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Do Stealth Startups Suck?
Posted by
timothy
on Mon Jun 20, 2005 01:48 PM
from the so-secret-we-ourselves-do-not-know dept.
from the so-secret-we-ourselves-do-not-know dept.
glinden writes "In 'Stealth Startups Suck,' Bloglines CEO Mark Fletcher argues that 'stealth mode for a web start-up is the kiss of death.' He says that moving quickly and getting feedback from early users is much more important than protecting the core idea or trying to launch a perfect product. Is there any good reason for a web startup to not be open about what it is doing? What about other kinds of software startups? What about hardware startups?"
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I somewhat agree with him (Score:5, Interesting)
One other interesting thing he did say, though:
My rule of thumb is that it should take no more than 3 months to go from conception to launch of a new web service. And that's being generous. I'm speaking from experience here. I developed the first version of ONElist over a period of 3 months, and that was while working a full-time job. I developed the first version of Bloglines in 3 months. By myself. It can be done. And I suck at it! Just ask all the engineers who have had to deal with my code.
This somewhat ignores the amount of business development that has to go on behind the scenes. It takes time to get funding for one, and much more time to build a network of providers. In fact, building that network can still be going on years after the service has launched! You may not even be able to launch the service if you don't manage to find an existing provider base that's willing to go with your idea. Most of them will want to sit on the fence and see how it goes first.
Of course, this strengthens his original point in that you can't gain a provider base until you get the word out to your customer base.
On another topic, this talk of investors has me curious. How does one connect with a VC or angel investment firm? Most of the more public ones don't seem to want to do business with you unless you're something other than a caucasian male. It seems that it can pay off to be considered ethnic.
What about other kinds of software startups?
You do need a product before you can release 1.0. Also, you need to have an advertising campaign in place with a one-two punch. First, release the product with much fanfare. This will generate interest and some sales. Then follow up with an army of salepeople and catchy advertising to prevent those initial sales from waning.
What about hardware startups?
Surprisingly similar to software products, only it can be much harder to release a patch. In fact, if the hardware fails to live up, it may be the death of your company. i.e. You may not be able to do another manufacturing run until you generate sufficient sales of the initial run.
Re:I somewhat agree with him (Score:5, Insightful)
Contacts. The Real Money (tm) comes from knowing people who know people, who can get your pitch into the right hands. I have relatives who do this (both as angels and as VC firms), and it's all from who you know. There're very few, if any, 'cold call' plays that end up with money from their VC firm.
Also, it helps to be doing something in China.
Parent
Re:I somewhat agree with him (Score:3, Insightful)
There are many different networking events where people can get in touch with VCs. VCs aren't trying to hide themselves, they're always looking for good, developed, non-crackpot ideas as investment fodder.
If a pe
Ah, the Transmeta Syndrome (Score:3, Insightful)
Seriously, any startup needs to have a userbase (and the easiest way to get a userbase is to get them hooked BEFORE your main product comes out). Indeed, there were many good computers developed in the 80s and 90s. Most failed, because nobody had written anything for them and no user had anything that would work with them.
If those companies had circulated enough informatio
Re:Ah, the Transmeta Syndrome (Score:5, Insightful)
Having been involved in several startups with budgets ranging from hundreds of millions of dollars down to one that's self-funded, I've found that the key is in knowing when to listen to your customers versus when to tell them what to do. Most people don't believe this, but there are times when you need to tell people what they should be thinking. After all, you're hired not only for your ability to service a customer's needs but also for your expertise, and if you keep asking people all the time what they want then they start wondering whether you know what you're really doing. The message that you want to convey to any new customer is "Hey, I know what I'm doing, and I want to use that knowledge to help you with your needs."
