When you hear the word "Startups," what comes to mind? Most likely, new companies with shiny new ideas for products or services and making the front pages of tech news. Actively and publicly seeking capital from different sources - loans, crowdfunding, and venture capitalists (VCs).
But did you know that another class of startups, called "Stealth Startups," exists? We are not accustomed to the term or often do not hear about them because activities associated with stealth startups are secret or private. This article explains what it's all about, whether you're looking to start a stealth startup yourself or you're an investor trying to find one. Read further.
Here is the definition of a "stealth startup," which you might be able to guess from its name:
A stealth startup is a new company that operates in stealth mode for various reasons.
Such reasons could be to hide new technologies or ideas to avoid theft or duplication, to avoid distractions from the public or competitors, or to show up to the public scene in a grand flashy style.
For a stealth startup, only limited information about their company, business, and operations is publicly available or disclosed. A stealth startup may be in total stealth mode, an alternative to in-company stealth mode.
In total stealth mode, the startup operates in absolute secrecy (even without a public profile or website) until launch.
While in the in-company stealth mode, an existing business develops a new idea or product in secret. In some cases, some might even use alternative or code names for such products.
Why should you be concerned with stealth startups? Well, there is the idea that something done in secret must be very important. So a stealth startup is an interesting topic for investors and VCs, because they could discover a gem or treasure if they can identify and invest in stealth startups.
However, finding these stealth startups is difficult and thus requires some form of investigation.
Imagine a secret agent or a ninja lurking in the shadows, keeping us on our toes until that big reveal.
Put this way, a stealth startup might sound great. What could be so important that they had to hide it? While there are benefits to privacy, there are also downsides. In this section, we will talk about just those.
Being a stealth startup has its benefits. The following are some reasons why a new company may want to do things in stealth mode.
The main advantage of operating in stealth mode is usually to protect intellectual property. This strategy is often employed by high-tech startups in areas like pharmaceuticals, heavy industrial, or cutting-edge industries. As a stealth startup, you can ensure the protection of your ideas or products, especially those that could be easily stolen and implemented once exposed. While maintaining secrecy is fundamental for a stealth startup, it is equally important to have a strategy in place to enforce intellectual property rights, ensuring that you're prepared to defend your business's innovations when the time comes.
Another advantage of going stealth mode is that a stealth startup can focus on building its product(s) while avoiding unnecessary distractions from clients and the media. Such distractions could lead to the over-engineering of a product due to pressure from clients, delivery of an incomplete product as a result of market pressure, or in some cases, dismissal of a quality idea by clients. Going stealth mode shields you from this unnecessary stress.
A third advantage of going stealth mode is that you do not have to worry about branding or public relations which in some cases may negatively affect your image. Imagine the negative press associated with the launching of a buggy or underdeveloped project. With stealth mode, your team can focus on strategies and skills to develop your product. In the end, you will only have to launch once your product is fully developed and ready for the market.
Going stealth mode is not without its problems. Some of the challenges a stealth startup may face are highlighted below.
Without connecting or interacting with potential users or clients, some stealth startups may end up building a product that nobody wants. This translates to a waste of time, energy and resources poured into the project. But with adequate testing and feedback, startups are usually able to adjust their products or features to find the right market fit. Therefore, stealth mode is a crucial drawback for people deciding whether to go for a stealth startup or not.
Another big hindrance to stealth startups is the difficulty in finding or attracting investors and venture capitalists. Since most activities associated with stealth are done in secrecy, it is very difficult to find them or even determine their reliability. This might be problematic for your startup when trying to convince investors.
Usually, startups engage in marketing activities and launch campaigns before the day of the eventual launch. These activities tend to build public anticipation and traction before product launch. However, a stealth startup will lack traction before launch. This is another disadvantage of being in stealth mode.
As a result, stealth startups will require more effort and resources from marketing and public relation teams compared to regular startups.
One way to find stealth startups is to track the movements of employees. Through the discovery of the movements of talents, for example, when a person of caliber such as a distinguished university, entrepreneur community or clubs, ex-engineer at FAANG change jobs or leave a company, you can monitor whether they are working on a new project or for a stealth startup.
Another way to find stealth startups is to monitor public funding activities. For example, any company that has gotten funding, whether stealth or not, needs to file SEC filings, which are made publicly available. These resources are good indicators of discovering a stealth startup. You can identify companies that have gotten funding and subsequently dig for more info about them.
Technology events, for example TechCrunch Disrupt are often packed with motivated and ambitious founders, investors, and tech builders. This is also a great opportunity to find stealth startups. A company, even a stealth startup, requires help with various services such as financial services, legal services, and so on. Connecting and interacting with people and service providers (lawyers, bankers, advisors, and so on) at such events might lead you to connect to stealth startups later.
Stealth startups can present lots of opportunities, yet could be a double-edged sword if not properly managed. If you are a prospective founder seeking like-minded entrepreneurs, or an investor searching for a gem of a startup to invest in, it is unequivocal to say that it is tough to track down these startups.
At Enrich Layer, we have rich data that allows you to discover and connect with a gem of a stealth startup. With our Person Profile Endpoint, you can track the movements of the entreprenuerial talents and discover when they set up a company. With our Employee Listing Endpoint, you can follow current FAANG/MAMAA employees and their movements in the job market.
To get started with the data and API tools to help you find stealth startups, reach out to us right now.
