What Is A Stealth Startup-Its Benefits And Drawbacks
Most businesses are eager to advertise their products and services because publicity attracts customers, inventors and talents. A well-recognised brand has more trust and accountability.
However, if you have business ideas but do not want to share them with the world, you can consider creating a stealth-mode startup. It is a smart strategy becoming popular among businesses, but you may wonder how it differs from regular business startups.
Here in this article, we will describe everything you need to know about stealth marketing, how it works and its benefits and drawbacks.
What Is A Stealth Startup?
Stealth startups are becoming more and more popular in today’s entrepreneurial landscape. These companies operate under the radar, keeping their plans and products a secret until they are ready to launch. While this approach may seem counterintuitive, there are several benefits to starting a business this way.
Simply put, it is a company that operates in “stealth mode,” meaning that it keeps its activities and products hidden from the public eye until it is ready to launch, in contrast to the traditional startup model, where companies announce their plans and work publicly to gain traction and attract investment.
Types Of Stealth Startup Mode
There are two basic types of stealth modes which are:
- Total stealth mode
- In company stealth mode
Now let’s look at these types of stealth modes to understand them better.
A. Total Stealth Mode
It is a stealth mode where a company or business wants to keep all its actions as possible. In this case, a company may mislead the public about its goals.
A stealth-mode startup may keep its personnel and location undisclosed on its website. It might even operate under a temporary name that does not reveal its field of business.
If you’re contemplating launching a stealth mode startup, you will adopt this type of secrecy.
B. In Company Stealth Mode
It is when you have an existing business but want to keep your new project or idea as secret as possible before its release. For example, Microsoft has a history of assigning codenames to its new projects like Windows 95 was named Chicago and Windows Vista was Longhorn to keep scrutiny as minimal as possible.
Stealth mode practices can go beyond just public-facing aspects. In-company stealth mode aims to keep internal and external stakeholders at a distance and avoid premature rejection of ideas or concepts. A business that operates under in-company stealth mode can take several measures to maintain secrecy, such as:
- Building a cover story
- Engaging informal sponsors
- Covert testing
- Freeing up extra employees to maintain secrecy
- Asking project employees to sign another non-disclosure agreement (NDA)
Suppose you are not running a business and just getting your startup off the ground. You will not need this stealth mode until your company starts working on its next offering.
Reasons To Choose Stealth Startup Mode
Here are some reasons that will help you understand why your business should go stealth:
I. Hide Your New Technologies
Businesses working on cutting-edge technologies or waiting to secure crucial patents may be reluctant to disclose too much information about their work. While this is a reasonable approach, such businesses are relatively uncommon.
Companies like Pharmaceutical, heavy industrial, or tech-related companies use stealth mode to protect their technology.
By keeping their plans confidential, they can minimise the risk of competitors replicating their technologies.
II. Avoid Distractions
Entrepreneurs, especially those with a background in product-to-engineering, may overdevelop their initial product. They might perceive sales and marketing as a distraction until they have perfected every aspect of their product.
Nevertheless, stealth mode could be suitable if you prioritise product development over sales and marketing. However, it can also be risky as the connection between you and your target audience is as essential as the quality of your product. Without interacting with your audience, you may develop a product that customers do not demand or need.
It’s crucial to weigh the pros and cons of the privacy offered by stealth mode before deciding. However, numerous companies in stealth mode (or are still in stealth mode) have achieved significant success.
III. Be Prepared For Ultimate Debut
Another reason businesses, especially startups, go into stealth mode is to create a splash when they debut. When we talk about establishing a business, it comes with two schools of thought; one is to choose a stealth startup, and the second goes with the early launch.
Entrepreneurs with media connections or a significant personal following may stay stealthy until their startup’s content marketing, social media, and public relations channels are fully developed. They may also wish to ensure their product can handle the anticipated rapid growth.
Moreover, being in the spotlight can negatively impact your team’s performance and company. Opting for a stealth mode approach could be the ideal choice if you aim to concentrate solely on your product or service, without the need to concern yourself with aspects like branding or public relations.
This approach enables you to concentrate on strategies and skill development and reduces the requirement (and cost) of additional initiatives aimed at the public eye.