Parent
Re:I somewhat agree with him (Score:3, Funny)
Well, I keep spending $49.95 on my pre-release, pre-advance version of Duke Nukem Forever in hopes that it'll come out sooner, so maybe advertising your product (wayyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyy y yyyyyyyy) before it's ready isn't su
Lets see how well it works for comments. (Score:5, Funny)
Your ideas intrigue me and I wish to subscribe... (Score:4, Funny)
Parent
Re:Lets see how well it works for comments. (Score:3, Funny)
They're good work if you can get it... (Score:5, Interesting)
They spent millions, much of it on our programming fees, as we went through endless iterations of design-as-you-build. We tried repeated to reign them in, get them on a rigorous development process, and convince them to get a basic system live and build from there. They insisted on dotting every i and crossing every t, and rolling out from day one with ridiculous bleeding edge multimedia features that had nothing to do with their business model, before ever revealing the site. All the while we billed them T-and-M. They went broke and dark within a month of their actual debut on the Web.
It was stupid, frustrating work for a stupid, frustrating client, but the paycheck sure was nice...
Re:They're good work if you can get it... (Score:5, Insightful)
Could you please post the name of your company, so I can never, ever use your services?
Does it bother you that you're a parasite?
I think his point was that good consulting advise can not make up for bad management.
The reasons startups fail, BAD MANAGEMENT
Parent
Re:They're good work if you can get it... (Score:5, Insightful)
Consultant: Your business idea is stupid.
Customer: We are brighter than you, take our money and do what we say.
Repeat.
At what point does the consultant not become a parasite? He indicated they told the customer it was a dumb idea, multiple times.
Eventually you just have to except the fact that your customer is stupid and you might as well take the money as compared to someone else taking it.
Parent
No .. (Score:2, Insightful)
Stealth? (Score:4, Interesting)
I'd have to say if your business model floats on that, you better have some arm floaties.
Re:Stealth? (Score:4, Insightful)
But yet... (wait for it)... They suck. Next example?
Parent
Stating the obvious: (Score:5, Insightful)
Nothing new here, it's been like this for hundreds of years.
Re:Stating the obvious: (Score:4, Interesting)
If you have real, defensible intellectual property in an emerging market, stealth mode is, in my experience, a really good idea. You need time to figure out what follow on patents are needed - solving some of the problems that always arise when developing innovative technology often generate *more* innovative technology that also needs to be patented. In addition, quite frankly if you are *actually building* something innovative, most likely the big players are at least 24-36 months behind you. And they wont start catching up (and they will, and they can afford better lawyers than you can) until they find out what you are doing when you go public. So the time you spend below the radar is invaluable.
On the other hand, if you are building product in an existing market, staying below the radar is the last thing you want. In this case, you want as high a profile as possible well before you are even ready to release product.
As always, there are no real hard and fast rules. Sometimes you want to be below the radar, sometimes you want to be as visible as possible, and sometimes you just want to be hidden in plain sight in the middle of the pack. Common sense just isnt that common, i suppose.
Parent
The non-stealthy way (Score:5, Insightful)
I have just released a new product to surf the "World Wide Web". I call it "Netscape".
I think something as important as this should not be kept under wraps. I would appreciate any feedback you may have!
Yours,
Marc Andressen
Meeting VCs (Score:5, Interesting)
Call or write them and ask for a meeting. Chances are you'll get 5-15 minutes of their time. If they're interested, you'll get more. VCs have a lot of money sitting on the sidelines right now, so they're eager to hear ideas.
Oh, if you want them to sign an NDA, forget it. Almost never happens.
Re:Meeting VCs (Score:2)
Call or write them and ask for a meeting.
Mmm... call who? That's the key issue. As I said, all the VCs and angels in the public eye are targetted toward minority groups of some sort.
Oh, if you want them to sign an NDA, forget it. Almost never happens.
Indeed. If anyone wants to get into business, the first thing they need to learn is that their idea is the least important of your concerns. It's all in the execution of the business m
Re:Meeting VCs (Score:3, Interesting)
Take a look at http://www.sequoiacap.com/ [sequoiacap.com] and http://www.usvp.com/ [usvp.com] for two examples. If you can't figure out how to contact a VC from there, you have larger problems to deal with. I don't see any references on either site to "ethnics only, no whites".
Good luck with cold calls (Score:4, Informative)
I actually asked a few of them about whether this was a common trait or their own idiosyncracy; based on their comments, this would appear to be SOP througout their community.
So you can take your chances with cold-calling. However, your time would probably be better spent networking with entrepreneurial types, IMHO.
