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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?"
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.
Javascript + Nintendo DSi = DSiCade
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The War of 1812... the good 'ol days when the federal government actually tried to save New Orleans.
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...
Trouble making decisions? Just flip for it.
.. only the failed stealth startups suck. The rest are successful!
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.
"When life gives you lemons, don't make lemonade. Make life take the lemons back!" -- Cave Johnson
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.
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.
"I'd rather be a lightning rod than a seismometer." -Ken Kesey
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.
"If we hit that bullseye, the rest of the dominos will fall like a house of cards. Checkmate." -Zapp Brannigan
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.
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
http://www.virtualvillagesquare.com/ Online Communities: The Next Generation
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
...to your newsletter. Put me down for $100,000.
Stealth Startups Don't Suck
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.
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.
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.
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.
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.
"I assumed blithely that there were no elves out there in the darkness"
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.)
"Fundamentalism" isn't about divine morality. It's about human authority.
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 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.
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.
I'm reminded of a quote:
"Don't worry about people stealing your ideas. If your ideas are any good, you'll have to ram them down people's throats."
-- Howard Aiken
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.
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.
Having worked with a couple of specifically-focused VC's (content management) before, they show a strong preference for people referred to them by mutually-known acquaintances. Rationale being that these third parties have/will do a bit of filtering before referring them on. Most have no lack of ideas sitting on their desk; they don't have a lot of time to do sanity-checking and even basic background research for the various segments the entrepreneur wants to operate in. The obvious BS can be thrown out pretty quickly (and it is indeed pretty obvious). Everything else kind of waits around, unless it has a champion pushing it, preferably one with some kind of track record with the VC.
I actually asked a few of them about whether this was a common trait or their own idiosyncracy; based on their comments, this would appear to be SOP througout their community.
So you can take your chances with cold-calling. However, your time would probably be better spent networking with entrepreneurial types, IMHO.
NDA--agree with the parent. Lots of legal and practical headaches associated with an NDA, the biggest being that the VC can't (legally, at least) sanity-check the idea with his/her brain trust under NDA. Don't bother. If you're truly paranoid, don't try to approach VC's with a track record of funding potential competitors.
I do also concur with the parent that there's lots more money available to be put in play now than in the last few years. So get out and start schmoozing, inventors!
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.
And if you tell people you're "in stealth mode", there's less likelyhood that they'll look at your idea and mention how bogus it is
I totally agree... most of the companies I've dealt w/ that are in "stealth mode" have some really lame ideas and they're run by complete morons. My new venture, on the other hand is really taking off. We're using tried and true investment tactics to diversify our portfolio of products in order to hedge ourselves against a single market's decline or unforseen technology advancement. I can't talk about all of the details but let me tell you that some of the products include nanotechnology, multicasted multimedia, tahitian noni suppliments, space elevators, and a compression scheme that has a consistant output size of 1-bit regardless of the size of the input data. It so sad, but so true... most businesses just aren't as technically or fundamentally sound as my new startup is.
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.
...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.
-- Political fascism requires a Fuhrer.
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.