Is “Stealth Mode” a Viable Strategy?

Should an entrepreneur keep their ideas under wraps? Should they keep it secret until the final product / service is ready for launch? If you’re an investor, what does this tell you about the product / service? Is it a “buy” signal or a “run away” signal?

Three years ago an entrepreneur was insistent that I signed an NDA before he revealed his world-stopping idea. He was currently in “Stealth Mode” he explained. It was really cool. Something no-one else was doing. I would be so impressed that I couldn’t fail to part with money. Eventually I did sign. And the idea: streaming films over the internet. I’ve written about NDAs before but what about investing in product in the “stealth mode” stage?

Let us consider a product in Stealth Mode. What do its owners lose?

  • Customers. Without anyone using the product how can an investor be persuaded that the product fills a real need. How can you know that people will buy the product? In other words, with no customers you lose the ability to prove there is a market for your product.
  • Feedback. If no one knows about your product nor uses it how will you get ideas for improving it and keep ahead of any competition? You have lost the direction and information the market gives you by being disconnected.
  • Money. Any business angel, bank, venture capitalist, or investor that does not sign an NDA will no longer be available as a source of funds. That’s a lot of potential money removed from the table.
  • Market Knowledge. No friends or professionals will know to tell the entrepreneur if another competitor comes onto the market. Someone is almost certainly doing something similar somewhere else. Not knowing about them means there’s no opportunity to learn from their mistakes.

Alternatively, if an entrepreneur can evangelise about his product, people will become enthused about it. They will tell others. They will buy it. They’ll give lots of feedback about potential improvements and new features. This allows the scarce development to targeted at key enhancements. The responsiveness gives this product an edge over the competition. Differentiation becomes easier generating more customers. More revenue. A virtuous circle and incidentally one that may not require investment!

So, is “Stealth Mode” a viable strategy? In an extreme case it might be. But given the other simpler propositions out there, I’m not going to be making the additional effort to find out.

And no, I didn’t invest in the idea of streaming films over the internet!

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