The startup world is incredibly competitive. In fact, the failure rates of most startups are very high. This figure is staggering and many entrepreneurs eventually find it impossible to overcome this fate.
Sometimes, to protect a new product and to set their own pace for development, people decide to launch a startup operating in a temporary state of secrecy.
This state is called stealth mode. In this mode, the startup aims to avoid the spotlight until it's ready to become public.
In this article, we will explain how it works, the reasons behind going into stealth mode, and the benefits as well as the challenges of operating this way.
What is a Stealth Mode Startup?
A stealth startup is a startup company operating in silent mode, in other words, avoiding public attention and announcements about its products.
Stealth mode is a temporary state of secrecy that ends when the company decides to become more visible and public, usually when the product is already developed and ready to launch.
The secrecy requirement also applies to the employees and other people connected to the project—many companies working this way have non-disclosure agreements and other rules to protect the technology and ideas.
There are two types of stealth mode: total stealth mode and in-company stealth mode.
Total stealth mode
A total stealth mode startup is a new company that starts and operates in secrecy until the launch. And it's not about just the public eye. Some companies would even go as far as not having any website or public profile during this stage. In contrast, other stealth startups simply avoid public announcements about their products and media attention.
In-company stealth mode
The term “in-company stealth mode” describes an existing business developing a new idea or product in secret. In this case, companies take various measures to keep that project a secret like dedicating human resources specifically to that project or using codenames for the new products.
Another difference between this and total stealth mode is that sometimes the development of a new product is also concealed internally, not only hidden from the public and the media.
Stealth mode startup types overview
Startups operating in stealth mode use different levels of secrecy to protect their business ideas, intellectual property, and strategic plans. The two primary types of stealth mode are total stealth mode and partial stealth mode, each with its own advantages and challenges.
Stealth mode startup benefits
Intellectual property protection
The main benefit of business operating in stealth mode is protecting intellectual property, which is especially important to those working with unique new projects.
Not having too much public information about the product prevents the idea from being copied and keeps it secret from the competitors.
Focus on the product
Stealth mode allows companies to set their own pace and launch when they are ready, without pressure from the outside.
Disclosing information about the project in the very early stages can also result in a premature dismissal of a good idea.
While it's essential to see what attention your product is getting, from client feedback to the media, it can be quite distracting and even demotivating. Not having to deal with it allows the teams to focus on the product's strategy and development.
Moreover, stealth mode startups don't need extra resources for marketing.
Control of public relations
When the startup is eventually ready to launch, it can start with a strategic campaign, manage its public image and build its reputation from scratch without a negative trail of public failures from the early stages of the project affecting it.
Stealth mode startup drawbacks
Lack of feedback
Keeping the product development secret makes testing and getting feedback harder. After all, even if the product seems to be in high demand, after you target customers, you might come to conclusion that the audience does not respond to it as expected.
Gathering feedback in the early stages makes it easier to decide what works and what doesn't. That's why stealth mode startups often rely on input and consultations with experts, stakeholders, investors or innovative testing methods.
Early feedback is a great help for companies still looking for the right market fit.
There are tools and methods for startups in stealth mode to test their products, however, it's not the same as being able to monitor the feedback they get organically.
Challenges attracting funding
The secrecy of stealth mode startups makes finding and attracting investors challenging. Usually, you can find a lot of information about a new startup. They have public websites, disclose funding information, show their teams, share feedback from customers, tell their story publicly, and more.
From the startup side, it's harder to approach and convince investors without client feedback or publicity. It's harder to discover these companies, determine if they are reliable, and do any research on them. All of these reasons limit their funding opportunities.
However, even though the process is more challenging, some projects operating in secret manage to secure impressive funding deals without public activities.
Attracting attention
While stealth mode provides the benefit of being able to manage public image more easily, it also means that before the official launch and becoming more public, the company didn't attract much organic attention.
Because of this, the launch campaigns and the activities after the official launch, such as writing their own press releases and getting mentions in the press, require more resources and effort from the marketing and PR teams compared to those startups that gain attention and become known while still developing their products.
How to fund a stealth mode startup?
Funding a stealth mode startup requires a unique approach since traditional fundraising methods rely on public visibility, user traction, and investor transparency. Since stealth startups operate in secrecy to protect intellectual property, avoid competition, or refine their product, they must secure funding in a way that maintains confidentiality while ensuring financial sustainability.
Venture capital (VC) & angel investors
One of the most common ways to fund a stealth startup is through venture capital (VC) and angel investors. Many experienced investors are willing to back stealth startups if they see strong potential in the founding team and the problem being solved. However, raising funds in stealth mode often means selective disclosure, where founders provide only broad details about their vision and market opportunity while keeping specific product features and competitive advantages confidential. Investors may sign non-disclosure agreements (NDAs) before receiving full access to company details.
Self-funding (bootstrapping) the startup
Another strategy is self-funding (bootstrapping), where founders finance the company using personal savings, revenue from consulting work, or early customer pre-sales. Bootstrapping allows startups to operate without external pressure, giving them full control over their strategy and timeline. While this approach helps maintain secrecy, it also limits resources, making it difficult to scale quickly.
