What is a stealth mode startup?
A stealth mode startup is a new business that is trying to bring a new product or service to market without people knowing about it. It refers to a company’s early stage when it is not ready to reveal its full identity and workings to the public and is instead operating under secrecy.
Stealth mode, also known as stealth startup or simply stealth, is a term originating from the world of business.
Many startups choose to go into stealth mode in order to avoid competition and build a solid foundation before making a big splash in the market.
Benefits of starting up in stealth mode
There are several reasons why startups opt for stealth mode.
- The first is to reduce competition and copycats (fear that the idea could be stolen). By keeping their plans and operations under wraps, startups can avoid having their ideas stolen or copied by larger companies. If you’re building anything in deep tech for example, being in stealth can help protect your intellectual property.
- Second, going into stealth mode allows startups to focus on product development without distractions. They can perfect their product before dealing with the pressures of marketing and sales.
- Stealth mode can help startups raise money more easily. VCs and other investors are often more willing to invest in a company that is still in its early stages and has not yet been exposed to the public.
- Another advantage of a stealth mode startup is that, if the startup fails, no one knows about it and founders can pivot to the next thing without being labeled as a failure.
- Being in stealth mode can also signal to stakeholders like future employees and investors, that the startup is working on something disruptive and new and the only way to know the secret is by becoming a part of it.
- When your startup is in stealth mode, it means that you are keeping your activities secret. This is usually a good thing because it means that you can stay under the radar and not draw attention to yourself.
Disadvantages of stealth mode startups
Of course, there are also some disadvantages to operating in stealth mode.
- Startups that are in stealth mode can have a hard time building buzz and generating interest in their product.
- They also miss out on valuable feedback from customers and the opportunity to learn from early adopters.
- Stealth mode startups are also looked down upon by many investors as they feel that founders have not “figured things out yet”.
- Or in other cases, investors feel that by being in stealth, founders are trying to display exclusivity where in reality there is probably nothing new or special since investors listen to tonnes of pitches and in rarity come across startups that claim to be the ‘first one’.
- It becomes harder to hire people because most people won’t want to work for a company they hardly know anything about.
- It becomes hard to ask for help from mentors, subject matter experts, and investors because without sharing details and nuances you can’t get much guidance. So unless the founders are absolutely sure about what they’re doing, it becomes hard to run a startup without external advice.
When to launch in stealth mode?
When to go into stealth mode is a question that every startup founder needs to answer. There are several factors to consider, including the stage of your business, the competitive landscape, your team’s experience, and your fundraising goals.
If you’re still in the early stages of product development, it may be wise to stay in stealth mode until you’ve perfected your product.
1) You have a sense of product-market fit
If you have a good idea for a product or service and you know the market for it, starting your business in stealth mode can be a good idea. This means not telling too many people about your product or service until you’re ready to launch. This can help you stay ahead of your competition because they won’t know what you’re doing
2) You need time to build new technology
If your product is based on technology, it might take a long time to perfect it. And if people found out what you were doing, larger companies with more resources (like Apple, Google, and Microsoft) might take your idea and do it better and faster than you can.
Starting your startup in stealth mode can help you get a head start on the bigger companies in your niche. When you’re ready to roll out your product, the big companies will have to pay to acquire it instead of developing it themselves.
3) You have a disruptive startup
Very few products are truly disruptive in the sense that they cause a revolution in an industry or change the world. If you’re having trouble thinking of some truly disruptive brands, think about Walmart, McDonald’s, Facebook, Amazon, and Uber.
Even if your product is great, it might not be as disruptive as the iPhone or Netflix. If your product is really good and different, then you might want to start a stealth-mode startup.
4) You are a serial entrepreneur/s
Many stealth startups are founded by experienced entrepreneurs who have connections to investors and the industry. Many stealth startups that actually make it to launch have rich pedigrees behind the business. This would be difficult for first-time founders to replicate.
Startups and businesses that started in stealth mode
Startup founders often choose to go into stealth mode in order to avoid competition and build a solid foundation before making a big splash in the market. In this article, we’ll take a look at some case studies of startups that have successfully operated in stealth mode.
1. Sky9 Capital is a venture capital firm that focuses on early-stage investing. The firm was founded in 2013, but it wasn’t until 2016 that it announced its existence to the public.
2. Basecamp is a project management tool that was founded in 1999. The company operated in stealth mode for its first few years, only revealing its product to the public in 2004.
3. Accel Partners is a venture capital firm that was founded in 1983. The firm remained in stealth mode until it made its first investment in 1987.
4. You might have heard of Coda now, but before its launch, the company was called Krypton. The company had a $400 million pre-launch valuation when it built its Excel-killer in secret.
5. Slack is a team communication tool that was founded in 2013. The company remained in stealth mode until it launched its public beta in 2014.
6. Pinterest is a visual bookmarking tool that was founded in 2010. The company remained in stealth mode until it launched its public beta in 2011.
7. Palantir is a data analytics company that was founded in 2004. The company remained in stealth mode until it launched its public beta in 2009.
8. Airbnb is a vacation rental marketplace that was founded in 2008. The company remained in stealth mode until it launched its public beta in 2009.
9. Stripe is a payment processing company that was founded in 2010. The company remained in stealth mode until it launched its public beta in 2011.
10. Neobanking startup, Jupiter raised $24 million in 2019 from VCs like Sequoia, Matrix Partners, and others. The startup was in stealth mode until recently.
These case studies show that it is possible for startups to successfully operate in stealth mode.
Tips for building a successful stealth startup business
There are several tips for building a successful stealth startup. Here are a few of the most important ones:
1. Don’t share your plans with too many people. Keep your team small and tight-knit, and don’t discuss your plans with anyone who isn’t essential to the company.
2. Stay under the radar. Don’t try to attract too much attention to your company. Instead, focus on building a great product and let the buzz come naturally.
3. Be prepared to pivot. The landscape of the startup world can change rapidly, so you need to be prepared to make changes to your plans if necessary.
4. Keep your investors in the loop. Investors will want to know how your company is progressing, so make sure you keep them updated on your progress.
5. Be patient. Don’t try to rush your product to market. Instead, take the time to perfect it and make sure it’s ready for the public before you launch.
If you’re considering launching a stealth startup, these tips can help you be successful. However, it’s important to weigh the pros and cons carefully before making a final decision.
The future of stealth startups
The future of stealth startups is shrouded in secrecy.
However, there are a few things we can predict.
First, stealth mode will continue to be popular among startups. This is due to the fact that there are many advantages to staying under the radar. Startups can avoid competition, focus on product development, and raise money more easily.
Second, we can expect that investors will become more open to investing in startups that are in stealth mode. This is because they understand the benefits of operating in secrecy.
Finally, we can expect that the stigma surrounding stealth startups will begin to dissipate as people come to see the value in this type of operation.
So, should your startup be in stealth mode? It depends on your individual circumstances. If you feel that you need more time to perfect your product or if you’re worried about competition, then stealth mode may be the right choice for you.
However, keep in mind that it’s not always necessary to stay in stealth mode forever. Once you’re confident in your product and have a solid plan for marketing and sales, you can slowly start to reveal more about your company to the world.
What do you think? Should startups stay in stealth mode or come out of hiding once they’re ready to launch? What are your thoughts on stealth startups? Let us know.