As its name suggests, stealth startups are rarely discussed. Yet for investors and venture capitalists alike, stealth mode startups are an increasingly common occurrence that everyone should be aware of.
Stealth mode startups companies are elevated with a sense of privacy, but more is needed to capture the full significance of the term. Let’s explore further what stealth mode startups mean and their significance.
Stealth startups are businesses founded with an element of secrecy. Employees and founders keep most information about the business private or away from public view.
For instance, they won’t issue a press release to announce the opening of the business or do any marketing.
Many may need more specific details when looking at websites and LinkedIn pages. Many will use fake names; for instance, this LinkedIn job posting might be advertised under the name of a company called Stealth Startup.
The profile for this company provides a Wikipedia-style description of a stealth startup rather than providing any official website. The article gives scant information on the company or its sector. Furthermore, they only casually mention their product development plans: “a revolutionary B2C product”.
Entrepreneurs looking for ways to invest in startups which are stealthy, often gain access through private connections. Deals may not be disclosed publicly. The business likely has a few clients recruited through direct communication, such as cold emails or referrals.
Customers, staff and investors could be subject to confidentiality agreements that prevent them from speaking to the media.
Once a business is established, usually, after several years, it will come out of stealth mode and begin investing in media relations and marketing just like other businesses do.
A stealth launch can also conceal certain aspects of a company, such as keeping new product development secrets even from other employees while they work on it. A funding round may not be announced publicly; data from the UK indicates that most equity transactions remain anonymous.
What is Stealth Mode for Startups?
Stealth mode refers to businesses that keep their fundamental objectives private to protect legal avenues. While some startups seek publicity, stealthmode startups conceal information about themselves by publishing only a brief overview of their venture online.
How do stealth startups differ from other startups?
Stealth mode start-ups do not make public statements, announce their products or services or seek endorsements. In the case of startups, this means getting investors and funding discreetly. Furthermore, this implies that the founders associated with these businesses follow a similar process to avoid attracting attention or attention.
How Can You Spot Stealth Mode
Businesses operating in stealth mode tend not to be easily identified. However, there are usually signs that something is up. If the website and other public information appear sparse, but there’s lots of money and successful investors, that can be taken as a clue.
Stealth Startup – How Do I Locate It?
If you are trying to determine what is a stealth startup, there are usually several clues. Stealth startups rarely seek funding in public and instead approach investors privately. Therefore, you may notice them when looking through the portfolios of investors. Venture capitalists usually need to disclose their investment portfolios. You may come across companies with no details but have a lengthy blank background or names that seem suspiciously incomplete.
Pros of Stealth Startups
While concealing your business may seem counterintuitive, there are numerous potential advantages to be gained by this approach.
Your ideas are secure
One of the main objectives of stealth ventures is to afford founders enough time for R&D & business expansion before competitors can respond. That is much more prevalent when the business is built on an innovative idea, which they would want competitors to refrain from copying.
For instance, if you had created VR entertainment for air passengers, large companies such as Meta or Sony might develop an identical product and partner with airlines before you even get a chance to launch.
Angel investor and entrepreneur Vincent Serpico believes that the fear of intellectual theft is unfounded for most businesses. He states that most successful startups require years of hard labour and significant amounts of capital. No one will copy your idea because they lack the capacity for it – no one else has what it takes.
But, according to him, there may be cases where other businesses can quickly implement your concept. In such cases, a stealth startup company may be a wise move.
Establish a loyal customer base
While in stealth mode, collecting customers makes it difficult for competitors to scoop them away when you emerge from hiding, especially if those relationships have been established.
You could overcome the difficulties if you decide to go public with secured funds.
Conversely, if larger companies are planning to enter the market that you’re considering investing in, an announcement that garners significant attention could force them to reveal their plans ahead of time, potentially complicating matters for you as an investor.
It’s common for companies to secure large rounds of funding while in covert mode. Stealth mode gaming company Ultima Genomics came out of the shadows in May 2022 with $600 million in investments after five years spent developing an improved method for gene sequencing.
