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?"

Comments

I somewhat agree with him

[AKAImBatman]

While I agree with him in general, one thing you need to be aware of is: Be careful that advertising before your product is ready doesn't tarnish your company's reputation. While such a thing can be turned around later, it can easily kill your company early on.

One other interesting thing he did say, though:

My rule of thumb is that it should take no more than 3 months to go from conception to launch of a new web service. And that's being generous. I'm speaking from experience here. I developed the first version of ONElist over a period of 3 months, and that was while working a full-time job. I developed the first version of Bloglines in 3 months. By myself. It can be done. And I suck at it! Just ask all the engineers who have had to deal with my code.

This somewhat ignores the amount of business development that has to go on behind the scenes. It takes time to get funding for one, and much more time to build a network of providers. In fact, building that network can still be going on years after the service has launched! You may not even be able to launch the service if you don't manage to find an existing provider base that's willing to go with your idea. Most of them will want to sit on the fence and see how it goes first.

Of course, this strengthens his original point in that you can't gain a provider base until you get the word out to your customer base. :-)

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. ;-)

What about other kinds of software startups?

You do need a product before you can release 1.0. Also, you need to have an advertising campaign in place with a one-two punch. First, release the product with much fanfare. This will generate interest and some sales. Then follow up with an army of salepeople and catchy advertising to prevent those initial sales from waning.

What about hardware startups?

Surprisingly similar to software products, only it can be much harder to release a patch. In fact, if the hardware fails to live up, it may be the death of your company. i.e. You may not be able to do another manufacturing run until you generate sufficient sales of the initial run.

Re:I somewhat agree with him

[kfg]

. . .the big name brands were painfully slow to deal with. . .

Doctor, it hurts when I go like this. The big name brands are not the only place to get the big name brand products at a price you can afford to pay.

My point was that his statement of three months oversimplifies the issue.

Well of course it does, as does my own post. They're short little web articles promoting a general rule. Anyone who blindly follows general rules probably shouldn't go into business in the first place. At the first trouble, which will happen almost immediately, the business will likely fail.

That's why I posited a "close future," rather than a specific time period.

But as a general rule I'd say that if you can't get up and running in well under a year there is something seriously wrong with your idea and/or strategy.

In your case the problem was in relying on the name brand providers to supply you with their product. Think unconventionally and get their shit on your shelves while you are dealing with the providers themselves.

And while you are doing that you are already building brand recognition, good will and "mind share," the most valuable parts of your business.

Writing code is maybe only 10% of the real business. The other 90% is the hard part.

As gathering resources in AOE is only 10% of the game and the other 90% is the hard part.

KFG

They're good work if you can get it...

[aborchers]

I spent about a year working for a consulting company that was developing the presence for one of these "stealth start-ups". They were certainly not counterevidence to the thesis.

They spent millions, much of it on our programming fees, as we went through endless iterations of design-as-you-build. We tried repeated to reign them in, get them on a rigorous development process, and convince them to get a basic system live and build from there. They insisted on dotting every i and crossing every t, and rolling out from day one with ridiculous bleeding edge multimedia features that had nothing to do with their business model, before ever revealing the site. All the while we billed them T-and-M. They went broke and dark within a month of their actual debut on the Web.

It was stupid, frustrating work for a stupid, frustrating client, but the paycheck sure was nice...

Stealth?

[TheRealMindChild]

This sounds just simply... for lack of a better word... stupid. I mean, it is like "Let's have a TV show that does X Y and Z, but we can't let ANYONE know what it is about, EVEN THE VIEWERS, or they might steal our idea!!!!!!!!!!!!"

I'd have to say if your business model floats on that, you better have some arm floaties.

Meeting VCs

[winkydink]

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

Call or write them and ask for a meeting. Chances are you'll get 5-15 minutes of their time. If they're interested, you'll get more. VCs have a lot of money sitting on the sidelines right now, so they're eager to hear ideas.

Oh, if you want them to sign an NDA, forget it. Almost never happens.

Re:Meeting VCs

[winkydink]

Sorry, replied in the wrong spot.

