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November 14, 2004

Entrepreneurs preferring to be stealth: KPCB partners

It is tough to do venture capital research in the US these days. Start-ups that receive VC funding are no longer keen to publicize their fund raising. So much so that the "dip" in VC investments during the latest quarter - indicated by data from VentureOne and VentureEconomics, may in fact be "artificial", according to a report in San Jose Mercury News.

The newspaper's assertion that "start-ups are trying to stay under the radar longer and not announcing their VC funding", is validated by no less than John Doerr, Brook Byers and Ray Lane (all partners at leading Silicon Valley VC firm Kleiner Perkins Caufield & Byers).

"Entrepreneurs want it that way. Ten years ago, as soon as a venture was funded by a reputable venture capitalist, within six months, two or three clone ventures would be launched like heat-seeking missiles right up their tailpipe. People got wise to that. Why should we say anything about what we're doing until we have happy customers, and we're ready to try to expand and grow our market? You see many more entrepreneurs wanting to remain in stealth mode for a long, long time. The smart ones, anyway," Doerr says in the interview.

"By talking too early, they produce weak competitors. The worst thing you can have is weak competitors. A strong competitor is actually good for you in an early market, because it helps build the market. A weak competitor, it turns off a client. The client says, ""I don't get it," because they're not able to put it across. It's not good for that original idea," adds Lane.

According to the KPCB partners, start-ups today are willing to forego the ability to attract positive buzz and good employees by announcing that leading VC firms have funded them in favor of the advantages of remaining stealth!