Protection of Intellectual Property (IP)
If your company relies on an invention, algorithm, medicine, software or any other new technology, it’s essential to legally safeguard it by obtaining an intellectual property right, copyright or trademark.
Without protection, your IP could be stolen. Stealth mode allows you to protect your IP while setting up legal protection – likely why healthcare and software are among the shadiest industries.
An example of a stealth biotech startups with IP at its core is Treeline Biosciences, an oncology biotech firm which has remained undercover since its founding on January 20, 2021; it has raised $473 million in the capital. Dope Security & Proprio are innovative startups in technology that utilize AI and AR.
Focusing can be challenging when everyone has your back. Start by being stealthy, which allows you to focus on the essentials, such as developing your product and building your team, without feeling the pressure or distraction from media attention or marketing initiatives.
Stealth can create confusion and anticipation around a company, especially if well-known stealth startup founders or investors are involved. That presents the chance for an exciting “big reveal” when the company emerges from hiding.
Shape Security was the focus of numerous recent stories regarding its secrecy. Executives were even interviewed without disclosing any information about their operations, leading to greater media attention than it would have received.
The Disadvantages of Stealth Mode
Stealing your company can present many obstacles, and some founders, investors and partners are firmly against it. Before deciding to begin operating undercover, there are some disadvantages you should weigh.
It can take longer to identify the ideal product-market fit
To determine this fit, collect customer feedback. That could involve surveys with customers, keeping tabs on complaints, conversing with sales staff about lost sales, taking notes, and receiving input from other community members.
Stealth mode can lead to less feedback and require longer modifications/improvements on your product, plus it loses the community’s support. Serpico states that one major disadvantage of stealth mode is the lack of assistance and input from others.
Limit Your Options When It Comes to Fundraising
Operating undercover may leave you missing potential startup funding opportunities that might present themselves due to being seen in the spotlight. Strategies like crowdfunding or joining an accelerator should not be on your radar.
Serpico notes that investing can also happen by chance while having casual conversations about your business. I’ve heard stories over and over about people having casual conversations on the street with strangers and needing to realize they are angel investors and getting investments.
Recruiting talented individuals
Interviewing and applying without a clear vision for the company could turn off potential candidates. With an established brand name, it becomes easier for employers to trust what you have to offer. Stealth startup careers can be shrouded in secrecy and more unstable than a conventional career.
Stealth mode may not always protect you. If a significant rival wants to know what you’re up to, they could figure out how to find out. Even if they are well-established and robust, they could still take your idea and destroy your business once you come out of hiding, no matter how much time has been invested into creating an impressive foundation.
One way to look at this is that when your business plan is well thought out and executed, you may not need the security of stealth modes. Launching your brand-new concept will grant you the advantage of being the pioneer in its field.
You could postpone Brand Building
If you only have limited opportunities for publicity and can only establish your brand after leaving shadow mode, developing an image and reaching more customers could take longer.
Some might view you as pretentious
Not everyone admires stealth modes; some consider them an unnecessary publicity ploy, and others believe their ideas to be more exciting or unique than they are.
21 Examples of Stealth Startups That Made It
Despite obvious drawbacks, many now successful businesses began in startup stealth mode. To better understand why and how stealth organizations are founded, consider these 21 examples.
With already prominent investors invested in the company, Globality seeks to revolutionize how businesses conduct business globally by combining Artificial Intelligence with domain expertise.
The stealth startup founders at Globality want to be involved in exporting goods and services vital to the domestic economy. Notably, an estimated 99% of exports come from only 10% of companies.
Light Field is a stealth startup which combines technology and AI to provide surgeons with a more accurate image of our body than loupes, microscopes, displays or traditional tools can offer. With Proprio vision, the brand aims to develop an image of our anatomy that gives surgeons more comprehensive and precise data.
For years, the company operated in secrecy, honing its techniques and receiving $7 million of funding while remaining undiscovered.
