Starting a business comes with highs and lows. On the one hand, an entrepreneur may feel endless optimism as they launch a new concept and see how the market responds. But conversely, fears over being scooped by the competition — especially bigger brands — can make even the most confident individuals second guess their decisions.
And in particular, steep competition from established businesses is a major caveat that an entrepreneur needs to consider when launching a new concept. This is because a competitor with a more established firm often has access to resources, a deep network and name recognition by consumers. This means that even if an upstart business is first to market with an idea, it can still be overtaken by the competition and lose its edge. This is where choosing to be a stealth startup can be a calculated and smart decision.
What Are Stealth Startups?
Stealth startups are exactly as the name implies — startups that maintain a low profile and enter into the market with little to no fanfare. Rather than making a large announcement or engaging in extensive consumer outreach, these businesses appear seemingly out of nowhere and operate in the shadows. While they are still fully functional, they avoid attracting attention. In most cases, this stealth mode will only last for a few months to maybe a year as it is not a sustainable long-term strategy.
When Is Being A Stealth Startup A Good Idea?
Launching a business in stealth mode is a protective measure. It does not mean that a startup is engaging in questionable activities. Instead, there are three main reasons a business does not want to attract attention during the initial launch period: competition, protecting ideas or intellectual property, and market readiness.
Avoiding The Competition
As mentioned in the introduction, a small upstart entrepreneur may realize that their business idea has a lot of potential but could be easily duplicated and reframed as a unique proposition if the competition got wind of it. So, launching with minimal to no promotion means that a business has time to build a reputation, revenue (and hopefully profits), and a market share before the competition can take advantage of having more visibility in the same industry.
Protecting Ideas Or Intellectual Property
Avoiding the competition also means preventing established competitors from beating a startup to market with a similar concept. It is impossible to completely prevent a competitor or even another startup from releasing similar ideas. But launching in stealth mode means that an entrepreneur has an opportunity to prove their unicorn concept is valid and — most importantly — unique and relevant to their industry.
Likewise, if a startup is launching around a product or idea that needs to be protected such as building an algorithm or developing a product that would require a patent, stealth mode is best. However, securing a patent, trademark, or copyright can take time. Operating as a stealth startup can give an entrepreneur the cover they need to meet the required benchmarks for gaining legal protection, while still technically being in operation.
Building A Market And Testing Viability
Conversely, if an entrepreneur wants to launch a new business with a strategy that is not fully vetted, opting for stealth mode is a safer play. This allows them to test concepts, fine-tune their product offering or marketing strategy, and properly source their target market without calling major attention to any gaps in their plans. Likewise, opting for a stealth startup launch also means a business can quietly pivot without drawing attention to themselves if they find that original plans are not sustainable or market demand dictates that they expand product offerings or target audiences or even adjust their business model.
How To Identify A Stealth Startup
One of the biggest indicators that a startup is in stealth mode is that there’s little verifiable information about the business. Common signs that a startup is in stealth mode include:
- Not issuing a press release
- Sharing limited information on corporate pages or social accounts
- No public push to acquire customers, clients or funding
For example, a stealth startup is unlikely to publicly post a fundraising opportunity on a platform such as AngelList or to launch a crowdfunding campaign for a new to-market product on a site like Kickstarter. Instead, such activities are tightly guarded and managed behind the scenes.
The Cons Of Being A Stealth Startup
As with any choice, there are benefits and risks to launching in stealth mode. And in many cases, the average business will not see significant gains in going this route. Still, it is important to consider both sides to make an informed decision.
Lower Visibility And Consumer Alignment
One of the biggest risks is that being in stealth mode means a startup is flying under the radar and cannot leverage that groundswell of community support that many small businesses benefit from. In short, a stealth-mode business can fall victim to being the best-kept secret. This means it can take longer to get enough relevant feedback from target audiences to create a product that really stands out from the competition. This concern also dovetails into finding the right product or market fit. Without that feedback, an entrepreneur is essentially creating a concept in a silo and hoping that they will land on a solid solution.
Reduced Funding Opportunities
Similarly, entrepreneurs hoping to fund raise may find that it is harder to do so in stealth mode. Some of the most proven methods to gain access to capital, such as joining an accelerator or incubator, or even launching a product via crowdfunding, are not an option when operating as a stealth startup. Likewise, because that business is the world’s best kept secret, randomly sharing details with strangers is frowned upon. As a result, it might be harder to attract investors thanks to the added veil of secrecy.
Slower Growth
Even though most stealth startups do not spend years in stealth mode, the time spent under wraps can represent lost revenue and ultimately, profit. Even if a business can secure clients, the potential loss of additional income that would have been earned with a wider audience cannot be fully grasped. Similarly, since fewer people know about the business, it can take longer to grow and ultimately scale the business.
Is A Stealth Startup A Good Idea?
Ultimately, most investors and business experts will agree that choosing to launch in stealth mode is not an option that most startups will need to choose. Unless a business is building a truly unique solution that requires added legal protections, is a legitimate industry disruptor or is at risk of corporate theft from a major player, it is unnecessary and counterproductive to be a stealth startup.
If none of the above applies, back away from stealth mode. Most businesses will benefit most from the freedom that a public launch offers. This includes the option to court media outlets actively, connect with audiences and the freedom to fundraise either with crowdfunding or through investors publicly.
