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Do Stealth Startups Suck?
glinden writes "In 'Stealth Startups Suck,' Bloglines CEO Mark Fletcher argues that 'stealth mode for a web start-up is the kiss of death.' He says that moving quickly and getting feedback from early users is much more important than protecting the core idea or trying to launch a perfect product. Is there any good reason for a web startup to not be open about what it is doing? What about other kinds of software startups? What about hardware startups?"
.. only the failed stealth startups suck. The rest are successful!
A stealth startup is a risk. When it is done smartly, the cash is bigger, when it is done badly, the failure is bigger. If you get more feedback early on, you can be more sure in the product, but on the other hand you face risk from the competition.
Nothing new here, it's been like this for hundreds of years.
It takes a man to suffer ignorance and smile
Be yourself no matter what they say
Dear Mr. Gates,
I have just released a new product to surf the "World Wide Web". I call it "Netscape".
I think something as important as this should not be kept under wraps. I would appreciate any feedback you may have!
Yours,
Marc Andressen
Toronto-area transit rider? Rate your ride.
Is there any good reason for a web startup to not be open about what it is doing? What about other kinds of software startups? What about hardware startups?
One giant reason for all of these is protecting your Intellectual Property. Assuming you're a small startup, you want to make sure your IP is protected against the big boys with loads of cash. Otherwise, M$ or anyone else with billions on hand can go "hm, look at that idea. Jones! You now have a $1.2 million budget. Makes something like this, market the hell out of it, and let's go".
"He uses statistics as a drunken man uses lampposts...for support rather than illumination." - Andrew Lang
>Be open and perhaps a larger company will buy you.
Good for the investors and execs, bad for everyone else who would rather have a job than a severence package.
-fb Everything not expressly forbidden is now mandatory.
2) Wait for someone else to actually make it or something vaguely like it work.
3) [have your lawers knock on their door] Profit!
This issue is a bit more complicated than you think.
Sxip operated in stealth mode for about two years while it was ramping up. All discussion of merit aside, sometimes it takes that long to get the ideas and the team solid. Identity management is a good example of the old saying, "Things of quality have no fear of time."
Parity: What to do when the weekend comes.
Anything you are working on, 1000 other people have thought of but didn't FINISH. Being secretive gets you nowhere, doing stuff does.
Anything you design will not be what users wants until you show them your prototype and then ASK THEM what they really want. You are a geek, not a user you cannot possibly comprehend what they want, so stop trying.
And most important, a stealth startup can't get you laid.
Stealth = bad.
- Adam L. Beberg - The Cosm Project - http://www.mithral.com/
Having been in this situation before, I would never join another so-called "stealth mode" startup. Why? Here's a few lessons I've learned, most of them at one startup:
1) "Stealth mode" = "Our product is a piece of crap and we want to make it look like the next big thing".
2) Customers? It's the "build it and the customers will come" view of the world. Sooner or later, you need to sell your product to the masses.
3) You're typically not given information about what they're trying to do, even after signing an NDA. If you can't tell me what my job entails, how am I supposed to make an informed career decision to join your company?
4) They have lots of money, but no ability to execute a business plan.
5) After finding out that their product is a piece of crap and won't sell (see #1 and #2), they decide to change the product entirely. Translation: rewrite from scratch.
6) After step 5, perform mass layoffs because the rewrite is also a total failure.
What about the Segway? They made a big publicity stunt out of being secrative. In some cases, how much information, and the timing of the information that you reveal about a new product is important for marketing purposes.
But yet... (wait for it)... They suck. Next example?
Hold on, you're discussing the theoretical merits of different ways to start a business? This is pointless. The capitalist system has a very simple, very clear method of determining worthiness. If your plan sucks, you go out of business.
How does one connect with a VC or angel investment firm?
Contacts. The Real Money (tm) comes from knowing people who know people, who can get your pitch into the right hands. I have relatives who do this (both as angels and as VC firms), and it's all from who you know. There're very few, if any, 'cold call' plays that end up with money from their VC firm.
Also, it helps to be doing something in China.
-EvilMagnus
On another topic, this talk of investors has me curious. How does one connect with a VC or angel investment firm? Most of the more public ones don't seem to want to do business with you unless you're something other than a caucasian male. It seems that it can pay off to be considered ethnic. ;-)
There are many different networking events where people can get in touch with VCs. VCs aren't trying to hide themselves, they're always looking for good, developed, non-crackpot ideas as investment fodder.
If a person's ethnic status was a business asset, (for example, if you're a women-owned, minority-owned business and that gives you preferential treatment within your desired market, for example government contracting) then the VC might be interested in ethnic considerations, but for the most part they don't care. Being female or being a minority isn't inherently going to help you make more money.
