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News & Updates - Wednesday, November 17, 2004

Stealth Depeche Mode

Kleiner Perkins' John Doerr, Brook Byers and Ray Lane go on the record about how cool it is for startups to launch in stealth mode. Given the success of Google programs like Gmail that remain in beta despite 1M users, it does seem that Net zeitgeist is to remain young, immature and stealthy. Here's the chat session with a link to further analysis:
Q: The [MoneyTree] venture capital survey shows a decline in VC investing (in the third quarter), but some suggest one reason may be artificial: Start-ups are trying to stay under the radar longer and not announcing their VC funding.
John Doerr: The entrepreneurs want it that way. Ten years ago, as soon as a venture was funded by a reputable venture capitalist, within six months, two or three clone ventures would be launched like heat-seeking missiles right up their tailpipe. People got wise to that. Why should we say anything about what we're doing until we have happy customers, and we're ready to try to expand and grow our market? You see many more entrepreneurs wanting to remain in stealth mode for a long, long time. The smart ones, anyway.
Ray Lane: It's worse than that. By talking too early, they produce weak competitors. The worst thing you can have is weak competitors. A strong competitor is actually good for you in an early market, because it helps build the market. A weak competitor, it turns off a client. The client says, "I don't get it,'' because they're not able to put it across. It's not good for that original idea.
Q: Wouldn't announcing to the world draw good employees?
Doerr: They can do that while being in stealth. People like joining stealth projects.
Brook Byers: Most companies come out of stealth with around 100 employees. And for the first 100, companies know who they want. That's pretty targeted.
Lane: They give up a little, short-term. If you can say Kleiner or Sequoia funded me, hey, that's a statement to the world, but this rarely offsets the advantage of remaining stealth.
Read - A Stealth Explanation (PE Week)