Government grants & research funding
For deep-tech, AI, and research-driven startups, government grants and research funding can provide non-dilutive capital. Programs like SBIR (Small Business Innovation Research) grants, EU Horizon grants, and defense contracts offer funding for startups developing groundbreaking innovations in fields like biotech, cybersecurity, and artificial intelligence. These funding sources allow startups to grow while maintaining operational secrecy.
Strategic corporate partnerships & industry investments
In some cases, stealth startups secure funding through corporate partnerships and industry investments. Large companies often invest in early-stage startups working on innovations that align with their long-term strategy. This can provide not only funding but also access to industry expertise, infrastructure, and market validation. However, such partnerships require careful negotiation to protect the startup’s intellectual property and independence.
Ultimately, the best funding approach depends on the startup’s industry, growth stage, and secrecy needs. Many successful stealth mode startups combine multiple funding strategies, starting with bootstrapping, securing government grants, and later raising capital from selective investors who understand the value of confidentiality. A well-planned funding strategy ensures that the startup remains financially stable while maintaining its competitive edge in the market.
Reasons behind launching a stealth startup
Here are three common reasons why some people decide to launch a stealth startup:
- They have a unique idea that will disrupt the market. Therefore, they want to protect intellectual property as much as possible.
- The company is creating a solution or an upgrade to an existing product or service; therefore it doesn't need to find a market fit and doesn't want to alert the competitors.
- Product development is complicated and will take a lot of time.
The main difference between regular startups and stealth mode startups is the commitment to secrecy. Being a new company, a typical startup usually wants to be visible, build its reputation from the start, run marketing campaigns, see what reactions the product and the company is getting, and then look for funding opportunities.
Being in the public eye is in the very nature of a startup.
In comparison, most of these things are what a stealth mode company avoids in the project's early stages.
But is it worth it? Let's discuss the pros and cons of launching a stealth mode company.
Stealth Startup Examples
Operating in stealth mode still doesn't guarantee that the business will remain secret. This year, Apple filed a lawsuit against a "stealth startup" for attempting to steal its chip technology secrets.
Stealth mode startup is not a new concept, and while it's not the right choice for every company, many startups find value in starting their journey this way. News about various companies launching with a bang after years of operating without attracting attention keeps coming all the time.
For example, just as I was writing this article, Lumirithmic, a 3D technology company, announced that they are exiting stealth mode after 2 years.
While some projects exiting stealth mode are relatively new and have just begun raising funding, others go from being secret to announcing their unicorn status.
Recently, Genomics, a California-based biotechnology company, exited stealth mode after operating in a temporary state of secrecy for 5 years. The company came out of stealth mode with a unicorn valuation.
Another unicorn company, Hailo technologies, exited stealth mode in 2018. The AI chip startup founded in Israel reached a $1 billion valuation after securing a $136M investment in 2021.
Finding stealth mode startups with Coresignal
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How to transition out of stealth mode successfully?
Exiting stealth mode is a critical milestone for any startup. After months or even years of operating in secrecy, transitioning to a public launch requires careful planning to ensure a smooth and impactful entry into the market. A poorly executed transition can lead to customer confusion, missed opportunities, or competitive disadvantages, while a well-planned strategy can generate excitement, attract investors, and establish a strong market presence.
Determine the right timing for your launch
The first step in coming out of stealth mode is determining the right timing for the launch. Founders should ensure that their product is fully functional, the business model is validated, and key operational elements such as customer support, infrastructure, and marketing are ready to scale. If the startup relies on investor funding, this is also the stage to secure additional capital and prepare for potential growth. A staggered launch, starting with beta users or select early adopters, can help refine the offering before a full-scale release.
Develop a strong PR & marketing strategy
A strong PR and marketing strategy is essential when transitioning out of stealth mode. Startups should craft a compelling narrative that explains why they were in stealth mode, what makes their product unique, and how they plan to disrupt the market. Engaging with media outlets, launching a teaser campaign, and leveraging influencer endorsements can help build anticipation. Establishing a robust online presence including a well-designed website, social media channels, and thought leadership content ensures credibility and visibility from day one.
Manage customer expectations & product scaling
Finally, managing customer expectations and scaling operations smoothly is crucial. A sudden influx of users or media attention can put pressure on infrastructure, customer support, and product functionality. Startups should monitor early feedback, be prepared to address potential issues quickly, and continue innovating post-launch to stay competitive. The transition out of stealth mode is not just about revealing a product – it’s about establishing trust, proving market fit, and laying the foundation for long-term success.
Conclusion
Although there are two sides to stealth mode, the success stories of some companies show that the benefits can outweigh the drawbacks.
When you are preparing to start an innovative business, it may help you to begin in stealth mode. This can give you an edge over the competition, help protect the products and services you are planning to provide to your customers, and ensure they receive an outstanding product.