NDA--agree with the parent. Lots of legal and practical headaches associated with an NDA, the biggest being that the VC can't (legally, at least) sanity-check the idea with his/her brain trust under NDA. Don't bother. If you're truly paranoid, don't try to approach VC's with a track record of funding potential competitors.
I do also concur with the parent that there's lots more money available to be put in play now than in the last few years. So get out and start schmoozing, inventors!
Parent
Re:Meeting VCs (Score:3, Informative)
Increase your chances of being bought (Score:5, Interesting)
Re:Increase your chances of being bought (Score:4, Insightful)
Good for the investors and execs, bad for everyone else who would rather have a job than a severence package.
Parent
gdfhdfh (Score:2, Interesting)
Re:gdfhdfh (Score:4, Insightful)
I would add that sometimes you want to keep quiet until your idea/plan/design/whatever is more concrete and refined.
If you let people take a peak at what you plan on doing and it looks like crap, then they're going to be less interested by the time you get working.
You also want to avoid over-hyping, which can lead to disappointment once you finally release.
So my advice would be:
1. Keep quiet until you have something of high enough quality that people would pay real money for it.
2. Don't say how great your product will be unless you know for sure it will be that awesome when you finally put it on the market.
3. Don't start hyping your product when a deadline isn't even in sight. When you finally do get out there, people will be so annoyed with your out-dated hype that they won't care about you anymore.
Parent
Yes. They do. (Score:2, Interesting)
jason
Protecting Your Intellectual Property (Score:4, Insightful)
One giant reason for all of these is protecting your Intellectual Property. Assuming you're a small startup, you want to make sure your IP is protected against the big boys with loads of cash. Otherwise, M$ or anyone else with billions on hand can go "hm, look at that idea. Jones! You now have a $1.2 million budget. Makes something like this, market the hell out of it, and let's go".
Don't forget the counterpoint (Score:5, Informative)
You don't have to *DO* anything (Score:3, Insightful)
2) Wait for someone else to actually make it or something vaguely like it work.
3) [have your lawers knock on their door] Profit!
All or nothing (Score:5, Interesting)
So there is a gray area between keeping it hidden and telling the world.
Depends on the service (Score:4, Insightful)
Sxip operated in stealth mode for about two years while it was ramping up. All discussion of merit aside, sometimes it takes that long to get the ideas and the team solid. Identity management is a good example of the old saying, "Things of quality have no fear of time."
Horrible Example (Score:4, Insightful)
Parent
The rules... (Score:4, Insightful)
Anything you design will not be what users wants until you show them your prototype and then ASK THEM what they really want. You are a geek, not a user you cannot possibly comprehend what they want, so stop trying.
And most important, a stealth startup can't get you laid.
Stealth = bad.
What a silly question (Score:3, Insightful)
Re:What a silly question (Score:3, Insightful)
Not necessarily (Score:4, Interesting)
Specifically, I've been thinking about how OSS is being embraced by major IT players, and how releasing proprietary software as open source can benefit the development process. The traditional view is that OSS projects should be open from the beginning, in order to cut down on development costs.
But the reality is that most successful projects were open sourced after they were already quite functional, only to be further enhanced by "the community". After a little polish by interested users, the original developer can then go on to support and even sell the project, in competition with the released, free version and those who contribute to it. In some cases (plex86/win4lin), the original free version can even be successfully "re-closed" and removed from the market even after having been released and improved by the community.
By doing most of the original work in-house, the original developer can gain a step-up on any later developers who contribute. This creates a barrier of entry for anyone who wants to support projects like OpenOffice.org and Mozilla, which sprang forth almost fully-formed from the heads of their creators.
Of course, keeping a tight grip on the evolution of development of the original project is necessary for this model to work to the original developer's advantage. This is why we see friction in projects such as Fedora. It's in RedHat's best interests to maintain control of the original project. But it's also in their best interest to have a group of outside developers making small contributions without paying them. Keeping control of the free version also allows you to kill or cripple the project when it comes time to move to a more proprietary model.