In the first week of December, Forge.AI emerged with a record 11.1 million Series A investment after one year in the dark. The Cambridge-based startup seeks to decode unstructured data – which accounts for 80% of all data on earth – including posts on social networks, news stories and SEC filings.
Symbolic IO has created technology that creates a fundamental shift in computing technologies, revolutionizing how information is stored, shared and transported, limitless by performance and scale. The company has raised millions of dollars through theft and launched an online presence filled with engaging content.
Forge.AI helps organizations maximize the use of their technology by utilizing AI. The stealth-mode startup uses NLP & cutting-edge machine learning that integrates with third parties. The stealth-mode startup has received generous VC funding, which will be put towards expanding the company’s team and expediting product development.
4. Tyto Life
Tyto has publicly declared itself a Silicon Valley company dedicated to creating devices and software for the connected home. Former Microsoft Vice President and Jawbone investor founded this Burlingame-based startup with various patents for deadbolt door locks and window frames – potentially leading to the creation of an integrated doorknob or home security system.
I’ve long been intrigued by the concept of 3D printing, so when Benny Buller, the founder of Velo3D, raised $22 million following years as an executive in the industrial and energy sectors, I had to keep an eye on their progress. Now they are producing unique metal parts to meet high precision industrial demands thanks to this investment.
Dremio was founded by two former MapR employees to ” enable organizations to unlock the value of their data.” According to Venture Beat, two co-founders created their own Apache Drill open-source project and believe Dremio will continue creating open-source software in this spirit.
7. Mist Systems
At the end of 2014, former Cisco CTO John Chambers left to found his own company. Although he kept details about what had transpired private, following their public debut in 2013, they received $144 million in venture capital funding to use artificial intelligence on their network. Five years and $155 million later, Juniper Networks purchased Mist for $405 million – genuinely remarkable.
If you have ever wondered what an attacker’s perspective is, perhaps Randori can help. Randori is a world-class attack surface management system that grants users access to evildoers’ minds. In 2018, Randori emerged from secrecy to announce a $9.75 million funding round led by Accomplice Ventures with 406 Ventures and Legion Capital participation. They boast that they created a “nation-state calibre attack platform” which simulates actual attacks on customers’ computers in real-time, providing real-time feedback about companies’ preparedness and attacker perception regarding security systems. Nowadays, top names like Forbes, Wallstreet Journal, Bloomberg and TechCrunch place great trust in Randori to enhance their security measures.
Pi-Coral’s mission is to solve data challenges at scale, particularly data storage at scale. As stated on their website, their name likely derives from their single page that reads, solutions for an ocean of data.
Perceptive Automata, a company which creates software to predict human behaviour in autonomous vehicles, emerged from hiding in July 2018 with $3 million of preliminary capital. JAZZ Venture Partners followed with a $16 million round for this Somerville-based firm in October.
Perceptive Automata’s software utilizes behavioural science to enable vehicles to “think” like humans, pedestrians and other drivers; this enables autonomous vehicles to navigate roads heavily populated with humans safely. As they continue raising funds to recruit top engineers for their AI program for human intelligence and expand the development of the product and add team members for client implementation and support teams, major brands such as Toyota and Aurora have pledged their cooperation with Perceptive Automata.
According to its application to Bill and Melinda Gates Foundation, Click Diagnostics is working on developing a device that will analyze diseases on a molecular level without the need for expensive machines.
Click’s disruptive technology can revolutionize healthcare in developing nations by revolutionizing the paradigm for treating prevalent infectious diseases like Tuberculosis and drug-resistant TB, as well as pandemics like Swine flu, avian flu and Ebola. Since it is user friendly, portable, rapid, disposable and instrument-free diagnostic tool – it can be utilized in remote villages, small towns or large cities alike,” according to the company.
You may have heard of Coda this year. The startup in stealth mode was previously called Krypton and was founded by Shishir Mehrotra – a former YouTube executive. With an initial valuation of $400 million, Coda quickly became the go-to choice of well-known companies such as TED, Figma, The Newyork Times, Buzzfeed and Uber. With such impressive clients, Coda continues to rise through the ranks.
