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Leadership

Why Building Your Startup In "Stealth Mode" Is A Bad Idea

"No one cares about your secret business venture," says one entrepreneur. Here's how building a startup under wraps can be fatal.

Why Building Your Startup In "Stealth Mode" Is A Bad Idea
[Photo: Flickr user John Ragai]

"Stealth mode" is the period when startups build a product or company in secret, ostensibly in order to gain a competitive advantage before they launch. Developers code in an undisclosed location, and every business development conversation is preceded by a nondisclosure agreement. During stealth mode, startup founders tend to speak in vague terms about their product as if their approach is generating traction through curiosity. Most likely it isn’t.

No one cares about your secret business venture. Share it, get feedback, improve it, and then maybe someone will. Unless you're a high-profile security startup and you're building futuristic weapons or climate-change–reversal technologies, you're probably making a mistake.

Building a company in secret cripples the development of an early customer base and eliminates any opportunity for valuable feedback. It also increases your risk of failure while racking up months or years of expenses before knowing if the idea is going to flop.

The Common Myths About Stealth Mode

Let’s start by exposing some common myths about why operating in stealth mode is supposedly beneficial.

Myth No. 1: Competitors don’t know what you're creating and therefore can't steal your idea. It's true that while you're in stealth mode, larger competitors don’t know you exist. So sure, these competitors could take your idea and build something similar themselves, but often it’s easier for them to acquire your fledgling startup to add to their portfolio instead. If being acquired is your goal, then stealth mode isn’t helping you.

Myth No. 2: A good product will prevail. A good product with a mediocre brand will likely die a slow death, but a strong brand with a mediocre product can pivot and succeed—because people trust and have a relationship with the brand, not just the product. This is one of the reasons why Apple has dominated over the last 15 years. People love its brand, and any product it introduces is widely coveted. Apple devotees might cringe reading this, but while it's true that the company is known for exemplary products, the power of its brand can sustain any weak product launches. Apple's longevity doesn't hinge on any single product.

I’ve spent the last 12 years consulting with startup clients and have learned that product/market fit and brand positioning are crucial to their success. It’s painful to watch a startup flounder when it hasn't figured that out. In more than one case, I've seen thousands of potential customers arrive at landing pages and convert at abysmal rates, all because the startup's value proposition or positioning hadn't been properly vetted.

Finally, after months of A/B testing and optimizing ad campaigns, marketing messaging, landing pages, and strategy, we come to a stark realization: It’s not a marketing problem. It’s a business problem. Yet sometimes marketing agencies have an easier time looking in from the outside to diagnose what the founders themselves don't want to see.

Marc Andreessen explains it well in this post on his blog:

You can always feel when product/market fit isn't happening. The customers aren't quite getting value out of the product, word of mouth isn't spreading, usage isn't growing that fast, press reviews are kind of "blah," the sales cycle takes too long, and lots of deals never close.

To achieve product/market fit, you first need to know your market. And you can't do that if you're operating in stealth mode.

Get Uncomfortably Close To Your Audience

Startup founders should spend as much time as possible talking to, researching, reading about, and even hanging out with their potential customers before they launch their businesses.

Instead of going into stealth mode, spend the first six to 18 months gathering as much feedback from potential customers as possible. Founders and marketers alike should actively discover flaws and ways to improve a brand or product during this crucial time, before their product is available to the masses. Phone interviews, customer surveys, and good old-fashioned research can tell you a lot about the potential opportunities and pitfalls before you release your product. Stealth mode can't.

This is also the time to sniff out and eliminate confirmation bias. As Cindy Alvarez of Yammer puts it in a First Round Review article on customer behavior, you need to ask your customers, "What’s one thing that would cause you not to purchase a service like this?"

And you have to do that without manipulating the response to get the answer you want. You might hear something that hurts your ego or damages your optimism, but it’s very likely the best thing for you.

Fail Fast, Or Don’t Start At All

A recent client of ours wanted to launch a tech product in the golf industry—no more specifics than that. After two months of research on a modest budget, we recommended the client avoid the industry entirely.

We surveyed thousands of golfers at all skill levels searching for a specific customer need to build a product around. There was no clear customer need that demanded a product that wasn’t already out there and flourishing in the marketplace. Our client could've followed his dreams and built a product, spending hundreds of thousands to get to market, only to struggle and fade away.

Ultimately, we advised him that we wouldn’t invest our own time and money in a venture of this kind, but that it was his call to make. We could have launched into stealth mode and started building something, but we did our homework and talked to potential customers instead.

When In Doubt, Build Your Brand

I’ve seen enough startups fail to know that even the best marketing can't fix a product/market misfire. You can have the most intelligent and driven founders, plenty of capital, and a winning idea, and still fail to get that match right.

So why not lower the risk? Remove the veil of secrecy and talk openly about your venture. Focus on your brand first, and share it with as many people as possible before your product is ready. Building your brand through social outlets can give you a nice platform to launch your product once it is ready. By establishing a strong voice and mission, and by publishing content that helps your audience, you can gain followers quickly. When the time comes to market your product, you’ll already have an engaged and loyal fan base to connect with.

After all, would you rather have 10,000 fans to sell to when your product is ready, or zero, because you were in stealth mode the whole time leading up to your launch? Even if your initial product fails and you're forced to pivot, you'll probably be better off. In fact, that's nothing to be ashamed of—many great companies begin that way. Few that last start stealthily.

Jason Brewer is cofounder and CEO of Brolik, a digital agency in Philadelphia. As an entrepreneur, Jason is passionate about helping other business owners navigate the complicated journey of owning a business and developing marketing strategies to grow brands. Follow him on Twitter at @jaybrew.

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