One of my favorite startup debates is about stealth mode. It seems like the approach du jour is blog first, fundraise second. Vivek Wadhwa (@vwadhwa) TechCrunch even published a piece decrying the end of startup stealth mode. Fast forward to yesterday and Dan Frommer (@fromedome) of Silicon Alley Insider declares, “Stealth Mode is Back.” He noted that Chris Dixon (@cdixon) of Hunch tweeted, “New early-stage start up trend: get big quietly, so you don’t tip off potential competitors.”Which is in direct contradiction to his earlier blog post, “Why you shouldn’t keep your startup idea secret.” Notably VentureBeat cited that five of the 26 companies that presented at Y Combinator Investor Day were still in stealth mode.
Like all opinions on strategy, those against stealth mode are right in some cases and totally wrong in other cases.
Let’s just start right in with my position: I am a firm believer in the value of stealth mode if used in the right way. Of course, there are exceptions to this, so I’m not making a blanket statement that the every company should do things this way. We’ve been in stealth mode at Trada for almost 18 months now. You’re reading this because we finally felt it was time to change that. Stealth mode has been a fundamental tenant of our approach to building the company, and I think it has served us well.
First, let me say that a big part of the debate comes down to what people actually define as stealth mode. Many people think stealth mode is about locking your team in a room, working through the nights unbeknown to anyone else, and emerging at some point with a fantastic market changing solution to something. While this is one definition (and you’ll see that I actually agree that doing this is a very bad idea in almost all cases), it’s not actually the definition that I use.
My basic definition of stealth mode is borne out of a general philosophy of prioritization in startups. If your business can survive and make substantive progress without doing something right now, just don’t do it (this is the un-Nike philosophy I suppose). Every day in a startup you battle the same two limitations: resources and time. You have to constantly be clear about what you are trying to achieve, what metrics move the business forward, how to learn enough about something to form an opinion of it, and in what order you think doing things will set your business up to scale. Every new thing you take on requires time and effort. Not just to create but to constantly manage and evolve forever in an ongoing fashion. So my definition of stealth mode is simply to not do all the things that come with being a public player.
Debate Point: Telling People What You’re Doing
In the beginning there are three basic things every startup needs: experts to give you input on your product as you’re building it, users to help you beta test your product in a real-life setting, customers who will give you real money for what you’re building and take real risk in doing so. You need all of these people to bake the cake.
I list these as three distinct sets of people as many times they truly are different. Someone who will show up one hour a week and give you feedback on every release may never take out their credit card and put their own business at risk by using your system. That doesn’t discount the value of their expertise and the influence it could have over how you build products. Conversely, a willing customer might not have the time to give you consistent feedback in the design stage – they just want the benefits of what you’re offering when it actually works. The perfect situation is to have a few people moving between all the categories.
As Trada, we spent an immense amount of time engaging people in what we were doing. We did this with in-house user groups almost from the very start. We had more than 50 PPC experts work with us as we built out the market and tried to understand the dynamics that matters when you asked individuals to do something they knew but in a collaborative and competitive way for the first time. Bill has a more in-depth post about how we did this.
We also spent a ton of time talking to all the different types of members of our ecosystem: PPC experts, PPC advertisers, small agencies, large agencies and the ad networks themselves. Each conversation was invaluable, and we didn’t play hide the ball with them. We just trusted they’d keep it to themselves. And for the most part they did.
Stealth Mode Pro: If you can find enough beta customers without the world knowing whom you are? Can you get enough input on the feature set from real users without having to blog about it? If yes, you don’t need to talk publicly about what you’re doing.
Debate Point: Exposure
The minute you become external about your business (more than maybe just a simple terse website which we had for over a year), you have added a whole new department to your business. Being external these days is about participating in a conversation with the market. There is no such thing as being broadcast only in a startup. You have to get involved and involvement takes time. Time that may not be worth it versus everything else you have going on. As we’ve headed towards our public launch, we actually hired two awesome Social Media Managers, Elaine and Anna, because we understood the level of engagement we’d need to have in the conversation. There is simply no way I could have justified this expense a year ago. It’s very telling when you go to a blog-first startup if their last blog post is 3 month ago. They simply underestimated the effort involved to be in the conversation.
As another note on exposure, when you put an external face on the company there is a different expectation about the polish and process that exists with the company. If I email someone at a publicly facing company, I expect a response somewhat quickly. Usually there is a phone number to call. We didn’t even have a Trada company phone number until 1 week before we launched (thank you to Michael and Ben for whipping this together in short order). If I proactively fill out a customer interest form, I expect some kind of response. So many companies I know just route this to whoever will take it in the business and hope it gets a response. To be fair, writing an email to very public companies like Expedia is like throwing rocks into a well. You’re extremely surprised when you’re rock comes back to you.
