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Why stealth startups need a reality check

Posted Dec 19th, 2009 at 11:15 AM and seen
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Truer words were never spoken: “stealth” startups need to get over themselves. Vivek Wadhwa of U. C. Berkeley explains why:

“Learning what a customer needs is an iterative process. You try something, get feedback. Both you and your customer learn more and you try again. You keep doing this until you have something which is so compelling that the customer will pay money to have it—that’s when you know you have a killer product. But you can’t get feedback if you’re in stealth. You only have yourself to talk to.”

My rule of thumb is that the more a company believes they must be secretive, the less they have. The extreme is when a company requests that you sign a non-disclosure agreement to learn about its “patent-pending, curve-jumping, revolutionary” product. Then, predictably, it has nothing.

What’s going on in the entrepreneur’s brain? “My idea is so astounding that if people just hear it, they will drop everything and implement it.” What’s going on in the venture capitalist’s brain? “Why did I agree to this meeting?” Bottom line: if merely hearing about your idea renders it defenseless, you don’t have defensible idea.

By the way, you should read everything Vivek has written.

More advice for startups.

Photo credit: Fotolia

 Guy Kawasaki

Comments (2)

Dec 19, 2009
kevinskih said...
This advice is like mandating five year economic plans based on the presumption that all companies follow one mold.
Dec 20, 2009
NalandaU said...
I agree with Wadwa's article on the whole, but maybe there is a middle ground between excessive stealth and extremely open? There are some ideas that could benefit by PR that could come as a result of a well-thought communication strategy particularly if the product delivers on the expectations? I could think of iPhone - though most startups don't produce such a wow.

Another thing I believe propels some startups to go stealth is, a lot of people don't change their first impressions and if the first impression is crappy they might not be willing to try it again. How many of us tried Cuil.com after the first day? Thus, some startups wait for the product to mature a while before the reviewers could sharpen their pencils. In theory this should work as long as they find a balance.

The third thing is the network effects. Some startups might want to capitalize on the initial wow to get a headstart and given the network effects their competitors will find it hard to catch even when they deliver superior engineering.

I'm not saying all startups should go stealth, but I could imagine a very small subset of startups that might benefit from stealth.

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