’t have a strong reason to have stealth startup, then chances are you don’t need to. Being open gives you access to useful advice, talent, and investment, and it generally requires less effort than keeping things under wraps.
A few specific types of businesses will benefit from supersecret stealthiness. If your idea is highly disruptive, quick and easy for a competitor to implement, or a ground breaking technology that is still in development, stealth might be for you.
But bear in mind that other companies are unlikely to drop everything overnight and dedicate time and money to your idea.
Finally, you could opt for a semi-stealth approach. You don’t have to send out press releases or reveal the product in full, but you can start reaching out to helpful connections and gather feedback while you’re tinkering behind the scenes.
