A stealth startup is a type of
startup company
A startup or start-up is a company or project undertaken by an entrepreneur to seek, develop, and validate a scalable business model. While entrepreneurship refers to all new businesses, including self-employment and businesses that never intend ...
that operates in stealth and silence to outsiders, avoiding public attention. This may be done to hide information from competitors (which may include
non-disclosure agreements
A non-disclosure agreement (NDA) is a legal contract or part of a contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish ...
), or as part of a
marketing strategy
Marketing strategy allows organizations to focus limited resources on best opportunities to increase sales and achieve a competitive advantage in the market.
Strategic marketing emerged in the 1970s/80s as a distinct field of study, further build ...
to manage public image and generate expectations and interest from potential clients. A Stealth Startup normally only operates in
stealth mode
In business, stealth mode is a company's temporary state of secretiveness, usually undertaken to avoid alerting competitors to a pending product launch or another business initiative.
When an entire company is in stealth mode it may attempt to ...
for its first few years.
The phenomenon is well known in the
venture capital
Venture capital (often abbreviated as VC) is a form of private equity financing that is provided by venture capital firms or funds to start-up company, startups, early-stage, and emerging companies that have been deemed to have high growth poten ...
(VC) community. Since investors may have to disclose funding a stealth startup, their names are made public, but often only a general summary description is known about the company.
Advantages
* Protect ideas and intellectual property:
If a startup is working on a revolutionary product that would be easy to replicate, such as software ideas or relatively inexpensive new technology, operating as a stealth startup and not publicizing product details decreases the risk of the product being copied by other companies, as does having their employees execute
NDAs. While this risk can be mitigated by patents, applying for a patent is a lengthy and expensive process, which is often not a viable option for a startup.
* Less pressure from the public: with only a close group of people privy to product details, employees can focus on building the prototype.
Disadvantages
*Harder to build trust with potential investors and advisors: Without any news articles or public demos the startup will have to put more effort into convincing potential investors and advisors that the idea is being developed seriously already.
*Finding new employees is more difficult: Without any track record in media and no ability to explain the candidates what they will be working on exactly, finding people willing to work for the company can be a challenge.
*Harder to do public testing: Getting the product tested will have to be done under a different name, or with a small group having signed a non-disclosure agreement.
References
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{{Private equity and venture capital
Entrepreneurship