On the issue of "stealth mode" companies, I'd generally agree it's best not to have the company be in stealth mode. In general, people overestimate the novelty of their ideas, and the desire of their competition to embark upon the huge effort that's needed to take a simple idea and turn it into something that actually makes money.
For example, if you come up with an idea for a particular type of software that hasn't been written yet, I can almost guarantee someone else has thought of writing it before, they just either haven't had the resources, or haven't had the desire or right moment to embark on that project. If you tell the world about your project, that doesn't suddenly mean that Microsoft is going to get interested in your market segment enough to bury you. Now, if you start to actually make a lot of money, it's a different story with competition...
-- Truth goes out the door when rumor comes innuendo. -- Groucho Marx
Could you please post the name of your company, so I can never, ever use your services?
Does it bother you that you're a parasite?
I think his point was that good consulting advise can not make up for bad management.
The reasons startups fail, BAD MANAGEMENT
Your post hurt my brain to read.
I would add that sometimes you want to keep quiet until your idea/plan/design/whatever is more concrete and refined.
If you let people take a peak at what you plan on doing and it looks like crap, then they're going to be less interested by the time you get working.
You also want to avoid over-hyping, which can lead to disappointment once you finally release.
So my advice would be:
1. Keep quiet until you have something of high enough quality that people would pay real money for it.
2. Don't say how great your product will be unless you know for sure it will be that awesome when you finally put it on the market.
3. Don't start hyping your product when a deadline isn't even in sight. When you finally do get out there, people will be so annoyed with your out-dated hype that they won't care about you anymore.
What?
You're kidding right. From the parent post it sounds like it went something like this:
Consultant: Your business idea is stupid.
Customer: We are brighter than you, take our money and do what we say.
Repeat.
At what point does the consultant not become a parasite? He indicated they told the customer it was a dumb idea, multiple times.
Eventually you just have to except the fact that your customer is stupid and you might as well take the money as compared to someone else taking it.
Release early, release often.
This process is also known as "beta".
Seriously, any startup needs to have a userbase (and the easiest way to get a userbase is to get them hooked BEFORE your main product comes out). Indeed, there were many good computers developed in the 80s and 90s. Most failed, because nobody had written anything for them and no user had anything that would work with them.
If those companies had circulated enough information to get software written prior to release, and had enough pre-release demand from users to keep things moving, it would have been easy. They preferred to keep things secret, their products died as a result.
Product publicity is like watering a plant. Water with toxins will kill, as will overwatering, as will not watering at all. The right amount of information, in the right-sized doses, would likely produce something with a better chance of survival.
It's a small world and it smells funny; I'd buy another if it wasn't for the money; Take back what I paid (SoM)
This guy has coded one little program that he runs on internet ("web service" as he calls it) and then he considers himself expert of everything and generalizes the work it took him to code that application to every program that has html interface. I would really like him to code for example a multilanguage e-commerce platform for real world use that handles tens of thousand simultaneous customers in 3 months and without "lot of money" and then write another article about the subject.
Our company has been programming a business "web service" for a global customer for about 1,5 years now and it definitely was not even in a prototype stage in 3 months, few real world projects that have real customer are. AND we are profitable, still in slight stealth mode and have no VC money.
My quality social news site.com.
I speak from experience that I would *love* to get my product out there. I wrote a custom messaging product from scratch that I have wanted to "open source" for about a year now. The problem? Resources. It seems to me that I shouldn't just throw code out there. It needs to be presented and packaged in a way that's more suitable for an end developer (as distinct from end user). Then, it's not just getting it out there, but with some expectation that it could be supported and managed as an open project.
You know, you could start by just releasing a source of the tarball and including a note that it is a work in progress. Maybe someone will find it interesting and help.
LedgerSMB: Open source Accounting/ERP
I've seen numerous smart people with smart ideas go absolutely nowhere because they are paralized by fear of having their idea stolen. I tell them, don't worry, nobody is going to steal your idea. You probably couldn't cram it down their throats if you tried.
Its not until you are making big money that anybody will take notice. No matter how good your idea is.
Even great ideas need marketing, and marketing is the opposite of secret keeping.
Besides, your idea is not new. You think it is, but a little checking will show that its been kicked around since the 50's. Just nobody has gotten it together enough to sell it.
An exerpt:t up.html
http://blog.softtechvc.com/2005/06/stealth_star
I fully agree that involving users as early as possible in the development process is an absolute must, but doing it too early can also be "the kiss of death". There are so many applications, services, cool web sites out there - crying for our eyeballs and attention - that launching something in front of users that is half baked, limited or too unstable might turn them off for a while, or for good. And will certainly not generate the positive buzz that is required for viral marketing to work.
