Startupedia: What Does Stealth Mean?
What does stealth mean? If someone (or something) is stealth, it means they are going about something in a sneaky or crafty way to avoid detection. In the tech world, 'stealth mode' is the term used to characterize startups operating in a state of secrecy during product development. Whenever I hear the term "stealth mode" I imagine the scene from Kung Fu Panda 2, when Po the Panda tries to sneak around some guards. He wants to get from point A to point B without attracting the attention of others, and manages to do so successfully—albeit it in a ridiculous way. When an early-stage startup is operating in stealth mode they are essentially doing the same thing. They are trying to go from product conception to product launch without attracting the attention of competitors. To maintain secrecy, all employees in stealth startup are required to sign nondisclosure agreements, as are any investors the company speaks with prior to launching their product.[bctt tweet="#StealthMode startups operate in secrecy to avoid attention from competitors, says @monique_lees"]
Why choose stealth mode?
There are a couple reasons why an early-stage startup would choose to work in stealth mode.
To protect Intellectual Property (IP)-
Patents are considered very important in the tech world, especially when it comes to capital raising. One of the conditions of having a patent granted is the innovation must be completely novel, meaning there can be no public disclosure of something like it existing previously. In order to ensure patent approval, it’s imperative that a company keeps their invention secret prior to filing. Operating in stealth mode is a way to make this much easier to do.
To build social buzz-
Operating in stealth mode is essentially like telling the whole world you have a big secret. Naturally, when people find out a company is developing something in secret, they want to know what it is. The media will start speculating based on the prior experience and the professional network of the company’s founders, and a social buzz will be created leading up to the product’s launch.
Often, a stealth mode startup will create interesting landing pages for their company to give an indication as to what they're developing and to collect the contact details of interested parties. In this way, stealth can be a great marketing tactic to get people excited about a new product before it’s launched to the public. Below are two examples of stealth startup landing pages:
[bctt tweet="Landing pages allow #stealth #startups to create mystery and buzz around their product -- @monique_lees"]
To avoid tipping off competitors-
By operating in stealth mode, competitors are unable to see what a company is up to, and as a result they can’t copy their idea. This is especially important if a stealth startup has a product that can’t be protected by IP laws. By staying quiet until launch, stealth startups have a leading advantage on competitors who want to replicate the product in any way.
When to be wary of stealth mode:
As with most things, there are some down sides to operating in stealth mode. If a company is developing their product in secret it is very difficult to validate their assumptions, collect customer feedback, and gain early on-boarders. Going down this path can be dangerous as it often means the company needs to get their product right on the first try--if there is a negative discrepancy between how impressive the company thinks the product is, versus how their target customers feel about it, then this can be very problematic. Without the ability to test the product with customers and gain feedback, stealth startups run a higher risk of their product flopping after launch.
One way stealth startups can get around this is by running closed beta testing throughout the development of their product. Closed beta tests are accessible by invitation only, and often participants will need to sign nondisclosure agreements to maintain the secrecy of the product before its launch. [bctt tweet="Closed beta tests allow #stealth #startups to test their product before launch, says @monique_lees"]
Successful stealth startup launches:
A few companies have executed successful stealth launches, some of which are shown below. It's important to note all of these companies were developing highly technical products, which is likely the reason they chose to operate in stealth mode throughout the development period.
Those of you who use an iPhone will be very familiar with this technology. For 2 years during the development of Siri, Stealth-Company.com was all the information outsiders could access about this company. Shortly after launching, Siri was contacted by Steve Jobs--the rest is history.
Coin solves the problem of using multiple credit cards to pay for different things - personal expenses, work expenses, shared expense etc. The company launched in 2013 and sold 1000 products in less than an hour.
Coravin is a company who have developed system that lets users access wine without removing the cork form the bottle. The company underwent a stealth launch in 2013, prior to which any journalists, industry partners or first users had to sign nondisclosure agreements before testing the product.