If your startup is in stealth mode, it is unlikely to attract much media attention. However, this can be advantageous because it lets you keep your actions confidential.
Moreover, it gives you more control over the information that potential investors and consumers receive. With the prevalence of social media platforms like Facebook, Twitter, Instagram, and LinkedIn, creating publicity is now one of the easiest things to do.
IV. Securing Investment
Launching your business publicly with secured funding can put you in a strong position to compete with others in the market.
However, if bigger players plan to enter the same market, a high-profile launch could prompt them to announce their plans earlier than expected, potentially hurting your investment prospects.
Therefore, raising significant funding while in stealth mode is not unusual.
V. Creating A Mystery Or Hype
Operating in stealth mode can create a sense of mystery and anticipation around a business, especially when well-known investors or founders are involved. It can generate excitement and buzz for a grand reveal when the business emerges from secrecy.
During its stealth mode, Shape Security received significant media attention, with executives even conducting interviews without disclosing any information about the company.
It created a buzz around the business, resulting in more publicity than it might have received otherwise.
Drawbacks Of Stealth Startup Mode
Operating in stealth mode has several challenges; some founders and investors are against it.
If you are thinking of going for a stealth startup, you must consider its drawbacks which are as follows:
I. Longer Time In Determining Product Market Fit
Gaining customer insight is the most effective approach to ascertain whether your product fits the market. It can be accomplished by gathering customer feedback by conducting surveys, monitoring complaints, or consulting with the sales team to assess lost sales. Additionally, it’s important to consider feedback and opinions from the wider community.
If you operate in stealth mode, you may encounter reduced feedback, which can prolong the process of refining and enhancing your product.
II. Restricts Fundraising Options
If you operate in stealth mode, you may forego numerous funding possibilities that would be available if you were more visible to the public. Fundraising strategies such as crowdfunding and joining an accelerator are unavailable during stealth mode.
Funding can also start by chance when you talk about your business with others. We have heard many people just having conversations on the street with people and not realising they can be their angel investors and start getting investments from them.
III. Stealth Mode May Not Always Protect You
A significant competitor can discover your plans, and even with a solid foundation, they may steal your concept and dominate the market when you emerge from stealth mode.
However, a more optimistic perspective is that if your business idea is compelling and skillfully executed, you may not require stealth mode security.
When you introduce your innovative idea, you can benefit from being the first to enter the market and gain an advantage over potential competitors.
IV. Delayed Brand Building
Stealth mode has its critics, with some viewing it as a superfluous publicity tactic. Others view founders who adopt stealth mode as deluding about their idea’s uniqueness or appeal.
Should I Go For Stealth Startup Mode For My Business?
If you do not have any strong reason to choose a stealth startup, then chances are that you do not need to go for it. If you are open instead of running your business idea secretly, you can access useful advice, investment and talent, which will help you keep things under wraps.
However, a few types of businesses can benefit from this stealthiness. If your concept is remarkably transformative, simple for competitors to adopt swiftly, or an innovative technology still in the works, stealth mode might be viable. However, it’s important to recognise that other companies will unlikely abandon their current projects and shift their focus entirely towards your idea overnight.
Alternatively, you could consider a semi-stealth strategy, commonly known as “tarp over the car mode,” where you refrain from issuing press releases or divulging every aspect of your product. Still, you begin connecting with supportive contacts and gathering feedback while continuing to work on the project in private.
Final Thought - Stealth Startup
In conclusion, a stealth startup is a business model that prioritises secrecy and confidentiality. While it can provide several benefits, like avoiding competition, reducing distractions, and building anticipation, it also comes with drawbacks, such as limiting feedback and hindering investor trust.
Therefore, before adopting a stealth strategy, startups must carefully weigh the potential advantages and disadvantages against their business goals and market conditions. It is essential to consider whether the benefits outweigh the costs and risks of such a model.
In the end, the success of a startup depends on many factors, including market demand, product innovation, team talent, and execution. While a stealth approach may work for some startups, it is not a one-size-fits-all solution. Ultimately, the key is to find a strategy that aligns with the company’s values and goals while also addressing the challenges and opportunities of the market.
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