Stealth hides early missteps, enabling a startup to refine its product without embarrassment. That's Ozzie's main argument, and it's hard to quarrel with his track record. Back in the 1980s, he built Lotus Notes as a stealth project, coming up with basic software architecture that has proven sturdy enough to accommodate countless upgrades without requiring a top-to-bottom rebuild. If public attention arrives too early, Ozzie contends, it's hard to make midcourse corrections without being seen as a company in trouble. That loss of flexibility can cause a company to press on with what prove to be second-best business decisions.
But spending too much time in stealth can drain away all sense of urgency -- and leave a company's leaders out of step with the market. A poignant recent example involves Interval Research, the Silicon Valley think tank funded by Microsoft cofounder Paul Allen. Interval did most of its work in secret and ultimately had trouble commercializing its ideas. Earlier this year, Allen pulled the plug on the operation.
One of the "debutantes" at the PC Forum conference this spring, FireDrop Inc., ran into a lesser version of this problem. Its founders spent months in stealth, developing Zaplet, an advanced form of email that's designed to help groups schedule events. Their demonstrations emphasized all of the things that they wanted Zaplet to do. At first, audiences were impressed, but they grew uneasy when they learned that Zaplet hadn't been widely tested in the rough-and-tumble real world -- where, it turns out, many email programs still don't support HTML, the language used to display many of Zaplet's most interesting features.
When a startup is battling an industry giant, secrecy may increase its odds of survival. That's the argument made by Transmeta Corp., which announced last January -- after five years in stealth mode -- that it had developed a new microprocessor that would increase the battery life of laptops and wireless devices. "We're up against the mother of all competitors, Intel," says Frank Priscaro, 49, director of brand development at Transmeta. If Transmeta had been too explicit about its plans a year or two ago, he says, Intel might have devoted more resources to developing a competing chip, or at the very least might have staged a PR war by announcing plans that appeared to undercut Transmeta.
Such thinking is appropriate in areas like chip design, where lead times are long, sunk costs are huge, and the sheer size of incumbents is a daunting competitive advantage. But for Internet-driven businesses, none of those conditions apply. Getting to market is comparatively quick and easy, and agile startups can hold their own just fine against bigger (and slower) incumbents. On the Web, too much stealth can mean obscurity.
When a stealth company is finally ready to talk, it can make for a dazzling debut. It's fun to dream, and every founder of a stealth startup envisions the day when the curtain will come up. If everything goes right, there will be a flurry of press releases, standing-room-only news conferences, and visits from CNN camera crews. "You really only get one or two shots at telling your story," says Thomas Blaisdell, 38, a venture capitalist at DCM (Doll Capital Management), in Menlo Park, California. "You want to be able to do it right."
The best such launches can create an unstoppable momentum for a new company. But these days, despite the ardent efforts of thousands of high-tech PR specialists, it's a rare "stealth launch" that comes anywhere near achieving that goal. Too many companies are trying the same gambit. For jaded news reporters, being told that a new company is about to pull away the veil of secrecy is about as exciting as being told that it's offering stock options or that its offices are filled with cheap furniture from Kmart. That's just part of the background ambiance now.
Cynics can snicker all they want, but even Atomic Tangerine got some useful mileage from its campy version of stealth. It spent about $10,000 on radio ads and got 100 résumés as a result. Two of those résumés translated into instant hires, and four or five more could lead to job offers, according to Diane Kegley, 32, VP and chief marketing officer at Atomic Tangerine. "That's a great return on our spending," she says.
The catch, of course, is that stealth alone won't build a great company. Ask Geoff Yang, 40, a venture capitalist at Redpoint Ventures, in Menlo Park. His firm has worked with more than its share of stealth startups, but Yang is one of the first to acknowledge that Silicon Valley's current fixation on secrecy is overdone. Coming up with a brilliant idea is only a small part of what it takes to build a successful company, he observes. The best companies execute superbly against their business plans -- doing thousands of small things well in ways that can't easily be copied, even if competitors take a peek.
"I get a little worried if an entrepreneur says his idea is so brilliant that he can't tell anyone about it," Yang says. "It makes me wonder if there's much else there."
George Anders (ganders@fastcompany.com), a Fast Company senior editor, is based in San Francisco. Your secrets are safe with him.
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