Take a look at http://www.sequoiacap.com/ and http://www.usvp.com/ for two examples. If you can't figure out how to contact a VC from there, you have larger problems to deal with. I don't see any references on either site to "ethnics only, no whites".

Increase your chances of being bought

[strongmace]

Be open and perhaps a larger company will buy you. This could open up all sorts of opportunities now that you'll have a larger resource pool (assuming you are still included in the project of course). However, you do have to have a quality deliverable. While being open is very nice, being available for public scrutiny while your product or service is still in its formative stages may be a bit much. You have to draw the line somewhere and balance is important. While getting constructive criticism is great, opening up your project too early could lead to ridicule and hurt your future growth.

gdfhdfh

[radiumhahn]

It depend on 3 things mostly... * How much funding you have... if resources are low then sales are everything. * How totally awesome and stealable the idea is. * Who your competition is... and of course everybody says their ideas will or have been stolen from microsoft, but honestly most ideas aren't even that good. for the most part very few startups should prioritize anything above sales.

Yes. They do.

[stagmeister]

I'm working on a start-up at the moment (Virtual Village Square), and you NEED to be open with your soon-to-be customers. It will do you a lot of good, from getting feedback to building up good relationships with your customers, and it makes them feel like they're on the inside, too.

jason

yes I feel like picking holes in you logic

[essreenim]

.. only the failed stealth startups suck. The rest are successful!

You are trying to graft logic onto statistics. While I agree that the parent post is ambiguous, it should be obvious that he is commenting on the statistical liklihood of a stealth startups failure being relatively high..

Actually, I think the more cutting edge it is, the more stealth like it's startup should be..

All or nothing

[wishus]

Well, it doesn't have to be all or nothing. I didn't want to advertise my game, Warband 1066, until it had been through a few rounds of testing from my friends. They gave me valuable feedback while I honed the gameplay over a period of months. Now, while it's not finished, it is ready for a larget audience, and I have confidence that I won't chase away early adopters with a game that sucks.

So there is a gray area between keeping it hidden and telling the world.

Not necessarily

[benjamindees]

Secretive work may not be the best strategy for web design, which has ridiculous competition. It's better to get the product out there to fend off competitors. But I have a feeling it could become a major component of software development, especially for more industry-specific niche applications.

Specifically, I've been thinking about how OSS is being embraced by major IT players, and how releasing proprietary software as open source can benefit the development process. The traditional view is that OSS projects should be open from the beginning, in order to cut down on development costs.

But the reality is that most successful projects were open sourced after they were already quite functional, only to be further enhanced by "the community". After a little polish by interested users, the original developer can then go on to support and even sell the project, in competition with the released, free version and those who contribute to it. In some cases (plex86/win4lin), the original free version can even be successfully "re-closed" and removed from the market even after having been released and improved by the community.

By doing most of the original work in-house, the original developer can gain a step-up on any later developers who contribute. This creates a barrier of entry for anyone who wants to support projects like OpenOffice.org and Mozilla, which sprang forth almost fully-formed from the heads of their creators.

Of course, keeping a tight grip on the evolution of development of the original project is necessary for this model to work to the original developer's advantage. This is why we see friction in projects such as Fedora. It's in RedHat's best interests to maintain control of the original project. But it's also in their best interest to have a group of outside developers making small contributions without paying them. Keeping control of the free version also allows you to kill or cripple the project when it comes time to move to a more proprietary model.

Re:Protecting Your Intellectual Property

[Anonymous Coward]

This is very true.

But sadly, the Patent Reform Act of 2005 is attempting to undermine the beneficial aspects of patents so that all we have left are the undesirable aspects we've complained about for so long.

If passed, the reform will put a cap of $1,000,000 or $5,000,000 on damages. The first cap for intentional and willful breach of patents and the second cap for particularly bad cases involving intent to defraud.

Think about the impact of this. Patents will no longer be a deterrant for big companies. But for smaller companies and independent inventors, patents will continue to be a deterrant.

In fact, I don't think independent inventors will go after a company that caused them $750,000 in damages if the trial is going to cost $3,000,000 (avg cost) and the maximum the lawsuit will provide the inventor is $1,750,000. For inventors and small companies, the opportunity cost of the inventor or management team spending time on the lawsuit is often more damaging than legal fees.