While every startup entrepreneur will tell you they love interacting with everyone interested in their company, there are some days when you just have more pressing things to do than field questions about what you’re up to. Now don’t go and jump down my throat on this. I did not say “some days there are more important things than your customers” – quite the opposite. It’s not the inbound customer emails that are time consuming; it’s all the other inbound communication that is. People are curious, especially about new things. They want to interact and in these days of public comments and no-introduction necessary internet bravado, they will simply send you an email. This is awesome if you’re in a mode where you can respond to it. Even during our times of no public presence, I found myself starting way too many emails with “Sorry for the delay.” I think this is a net bad, and it’s dangerous to cater to it before you’re ready.
Stealth Mode Pro: Commit to the public conversation when you can actually commit to it.
Debate Point: Being Public Takes Infrastructure and Process
Related to my last point, when you start interacting with people you don’t know (e.g. those who won’t give you a break if you screw up), you need process and infrastructure to manage this. Do you know, right now, how long on average it takes for a support ticket to be closed at your company? How about how stale your inbound leads are? How long you website has been down on a Saturday at 11:00pm? How many prospect voicemails are in your voicemail queue and how old they are? Is everyone in the company saying the same things to prospects? Do you have a “culture” of customer experience that is commonly known in our organization?
Communication takes infrastructure and infrastructure cannot work without process. Both cannot become efficient without iteration. Fortunately these days there are very low cost ways to organize your communication. Salesforce handles non-customer inbound (and response) pretty well, ZenDesk does a good job of capturing customer/user inbound and response pretty well (although trying to get a frigging average open and closed ticket time from ZenDesk is like pleading with a 3 year old to sit still – come on guys its Ticket Management metric #1 – please fix this). Email and phone cover the rest. With ZenDesk you can front your email with a “support@” address and with Google Voice you can front your account management team’s cell phones with one consistent phone number and voicemail. The ability to create the illusion of scale and order is available almost for free these days.
Stealth Mode Pro: Avoid having to invest in infrastructure and process until it’s absolutely necessary to deliver a level of service that the public expects.
Debate Point: Playing your Own Game
The last major argument I have in favor of stealth mode is simply the most obvious – that you should play your own game for as long as you can. Being able to pick and choose what is correct for your business with as few outside influences as possible is a luxury that you won’t always have. This doesn’t mean don’t talk to people and adjust based on what they say. You absolutely have to do this from day one. Just don’t have the conversations in public. I don’t know a lot of people that take their relationship issues to the park and invite anyone walking by to opine on what would work best for them. Take advantage of private conversations and reduced noise for as long as you can get away with it. Focusing on a small set of objectives will allow you to learn quickly and fail things out of the system that won’t help your business.
If you are able to play this game, you will be able to launch your company with the direction, momentum and scale that you think is defensible. All good ideas drive competition sooner or later. In our world, the size (and growth rate) of the market on both sides (advertisers and optimizers) is in the end the competitive advantage. We do have some feature tricks up our sleeve and an incredible ability to expand our model into adjacent businesses (you’ll see a lot of this from us in 2010). But once the cat is out of the bag you cannot help but play to the crowd and to the competition. And you have to embrace this. We work for our crowd. This is something we’re trying to instill in everything we do. But before you’re ready, this can be distracting and hard to ignore. The problem with playing the competition is that you don’t know the holistic path your competitors are taking. You get glimpses into their strategy and tactics. And you start playing game theory with them. Once you’re doing this you’re not optimizing your own strategy anymore, you’re optimizing against the market’s current valuation of the strategies it sees. Once you’ve carved out your own path, scale, scale, scale.
Stealth Mode Pro: It takes time to bake a cake. You might have to iterate through a few big mistakes along the way. Do this in private for as long as you can so when you come out of the gates you are charging as fast as possible up the first hill you want to take publicly.
Some Final Thoughts
In the end, being stealthy or not is situational, like all business choices you make. I understand all the counter arguments to what I’m stating here: the value of engaging the market, the immense feedback you get from participating in the conversation, the customers that opt into what you are doing by reading about you, the exposure your concept gets, etc. And I do understand how you can leverage that into competitive advantage. In the end, this is a philosophical choice about focus and timing. I only wanted to plays devil’s advocate to a lot of the current wisdom that says talk about your idea as soon as you have it. I believe for us it has worked well to do the exact opposite, or better said, to talk about as much as possible, just behind closed doors.
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- Stealth mode for startups: Whether and when? (feldmanfile.blogspot.com)
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- Stealth mode, schmealth mode (theequitykicker.com)
(Cross-posted @ Trada Blog)