DevRev from Palo Alto recently launched from stealth with $50 million funding
We’ve all heard of it at least once. Someone has an awesome idea, but they can’t tell you yet.
It’s most common when you’re talking to a friend or acquaintance, and they mention that they’re working on a huge idea, but they can’t tell you yet because they’re working on it in stealth.
This doesn’t even have to be a startup. It could be a Youtube channel or even a blog. After all, if they tell you about this brilliant million or billion-dollar idea, you could just steal it yourself, right?
“Oh yeah I am working on a big idea but I am doing it in stealth” — said someone at one point
I’ve always just shrugged it off and never pushed them to tell me, after all, why is it my business to know. Recently, however, DevRev, a startup co-founded by ex-CEO and co-founder Nutanix, launched into the market after being in stealth for over eight months.
They announced a considerable seed round of $50 million and the fact 75 employees were already working for the startup. The idea was focused on linking developers and customers together with a CRM to avoid the siloed approach to developing software.
It sounds simple on paper, but ironically, not many tools out there do this. On the other side, there is a community of hackers and entrepreneurs who share everything they’re doing, even revenue numbers, publically.
Both are different approaches to building an idea or startup yet can be successful depending on each situation.
Let’s take a look at the viability of going stealth first
Funding for stealth startups has actually gone up over time since 2016. So what are the reasons why you should go stealth?
Just for reference, I am not talking about companies that execute stealth projects within an existing business. For example, Microsoft used to call the Windows 95 under project Chicago. This is purely for new ideas or startups that want to remain hidden under the public eye.
Preparing for a big bang launch
As mentioned with the DevRev example, some startups want to generate huge press with a massive release. However, this strategy only works if you already have a significant following on social media or have PR connections ready in the works to go to market.
In the case of DevRev, a considerable seed round and PR connections made for a great story with many tech and startups news sites picking upwind of the recent launch.
This means, for the most part, unless you have a huge release or you have PR connections, going stealth, for this reason, isn’t going to work for you. You’re better off doing early releases and getting product feedback early on in the process.
To hide information from competitors
For the most part, this is why people think they need to go into stealth mode. After all, once you go public, all your competitors are going to steal your idea.
But this is far from reality, and there should only be two reasons why you should even bother going into stealth mode for this reason.
One is if you’re working on a high-tech idea that might need patents or the like. This means you might be in industries like pharmaceutical or other cutting-edge fields. These are industries where other companies do tend to copy off each other, so being in stealth mode initially does actually make a lot of sense.
Otherwise, the other reason is if you have one specific competitive advantage that a competitor could steal from you and there’s an actual reason for you to ‘hide.’ To give an example, Firefly, a startup that’s looking to leverage ride-share vehicles to create a smart city media network, did exactly this a few years ago.
They planned to put screens on vehicles which isn’t a revolutionary idea. However, it’s the IoT data that these screens collect which made it a unique value proposition. Firefly purposely held off going public with this information, so it had enough of a gap between its competitors to execute its strategy.
The question is, do you truly have a competitive advantage?
Does your idea have a true and unique value proposition that competitors could quickly copy and spin it up into their own product if revealed in the market?
Most of the time, this will not be the case which brings us to the third reason why a startup operates in stealth — fear.
This could be a combination of being fearful of their competitors or even releasing a product into the market that others might scrutinize. However, as the founder of LinkedIn rightfully mentions, your first product should not be perfect and might actually be an indicator that you launched too slowly.
“If you’re not embarrassed by the first version of your product, you’ve launched too late” — Reif hoffman
Thus we take a look at one of the most important points for going public early.
Get product feedback to build your idea or startup
This is probably the most important reason for building your idea publically. Although you might not release a fully built product, you can make prototypes or early releases to a private or public audience.
This means, however, you can start building a userbase early, so when you launch, you don't start with absolutely anything. There are especially a ton of resources in the Bay Area including
Although this might not be an issue for some, it’s important to get early product-market validation for most who are working on their startup or ideas. This is so you don’t waste your own important resources during the early stage.
Going stealth means you might not be able to secure funding as easily
Many startups that launch in stealth reveal to have massive funding rounds. However, most of the time, these are successful entrepreneurs who already have a network to rely on.
If you’re starting fresh, you most likely do not have this, and if you’re launching in stealth, without any traction or history of success in the past, you’re probably not going to find it easy to raise a seed round.
You’re better off launching publically
Going public early and getting early adopters or product feedback will triumph most of the other reasons you can throw at going into stealth mode. If you’re not sure, then it’s probably an indication that you don’t need to go into stealth.
Most of the time, only the most seasoned veterans in the market will know if going stealth is a good idea.