13. Berkshire Grey
Berkshire Grey, a highly secretive robotics firm, emerged from stealth mode in early December 2018 by announcing they had quietly installed AI-powered robots into over 100 retail stores and fulfilment centres. Their customers use these intelligent robots for automated tasks like packing, picking and sorting for retail, e-commerce and logistics – far more efficient and precise than humans could accomplish. As of 2021, Berkshire Grey had earned itself a place among America’s top 200 startup employers, according to Forbes magazine.
Established in 2012 by Brian Ignomirello, former Storage CTO of Hewlett-Packard, Symbolic has transformed how data is stored, shared and transported at scale. Since its launch, the company has raised millions of dollars and has pursued an aggressive online marketing strategy.
15. DUST Identity
DUST Identity emerged from the shadows with $2.3 million of early capital. The stealth company created the first non-clonable security tracking system that uses nanodiamonds – tiny particles that can be measured in nanometers – as security. With funding from DARPA, they developed their core technology and turned it into an industrial product to modernize manufacturing and supply chain security. DUST has formed partnerships with several top US government agencies and top tech firms in business operations and supply chains worldwide to protect its most valuable asset.
16. CNEX Labs
Co-founded by Yiren Huang, former chip engineer at Huawei/Brocade/Cisco, and Alan Armstrong (former semiconductor at Marvell), this stealth startup has been quietly raising money for years. After raising $38.8 million, CNEX Labs now features a press blog on their website – an impressive step in making their presence known.
MosaixSoft, another data centre firm, has announced on its website that it will offer companies software infrastructure that fosters innovation among application programmers while increasing enterprise control and operational effectiveness. What this entails remains unknown, but MosaixSoft has been developing this concept since 2013.
Established by Shishir Mehrotra, a high-ranking YouTube director, Krypton intends to challenge Microsoft Office with its rival mobile-based devices. Backed by LinkedIn, this stealth startup is estimated to be valued at $400 million even though its product has yet to be publicly released.
Forward Networks is taking a bold step with its goals. Their website describes themselves as developing “a game-changing networking solution with the mission of revolutionizing how network operators and engineers build and maintain large-scale networks.” Currently, in private closed beta, this could be one of the more advanced stealth mode businesses to launch soon.
Established in 2012, Koverse is a stealth AI startup that leverages vast data sets to create innovative products and services for business customers.
Jon Matsuo, president and CEO of Koverse, noted that customers often request confidentiality regarding their work. Koverse was given a rare chance to demonstrate its capabilities through its big data platform designed to assist auditing giant PwC in reviewing global supply chains to detect risk. Regardless of size, its Know Your Vendor system detects any mishap – from minor missteps to grave human rights violations.
We assist these organizations with strategic use cases, not just routine cost-cutting initiatives. Typically, our assistance involves something integral to their business operations -introducing a new product or service that gives them an edge.
Hyperscience is a stealth startup in NYC that offers businesses cutting-edge artificial intelligence. According to its partners (Firstmark Capital High Line Venture Partners and Slow Ventures), their product will allow all companies to communicate more efficiently with their customers.
Should I Start My Business Stealthy?
No, there’s no need if there is no compelling reason for conducting a stealth operation or snooping around. Being transparent gives you access to valuable information, advice and investment opportunities with less effort than keeping information hidden.
Certain businesses can benefit from stealth’s super-secretive nature. If your idea is innovative, fast and straightforward for competitors to adopt or even if an emerging revolutionary technology is being developed, stealth could be ideal. Many examples of startups went stealth in California, particularly in Silicon Valley. Remember that most companies will only abandon their plans after some time and must devote time and resources to your venture.
Whether you are a fintech in startup stealth mode or a stealth education startup, you could also opt for a semi-stealth approach or, as Serpico puts it, “tarp over the car mode.” While you don’t need to issue press releases or reveal all of your product, you can start reaching out to helpful contacts and getting feedback while testing out software in the background.
Free Startup Resources: https://businessmedialive.com/20-top-free-resources-and-tools-for-startups/