What is a stealth startup?

Most companies are eager to spread the word about who they are and what they do. Publicity attracts investors, customers, and talent. A recognizable brand can help build trust and credibility. 

But some startups are choosing stealth mode — and it turns a lot of traditional wisdom on its head. In 2020, funding for stealth startups increased 140% YoY, raising $1.6B+ across 365 deals globally. 

Stealth may be trending, but not everyone is convinced that it’s a smart strategy.

What is a stealth startup?

A stealth startup is a business that is launched in some degree of secrecy. Founders and employees keep all or some of the details of the business private or away from public attention. 

For example, they won’t write a press release to announce the launch of the business or conduct any marketing. 

If there is a website or LinkedIn page, it will have vague or limited information. Some will even operate under a decoy name. This LinkedIn job post, for example, is advertised under the company name “Stealth Startup.” 

The company’s profile provides a Wikipedia-style entry for “stealth startup” in place of a website. The post offers almost no information about the business or even the industry it is in. It makes only a vague reference to the product they plan to build: “a revolutionary B2C product”.

Investors in stealth startups are acquired through private connections, and deals may not be announced. The business will likely have a small group of customers who are acquired through targeted, direct outreach like cold emails or referrals. 

Staff, customers, and investors may be subject to nondisclosure agreements and banned from talking to the press.

Once the business is more established, usually after a couple of years, the startup will come out of stealth mode and invest in marketing and media relations like other companies. 

Stealth mode can also be applied to specific aspects of the business: A new product might be kept secret, even from other employees, while it is developed. Or a funding round could go unannounced; data from the UK shows that 68% of equity deals go unannounced. 

Why would a startup be stealth?

Keeping a business undercover might seem counterintuitive, but there are lots of potential benefits to this strategy. 

Protecting your ideas

One of the core purposes of stealth mode is to give founders time to nurture and build a business without giving competitors a chance to react. 

If your business is based around a unique idea, competitors who are already established could potentially steal that selling point and make a success of it before you can. 

For example, if you came up with VR entertainment for airplane passengers, big companies in this space, like Meta or Sony, might build a copycat product and partner with airlines before you can find your feet. 

Entrepreneur and angel investor Vincent Serpico says that, for most companies, the fear that their idea could be stolen is unwarranted. “Startups take years of backbreaking work and tons of funds. Nobody’s gonna steal your idea because they just don’t have the time, effort, energy, or wherewithal to do it.” 

However, he adds, there are rare cases where your idea is something that another company could easily implement with little effort. In those cases, starting stealth is valuable.

Building a loyal customer base 

Acquiring customers in stealth mode means it will be difficult for competitors to poach them when you finally come out of hiding, especially if you’ve nurtured those customer relationships. 

Arlene Battishill is the co-founder of GoGo Gear, a company that sells fashionable, protective clothing for motorcycle and scooter riders. They launched in 2008 and spent six months in stealth mode. Battishill started building a customer base by engaging with female motorcycle enthusiasts on Twitter and Facebook groups. 

Those women became customers and stayed loyal when GoGo Gear emerged from stealth mode, even when competitors offered something similar. “Believe it or not, there are people who were first on our email list that are still our customers now 14 years later,” Battishill says. 

Testing your product

You can use a small customer base to experiment with different ideas and work out kinks before your product is publicly available. This strategy is a lot like beta testing.

“You [can] get feedback before you’ve committed too much money to your product,” Battishill says. “It gives you time to pivot if you’ve made a miscalculation about the demand or a mistake with the actual product.”

Securing investment

If you launch your business publicly with funding already secured, you may be in a good position to take on the competition.

On the flipside, if there are bigger players planning to enter your proposed market, a heralded launch could push them to announce their plans early, potentially chilling your investment prospects.

It’s not uncommon to raise large funding rounds while in stealth mode. Ultima Genomics, for example, came out of stealth mode in May 2022 with $600m in investment after spending five years secretly developing an improved method for gene sequencing. 