The second argument for laying low is that your ideas might not be unique, but your overall product approach, and implementation, might be - for a period of time. Since very early stage startups generally don't have a lot of development "manpower", coming out of the closet too early might make it very easy for competitors to replicate some of these (good) ideas.
There might cases where Mark's suggestion is applicable, but I don't see them as being majority. And then I would ask whether these companies are the ones that are "built to flip".
First, there is such a thing as a unique idea and it can be important to keep it quiet. You certainly need to get your patents filed first. The fact that the author suggests otherwise simply means he has never worked in a truly inovative environment.
The first mover is important argument is not a truism. In fact, the first mover usually looses. Netscape is a poster child for that.
I'd suggest trying a couple more startups. The author can then look back at this article and smile at his naïveté.
When I read it, I could have sworn is said Do Stealth Starships Suck?
I thought "How esoterically geeky, even for Slashdot."
It's my opinion that if stealth mode gives you a tactical advantage, why not?
Discuss.
Alright, many of the preceding posts have hinted at it, but I'll lay it on the line:
If you're a startup, you have limited resources across the board. Okay, okay, If you have tons of VC money, feel free to follow his advice, then explain to the VC dudes why you didn't get them the massive ROI they expected two years down the road.
The worst thing you can do in any business is advertise a product too soon. Whether you're selling the Osbourne 2 or Team Fortress 2, early hype is "the kiss of death".
A previous poster commented something to the effect of the mantra I've followed for a while: Ideas are cheap; it's execution that matters. TFA seems to think that Ideas are what matters, and that stealth is all about protecting those. While I agree that stealth is a dumb way to protect ideas, it is a great way to shield your staff from "outside distractions" while they execute that idea. And it's also a great way to control the media -- and there's no business in the world that doesn't benefit from positive media control.
I still do not understand why VC companies use all this wording to convey simple concepts. I think they believe that investors and banks need to be amazed by their wording, since that is, in most cases, all they will see for a long, long time until the actual stuff comes out from development. And they'll realize they put a lot of $$$ to get a closed-source Xaraya or Mambo look-alike. Pffft.
My quality social news site.com.
Sxip is a horrible example. They've become unsecret yet they still don't have a working product (I know what I'm talking about: if they did, my employer would probably buy it), so what did the secrecy get them? It certainly didn't protect them from competitors, because Microsoft has been trying to give away a product (Passport) in that market for years. As far as I can tell, Sxip's secrecy is mostly about making them cool, which surely does give them a financing and hiring advantage...if only that let them produce something.
Our new service http://www.sportsvite.com/ is intended to help people organize and play sports. We had a whole slew of a priori ideas regarding the features people would want for this type of service... BUT, after getting great feedback from our initial users, we were able to prioritize our requirements and fine-tune our plans for following releases.
Bottom line -- for these types of web services, it makes all the sense in the world to get it out there fast and essentially evolve the service alongside the users.
First, they wouldn't tell me what they were up to in the interview (red flag #1) then of course it turned out the idea was lame, then they were funded through VC only with no revenue. Then it was the classic catch 22 of a stupid dotcom. They had to convince a bunch of online merchants to adopt their solution so that consumers would use their portal which required them to subscribe a bunch of merchants. Needless to say they are long dead and buried. Bad idea (so bad they were embarrassed to openly talk about it), bad execution (lots of so called solution architects hired who didn't contribute very much) and a terrible marketing/launch plan.
Never again will I join a company that will not tell me what the hell they are trying to build.
Those were tough times however, so I'm glad they tied me over until 2004 when the market rebounded somewhat.
Your pizza just the way you ought to have it.
I couldn't agree with this more. We did a startup in 2001 and kept a web presence up and running the whole time. The primary things we agreed would always be available:
Based on this web presence, we were contacted several times with various offers, ultimately selling the technology to Sendmail, Inc. and taking full-time positions there working on the code. Now the product (Mailstream Manager) is going gangbusters under the Sendmail flag.
This is the second time we've done this kind of deal. The first time was pre-Google in 1996, so it was more of a "loud startup with good industry networking" since you couldn't STFW as effectively in those days ;). This technology is still in use today in products from Tumbleweed Communications.
Getting back to this "Do Stealth Startups Suck?" theme -- our personal perspective is that if it's so cool that you have to keep it a secret, then it isn't very cool at all. If you can't maintain an edge even if the other guy knows exactly what you're doing, then you don't have an edge. We call this the "True Lies" approach -- at the end of True Lies, Schwarzenegger explains exactly his plan for escaping from the guy who's gonna torture him, and despite the fact that the guy knows the exact plan, Schwarzenegger is able to execute it and escape.