Monday, June 20, 2005

Do Stealth Mode Startups Suck?

Apparently, Mark Fletcher feels that they do. He was commenting on 24 Hour Laundry, a new stealth startup by Marc Anderseen. And before I go on, I strongly encourage you to read 24 Hour Laundry's , of sorts, and Paul Kedrosky's rebuttal to Mark's points. That done, let us see why Mark Fletcher considers to be a bad idea. According to Mark, there are 5 main reasons that he thinks so:

  • First mover advantage is important.
  • There is no such thing as a unique idea. I guarantee that someone else has already thought of your wonderful web service, and is probably way ahead of you. Get over yourself.
  • It forces you to focus on the key functionality of the site.
  • Being perfect at launch is an impossible (and unnecessary and even probably detrimental) goal, so don't bother trying to achieve it. Ship early, ship often.
  • The sooner you get something out there, the sooner you'll start getting feedback from users.
Mark also has this to say, about ideas -
Some people think that they need to stay in stealth mode as long as possible to protect their exciting new idea. I hate to break the news to you, but unless you're Einstein or Gallileo, your idea probably isn't new. I have this theory. The success of a web service is inversely proportional to the secrecy that surrounded its development. There are exceptions of course. But I also think this can be applied to other things. Segway, anyone?
Well, now that we've everything in place, let us analyze each of those points, and see how much sense they really make. First Mover Advantage is important First mover advantage is useful, if you are new and unique, I cannot disagree with that. But at the same time, you mention that almost no idea is original or new. Well, then - you've already lost the first mover advantage, haven't you? Yahoo! was one of the first search engines, and Google was one of the last - yet, what has first mover advantage done to Yahoo!? The point is, first mover advantage is a tiny edge, and it is an edge that cannot override quality or standards. Unless and until you are really good, your first mover advantage cannot take you far. I can state countless examples - IE wasn't a first mover, and neither was Winamp. And yet, look at their marketshares today. Yes, you may lose out on the first mover advantage - but that does not mean that you come out with a sucky product and would somehow miraculously gain marketshare. This also brings up another issue, that of user expectations - when you do publicize your product or put it out before it's really ready, you raise user expectations. Hype and expectations can bring down even the very best of things, no matter what. A good product launch without any preconceived notions has its own set of advantages. There is no such thing as a unique idea Ofcourse there isn't. However, there is such a thing as a good implementation of a good idea. Google's ideas aren't unique by any stretch, but what sets them apart from the crowd is that they do a great job of their ideas. Investors and customers stopped paying for unique ideas a long time ago - the DotCom boom was the last time that people invested in technology for the sake of technology. These days, investors look for viable, reliable, working ideas that help them. Stealth during the period when you develop your idea into maturity is most certainly a good thing to do, because if you publicize your product before you are ready, you are going to raise user expectations and would be forced to move earlier to keep up with your competitors. End result? You come out with incomplete and badly developed products, not all that better than your competitors. Ever wonder why Google never even gave you an indication of what Gmail would look like, or that it would exist at all? They did that for a reason, if they had come up with a half-baked version in a non-stealth mode, it would not have been half as popular. And I would take this out even further, if you do have vital and defensible intellectual property in an emerging market, stealth is definitely a good idea - making your efforts public will only give your competitors an advantage. Forces you to focus on the key functionality of the site Well, sure. But it also forces you to do that in a haphazard manner, under market pressure and threat from your competitors. That is not a good way to build an idea, nor a company. And if focussing on the key functionality is your biggest problem, you've got bigger things to worry than being in stealth mode or not. Being perfect at launch is an impossible Yes, but that does not mean you go public with an incomplete, underdeveloped product. Being perfect at launch maybe impossible, but that does mean you should not aim for it. More importantly, perfection is relative. While you may not achieve perfection, you can definitely appear to be much better than your competitors - which would definitely make you look great in the eyes of your customers. If you are willing to wait and put the time and effort in achieving this, I can assure you that your business will go places. Ship early, ship often. Hmm, this is something that would entirely depend on who your market is made of. If you are targetting the enterprise segment, you can be quite certain that nobody likes their systems requiring an upgrade every other week. This does not mean you should be like Debian, but a good balance is a great thing. Ship as early as you can, but ship updates and bug-fixes often - this would be a much better advice. If one were to ship early for the sake of shipping early, you would ship products lacking complete feature sets and with lots of problems - this would only do to antagonize those that are willing to give your product a chance. Worse yet, this would create an element of bad publicity, which is something that you definitely do not want. And besides, shipping early is relative - when you do not know what is it that I'm shipping to begin with, how does it matter? The sooner you get something out, the sooner you'll start getting user feedback Ofcourse not. They are called NDAs. What use is feedback if you are shipping an incomplete, underdeveloped product? Feedback is valuable when you've made a complete product, worthy of shipping, where user feedback *means* something. I can ship up a lousy product that I coded up in all of two days, but that does not mean much unless I've taken the efforts to make it complete. User feedback is important, but only when there is something worthy of giving feedback to. And Paul brings up an excellent point, that I could not have put better:
"But you have to keep the role of stealth in context. It is a rational response to a marketplace with too much risk capital, low barriers to entry, and many entrepreneurial teams looking for ideas. Saying that many people will come to variants of the same idea at the same time is not the same thing as saying you should ring a bell and invite everyone and their favorite VCs to come and feast on your nascent startup."
Stealth is relative - it is no silver bullet, but there are situations when it makes sense and situations when it does not. In a ruthless market filled with picky customers and investors, where ideas are dime a dozen, publicizing your works before maturity isn't always a good idea. Remember that while it may give you an edge, it also gives your competitors the exact same edge.