Mum's the word.
While most start-ups in the Internet age blow out their tonsils before they have a product to offer the market, some of the more flamboyant private company stories today come from silent start-ups. From (most notably) laptop chip upstart,
, it's time to praise the stealth start-up.
Stealth companies spend their infancies -- and in Transmeta's case, its adolescence -- cloistered away from the siren's song of media attention. More than four years of quiet time gave Transmeta the opportunity to build low-power, software-based chipsets for the portable computing world, without the hassles of media scrutiny and without tipping off the competition to its tactics. Since embracing the media in January, Transmeta has announced an $88 million funding round and has won business from
, which announced this week that they would begin selling an Internet appliance this fall using Transmeta's Crusoe processors.
Andreessen's Loudcloud had a stealth upbringing for different reasons. According to Barbara Krause of PR firm
, Andreessen's departure from AOL was too scintillating for the press to resist. Instead of waving a rump roast in front of razor-toothed tech paparazzi, Loudcloud and its PR team announced the start-up as soon as Andreessen signed on, declaring Loudcloud's intent to fly in stealth mode for four months. That way, it satiated the public's curiosity about Andreessen and gave the company time to create something to sell -- namely several services to handle Web site maintenance (which Andreessen could unveil at the high-profile
technology conference in February).
For other companies, markets determine the tactic. Former Netscape VP of marketing Lori Mirek heads up
, which aims to make foreign-exchange markets more efficient. Currenex allows companies to secure banks' foreign-currency prices online -- as opposed to traditional methods of phoning banks or using proprietary foreign-exchange data systems. Mirek explains that in a $1.5 trillion-a-day business, it was worth spending four months under wraps for credibility and a solid approach. Currenex spent those hot market months inking partnerships with 20 banks and the likes of
, hiring top level executives from
, and opening bureaus in London and New York.
By March, buzz was building up around the idea of an online forex market and Currenex opened house. "I would've liked to have three more months," says VP of marketing Karen Steele.
How do start-ups stay quiet? Transmeta was a delicious hype candidate, given employee and Linux-creator
star quality, not to mention a hefty 200-person operation toiling away in Silicon Valley. But as Torvalds toured the country giving open-source-software speeches, he stayed tight-lipped about Transmeta and its mission.
"When you're building a chip, it takes 36 months to physically lay out the rectangles. Once you've finished the design, it takes one year to produce. If we could keep the secret until the product was done, we'd have a five-year time advantage," says Transmeta CEO
, a Sun veteran who's spent plenty of time with the media glare reflecting off of his forehead. "We let all the employees know why it was important to them to be quiet ... everybody has stock in the company. What your stock will be worth is dependent on how we play, but could be destroyed if people went out and started talking."
And so Ditzel held weekly meetings, keeping employees informed of new deals and inside information. This goes along with Ditzel's philosophy that employees were tightly bound to the company and deserved to be as informed as top-level management. "Silicon Valley is so small, employees will talk outside the company to see what's happening. If you don't give people information, they'll do what it takes to get it."
Ditzel pegs the No. 1 leak-generator as the hiring process. Transmeta carefully managed that with pinpointed candidate selection. Charlie Woo, of still-stealth
, relates that the content-based start-up he co-founded after a semester at
Harvard Business School
won't divulge the company's strategy to prospective employees "until they're willing to take the leap of faith." Adds Woo: "On their first day they're shown everything. First they sign a lengthy nondisclosure agreement, then we show them the product."
Despite that awkwardness, Woo says hiring hasn't been a struggle. Currenex's Mirek agrees that stealth mode didn't inhibit the company's hiring efforts, and probably helped them. "Candidates could talk to actual customers," she says. Currenex has hired 40 employees since it was founded in November 1999. "Plus, it's pretty sexy and mysterious to be in stealth mode."
In the end, all parties involved argue that stealth is the way to go. "A lot of companies don't exercise that self-restraint. They're so eager to get press, and they're not confident in their ability to get money. So they talk about what they don't have," says Ditzel. But for all Transmeta's current buzz, he laughs, "At the beginning, we didn't know how long it would take to do it, how good would it be."
Better to keep us all guessing.
Tish Williams' column takes at look at the people who make Silicon Valley tick. In keeping with TSC's editorial policy, she doesn't own or short individual stocks, although she does own stock options in TheStreet.com. She also doesn't invest in hedge funds or other private investment partnerships. She breathlessly awaits your feedback at