Protecting intellectual property (IP)

If your business is based around an invention, medicine, algorithm, software, or any kind of new technology, you need to legally protect it with a patent, copyright, or trademark. 

Without this legal protection, your IP can be copied. Operating in stealth mode can protect your IP while you organize legal cover. That’s probably why health care and software are the stealthiest industries.

Examples of stealth startups with IP at their core include:

• Treeline Biosciences — an oncology biotech company that has been in stealth mode since it was founded in 2021; it has raised ~$473m in funding. 
• Dope Security — a cybersecurity company catering to corporate workforces of all sizes.
• Proprio — a tech startup using AI and AR to help surgeons plan and perfect surgical procedures. 

Staying focused 

Building a business can be harder when there are eyes on you. Starting stealth gives you room to focus on essentials, like developing the product and building your core team, without the distraction and pressure of media attention and marketing campaigns. 

Creating hype

Stealth mode can generate mystery and hype around a business, especially if high-profile investors or founders are involved, and create room for a “big reveal” when the business comes out of the shadows. 

Shape Security was the subject of many new stories while in stealth mode, and the executives even gave interviews without revealing anything about the business. All this garnered the company more buzz than it might otherwise have generated. 

The cons of stealth mode

Operating in stealth mode presents a range of challenges, and some investors and founders are strongly against it. If you’re thinking of launching stealthily, there are some downsides to consider. 

It takes longer to figure out product-market fit 

The best way to determine product-market fit is to get feedback from your customers. That might involve customer surveys, keeping track of complaints, or talking to your sales team about lost sales. It might also include listening to feedback and commentary from the broader community. 

If you are operating in stealth mode, you will get less feedback and it could take you longer to adjust and improve your offering. 

You’ll lose out on community support 

Serpico says that the biggest disadvantage of stealth mode is a “severe lack of feedback, help, and input from others.” 

He adds, “I have found that the best success comes when you shout your idea from the mountain top — people come out of the woodwork to help in so many ways.”

It limits your fundraising options

If you’re in stealth mode, you’ll miss out on potential funding opportunities that could arise from being in the public eye. Fundraising strategies like crowdfunding and joining an accelerator are off the table.

Funding can also happen serendipitously when you talk about your business. “I’ve heard stories over and over again about people just having conversations on the street with folks and not realizing they’re angel investors and getting investments,” says Serpico. 

It might be harder to attract talent 

Job seekers might be put off by applying and interviewing with only a vague idea of what the business is about. Without an established brand, it’s more difficult to prove your credibility to potential hires. 

Stealth mode won’t necessarily protect you 

If a major competitor really wants to find out what you’re up to, they might figure out a way to do so. If they’re powerful and well-established, they may still steal your idea and crush your business when you come out of stealth, no matter how much time you’ve taken to build a strong foundation.

A more positive way of thinking about this is, if your business idea is strong and well-executed, you might not need the protection of stealth mode. When you launch your new idea, you’ll have the first-mover advantage by being first in the field. 

You’ll delay brand-building

If you can only engage in limited publicity, you won’t be able to start building a brand until you emerge from stealth mode, meaning it might take longer to develop a reputation and expand your reach.

People might think you’re pretentious

There are plenty of commentators who are not big fans of stealth mode. Some see it as an unnecessary PR stunt, while others perceive stealth founders as being under the illusion that their idea is more special or exciting than it really is.

Should I launch my business in stealth mode? 

If you don’t have a strong reason to start stealth, then chances are you don’t need to. Being open gives you access to useful advice, talent, and investment, and it generally requires less effort than keeping things under wraps. 

A few specific types of businesses will benefit from supersecret stealthiness. If your idea is highly disruptive, quick and easy for a competitor to implement, or a groundbreaking technology that is still in development, stealth might be for you. 

But bear in mind that other companies are unlikely to drop everything overnight and dedicate time and money to your idea.

Finally, you could opt for a semi-stealth approach, or what Serpico calls “tarp over the car mode.” You don’t have to send out press releases or reveal the product in full, but you can start reaching out to helpful connections and gather feedback while you’re tinkering behind the scenes.  

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