Hush Hush

Keep your mouth shut about a new product you're developing, and you may gain the foothold you need to succeed.

Brian Sommer could have easily had his company written about in high-profile publications, lured world-class employees and set up meetings with deep-pocketed investors. Instead, the CEO of IQ4hire Inc. in Chicago flatly refused to answer reporters' questions for months, kept his job openings quiet and rebuffed venture capitalists who wanted to know what he was up to.

"Loose lips sink ships," Sommer says, explaining why he chose to operate his 40-person company in stealth mode for nearly six months. Specifically, Sommer feared that if word got out about his project to build an employment database to help large corporations find IT service providers, eager competitors would swarm in before sales got off the ground. Sommer also wanted to wait until he had the envisioned product perfected and patented.

Stealth mode is an increasingly popular operating style for companies that are incubating promising products or services. It often combines a genuine attempt at top secrecy with a paradoxical effort to generate buzz by appearing mysterious. "It's basically turning your company into a teaser campaign," explains Kevin Jones, an analyst and expert on B2B e-commerce companies at technology research firm Jupiter Communications.

Among the best-known recent cases of successful stealth is Transmeta Corp., a Santa Clara, California, company that kept its plans secret for five years, despite intense scrutiny, before unveiling its low-power computer processing chip in January 2000. Four months after its hotly anticipated announcement, Transmeta had raised $88 million from a list of blue-chip technology corporations and went public in a $273 million offering seven months after that-not bad for a company reporting 1999 sales of just $5.1 million.

Clearly, stealth can be an effective way to attract investor attention. It's even more important for getting a jump on imitators. "If you can get enough of your product built and keep a lid of secrecy on it," says Sommer, "you can build and bring to market a powerful image that no one else can compare to."

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This article was originally published in the April 2001 print edition of Entrepreneur with the headline: Hush Hush.

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