During the boom years, it was popular to start up "stealth" companies -- but they were almost always done for marketing purposes. A stealth company could build up some buzz and speculation depending on who worked at or funded the company. However, after the bubble popped, a lot of people turned against the idea of stealth startups, pointing out that getting your idea out there faster was often better for building buzz and for making sure you were really on the right track. However, in this interview with some partners at Kleiner Perkins, it appears that they now prefer startups to stay stealthy. They claim that's why it appeared that VC investing was down last quarter: because no one is admitting to raising funding as they want to stay stealthy. Instead of staying stealthy for marketing reasons, though, the Kleiner partners say that the stealthiness is to avoid bad competition, because bad competition can destroy a market. It sounds like these VCs are refining their earlier message about how competition was somehow bad for the market when they realized that me-too VCs were funding me-too companies. It sounds nice, but it's not true. There's always going to be competition (good and bad) out there. Staying stealthy doesn't change that. It just lets the companies think they're on some exclusive road, when really it's tougher for them to know what the market really wants by just putting their product out there. The VCs are doing it to avoid too much of the lemming effect, but keeping things secret tends not to help out in the long term. They should just let the companies compete on their merits.
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