They seem to be becoming less popular lately, but not too long ago "stealth" startups were a growing fad in the Internet entrepreneurship sector. A team with a big idea would insist on keeping their business a secret from the public and even from investors until the last possible moment in an effort to ward off any fast moving idea vultures that might swoop in and copy their idea. Others went stealth to create a buzz around their mysterious and unknown project. Some argue, however, that being stealthy limits a startup's opportunities for funding and feedback, among other things, so is there a better way to go about this?
Investor and Hunch co-founder Chris Dixon wrote Tuesday about his idea that instead of going into "stealth mode," startups should instead just try to "underhype" themselves, a process I'm going to call "flying under the radar." I call it this because "stealth," like "stealth bomber," implies the ability to be undetectable and virtually invisible, while "flying under the radar," means you are perfectly visible, but are strategically flying in a manner as to go unnoticed.
"The companies I'm referring to ... are publicly launched, acquiring users and generating revenue," writes Dixon of "underhyped" startups. "They are modeling themselves after Groupon, where the first time the VC community / tech press gets excited about them, they are already so successful that it's hard for competitors to jump in."
Startups that can fly under the radar get all of the benefits of stealthiness but without the costs. By quietly building a stellar product and garnering a loyal audience without tipping off the press or major VCs, startups can be assured that they are providing the best product while protecting themselves from a quick copycat company. Instead of closing your company off to a select group of individuals, these startups can be completely open to public feedback and user testing, as well as VC scrutiny, something most stealth startups can't do.
"Unless you are extremely lucky or extremely brilliant your product won't be a great match for your customer's needs until you have spoken to them about it and iterated a bunch of times," wrote Nic Brisbourne of DFJ Esprit last December. "With regard to VCs in particular, being stealthy stops them from letting you know if they have seen many other startups in your space and the extent to which your plan might or might not need to morph to become an attractive investment."
It would seem that the costs outweigh the benefits when it comes to going stealth. In a 2006 OnStartups post, Dharmesh Shah argued that going stealth could unintentionally convey to investors that the company lacks focus, commitment, solutions, or direction. So before you decide to keep your super secret project under lock and key, think about hiding in plain sight by flying under the radar instead.