In other words, patents are going from somewhat bad to horribly bad. Small companies and inventors will get royally screwed.

Depends, like everything else, on your audience

[ianscot]

This story would be analogous to saying "Small, vanity press publications suck" or "mass market paperbacks suck." For the wrong purpose or the wrong people, anything sucks.

When you're in the business of publishing something, almost everything about the way you do it depends on the audience you're trying to reach. I've been involved with several directory-style sites that we will have done "stealth" releases for, by the rough definition being used in this article. The idea wasn't to broadcast to a mass audience, and we were just fine letting the first trickle of users see things without all the dots connected. We weren't measuring ourselves by a "branded release" model where we needed to appeal to a general audience; the people using this sites when they were fully up and running would be accessing them through a controlled set of sources.

(And your high class steak joint probably doesn't measure itself by Subway's standards, either, except in very general terms. Doesn't take out billboards to advertise, doesn't open in the same way at all.)

Re:Stating the obvious:

[zuzulo]

Basically it seems to me that there is a very simple dividing line between companies that *should* stay below the radar for as long as possible and those that should attract as much attention as possible.

If you have real, defensible intellectual property in an emerging market, stealth mode is, in my experience, a really good idea. You need time to figure out what follow on patents are needed - solving some of the problems that always arise when developing innovative technology often generate *more* innovative technology that also needs to be patented. In addition, quite frankly if you are *actually building* something innovative, most likely the big players are at least 24-36 months behind you. And they wont start catching up (and they will, and they can afford better lawyers than you can) until they find out what you are doing when you go public. So the time you spend below the radar is invaluable.

On the other hand, if you are building product in an existing market, staying below the radar is the last thing you want. In this case, you want as high a profile as possible well before you are even ready to release product.

As always, there are no real hard and fast rules. Sometimes you want to be below the radar, sometimes you want to be as visible as possible, and sometimes you just want to be hidden in plain sight in the middle of the pack. Common sense just isnt that common, i suppose. ;-)

Feedback is great!

[3cents]

I agree with the article, I have posted my senior year project here before and it's great to get feedback. CmdrTaco wrote me and told me to keep hacking at it. As you can probably tell I haven't done as much hacking as I should, I've been busy with a VC startup. It was still great to get some feedback, especially from the founder of slashdot! I will probably do something similar when I have something to show for my new company.

Slashdot is an excellent group of people to get some feedback from because they are generally more willing to put up with bugs and poor layout to try out some new tech. They are also more likely to give their brutally honest opinion, as I'm sure your all well aware of.

Re:Ah, the Transmeta Syndrome

[Anonymous Coward]

I think the "get them hooked before the product comes out" approach works pretty well. Mozilla did this with Firefox to get the hard-core users to use it in real-world before the big 1.0 launch. Most of the kinks and such were worked out. And now look how successful it has been.

Re:I was going to write "FIRST!"

[djward]

I get mod points all the time, and I'm happy to "waste" them on stuff like yours, because my 5 little points are among thousands and thousands out there at any given time. You seem to place too much value on mod points - moderating is something to do efficiently and not worry about. Who cares if I "wasted" a mod point? Not like it cost me anything.

Besides, there's too many crappy comments that make +5 but should be modded redundant. Any joke involving Slashdotters not getting laid, for instance, is trite as hell, and a poor, outdated stereotype. Yet, consistently, they get +5 Funny mods. Modding down needs to be done too.

And some AC comments are insightful, so no, not everyone has them below threshold.

And if I could, I'd mod this whole thing offtopic, because I could. But I can't, so I'll feed a troll, and a poor one at that.

I don't know about startups but...(stealth good?)

[Prien715]

...there was a CEO who decided to mostly stealth a portable music player. It actually ended up working out pretty well. He did the same thing for his music store. iTunes and the iPod rock, despite naysayers constantly nagging "Why do we need yet another portable music player? How exactly is this revolutionay?"

But then again, maybe veterans are different vs startups in this respect.