Depends, like everything else, on your audience (Score:4, Interesting)
When you're in the business of publishing something, almost everything about the way you do it depends on the audience you're trying to reach. I've been involved with several directory-style sites that we will have done "stealth" releases for, by the rough definition being used in this article. The idea wasn't to broadcast to a mass audience, and we were just fine letting the first trickle of users see things without all the dots connected. We weren't measuring ourselves by a "branded release" model where we needed to appeal to a general audience; the people using this sites when they were fully up and running would be accessing them through a controlled set of sources.
(And your high class steak joint probably doesn't measure itself by Subway's standards, either, except in very general terms. Doesn't take out billboards to advertise, doesn't open in the same way at all.)
Open source motto (Score:3, Insightful)
This process is also known as "beta".
web service can be made in 3 months and without $$ (Score:4, Insightful)
This guy has coded one little program that he runs on internet ("web service" as he calls it) and then he considers himself expert of everything and generalizes the work it took him to code that application to every program that has html interface. I would really like him to code for example a multilanguage e-commerce platform for real world use that handles tens of thousand simultaneous customers in 3 months and without "lot of money" and then write another article about the subject.
Our company has been programming a business "web service" for a global customer for about 1,5 years now and it definitely was not even in a prototype stage in 3 months, few real world projects that have real customer are. AND we are profitable, still in slight stealth mode and have no VC money.
Pretty far off base (Score:4, Insightful)
First, there is such a thing as a unique idea and it can be important to keep it quiet. You certainly need to get your patents filed first. The fact that the author suggests otherwise simply means he has never worked in a truly inovative environment.
The first mover is important argument is not a truism. In fact, the first mover usually looses. Netscape is a poster child for that.
I'd suggest trying a couple more startups. The author can then look back at this article and smile at his naïveté.
Klingon Bird of Prey (Score:4, Insightful)
I thought "How esoterically geeky, even for Slashdot."
It's my opinion that if stealth mode gives you a tactical advantage, why not?
Discuss.
obquote (Score:4, Funny)
"Don't worry about people stealing your ideas. If your ideas are any good, you'll have to ram them down people's throats."
-- Howard Aiken
Redux (Score:5, Insightful)
If you're a startup, you have limited resources across the board. Okay, okay, If you have tons of VC money, feel free to follow his advice, then explain to the VC dudes why you didn't get them the massive ROI they expected two years down the road.
The worst thing you can do in any business is advertise a product too soon. Whether you're selling the Osbourne 2 or Team Fortress 2, early hype is "the kiss of death".
A previous poster commented something to the effect of the mantra I've followed for a while: Ideas are cheap; it's execution that matters. TFA seems to think that Ideas are what matters, and that stealth is all about protecting those. While I agree that stealth is a dumb way to protect ideas, it is a great way to shield your staff from "outside distractions" while they execute that idea. And it's also a great way to control the media -- and there's no business in the world that doesn't benefit from positive media control.
I don't know about startups but...(stealth good?) (Score:3, Interesting)
But then again, maybe veterans are different vs startups in this respect.
Worked for a stealth startup... (Score:3, Insightful)
First, they wouldn't tell me what they were up to in the interview (red flag #1) then of course it turned out the idea was lame, then they were funded through VC only with no revenue. Then it was the classic catch 22 of a stupid dotcom. They had to convince a bunch of online merchants to adopt their solution so that consumers would use their portal which required them to subscribe a bunch of merchants. Needless to say they are long dead and buried. Bad idea (so bad they were embarrassed to openly talk about it), bad execution (lots of so called solution architects hired who didn't contribute very much) and a terrible marketing/launch plan.
Never again will I join a company that will not tell me what the hell they are trying to build.
Those were tough times however, so I'm glad they tied me over until 2004 when the market rebounded somewhat.
Re:Not if you're based on a consulting product (Score:3, Insightful)
You
Re:I was going to write "FIRST!" (Score:3, Interesting)
Besides, there's too many crappy comments that make +5 but should be modded redundant. Any joke involving Slashdotters not getting laid, for instance, is trite a
Re:How 1999 can you get? (Score:3, Funny)
I totally agree... most of the companies I've dealt w/ that are in "stealth mode" have some really lame ideas and they're run by complete morons. My new venture, on the other hand is really taking off. We're using tried and true investment tactics to diversify our portfolio of products in order to hedge ourselves against a single market's decline or unforseen technology adva