Space industry startups used to clamor for public attention. Now, many spend years in stealth mode refusing to disclose even the broad outlines of their plans.

“It’s not a new phenomenon but it seems a lot of companies have gotten on board lately,” said Chad Anderson, chief executive for Space Angels, which backs early stage space ventures.

LinkedIn, for example, lists 100 employees at Stealth Space Company in the San Francisco Bay Area. Employment website Indeed advertises jobs for stealth space industry technicians, engineers and mechanics. In April, a stealth company was one of three firms to qualify for a U.S. Defense Advanced Research Projects Agency competition to conduct launches from different sites within weeks.

Why the secrecy?

“New entrants are emerging all the time and, unfortunately, some copy the business models and approaches of higher profile startups,” said an entrepreneur whose business remains under wraps. When Skybox Imaging and Planet Labs announced plans to create small satellite constellations in 2012 and 2013, respectively, “dozens of copycats with little or no differentiation emerged,” the entrepreneur said. “Fortunately for Skybox and Planet, they had raised very large funding rounds and were able to retain their leadership positions.”

New startups might not be so fortunate. With the growing popularity of space industry investment, “some charismatic founders are able to raise tens of millions of dollars even to pursue copycat missions,” the entrepreneur said. “Although there are some advantages to being the first mover, large funding rounds can allow less-creative fast-followers to close the gap.”

The lean startup approach exacerbates the risk copycats pose. Entrepreneurs following this model test products or services on early customers and pivot if necessary, modifying their approach until they find success. “I have seen this play out multiple times where pivots end up being inspired by other startups,” the entrepreneur said. “We do not want to be that kind of inspiration.”

Stealth can be a useful tool for startups seeking to disrupt the business of powerful incumbents with extensive technical capacity and money, Anderson said. “You are not in a position to compete head-to-head, so you give yourself a head start.”

Still, there comes a time when even the most secretive companies must emerge from the shadows. Blue Origin flew under the radar from its founding in 2000 until 2004 when Amazon Founder Jeff Bezos discussed the results of low-altitude test flights. The billionaire was able to keep Blue Origin’s work secret partly because he was in the “luxurious position where he didn’t need to seek external funding,” Anderson said.

That model inspired others, including Gabe Dominocielo, co-founder of Umbra Lab, a Santa Barbara, California, company developing synthetic aperture radar microsatellites to offer sub-meter resolution imagery.

Umbra was able to keep a close hold on information from 2015 to 2017 partly because its founders could cover expenses. During its stealth period, Umbra founders shied away from media attention but spoke freely with curious investors and customers. By 2018, Umbra was an open secret.

“Stealth works to a point because the space community is small and there is gossip,” Dominocielo said. “Offering dramatically improved performance, raising institutional capital, ordering components for multiple satellites and hiring key executives from legacy aerospace raises eyebrows.”

The entrepreneur whose firm remains in stealth mode plans to avoid the limelight until the company has “a well-established and defensible position” in its segment of the industry.

It’s not unusual for early stage companies working to patent technology and raise seed funding to hold information close to the vest.

“But eventually you need customers to know what you are doing,” said Tess Hatch, former SpaceX mission manager and Bessemer Venture Partners investor. “Stealth at a later stage hurts rather than helps.”

Investors also should be cautious of secretive companies, Anderson said. Through stealth, a company could hide shady business practices, he added, pointing to Theranos, a Silicon Valley healthcare startup that raised more than $700 million before ceasing work and settling SEC fraud charges in 2018.

Anderson cites other problems. In the beginning, it doesn’t take much effort to keep quiet. “As you begin talking to suppliers, the effort to rein in the conversation and enforce nondisclosure agreements seems like a losing scenario,” he said. “The more work you do, the more time and energy you spend controlling the narrative.”

Stealth companies also can spend a lot time explaining their plans. “With every new customer or partner, we are starting from zero,” the entrepreneur said. “We have had to really hone our ability to quickly explain our company and value proposition, but it is certainly a challenge to start from the beginning with everyone.”

In addition, secrecy among investors can discourage “would-be champions because private investors can’t talk to their friends and say, ‘Hey, you might want to invest in the company, too,’” Anderson said.

Instead of stealth, Space Angels counsels companies it supports to foster open communications and transparency among entrepreneurs, employees and investors. “We’ve found a tight correlation between the level and quality of communications and the success or failure of the company,” Anderson said. “Surround yourself with people who can help you through difficult decisions. If you’re not open about your business model and how well it’s working, you cut yourself off at the knees.”

Federal rules bar contracts for stealth companies

One of three companies qualifying for the U.S. Defense Advanced Research Projects Agency’s Launch Challenge remains in stealth mode.

DARPA announced in April that Vector Launch, Virgin Orbit subsidiary VOX Space and a stealth company qualified for the $10 million grand prize competition to identify vehicles capable of launching satellites from different sites weeks apart.

DARPA gave a $400,000 prize to each of the three competitors, but a stealth company cannot win a federal contract or Other Transaction funding. Other Transaction agreements do not follow federal contracting rules and are reserved for research and prototype projects.

“The recipient of a FAR-based contract must be registered in Sam.gov and the award notice is posted on fbo.gov,” a DARPA spokesperson tells SpaceNews. “Recipients of Other Transaction contracts also must be registered in Sam.gov, but fbo.gov posting is not required.”

These articles originally appeared in the May 20, 2019 issue of SpaceNews magazine.