PALO ALTO, Calif. (Dow Jones)--Bazaarvoice Inc. was a high-tech start-up operating under a veil of secrecy but that did not stop Sam Decker from trumpeting news of his job with the company on his personal blog in January.

"I've Joined a Word-of-Mouth start-up!", wrote Decker, a former executive with Dell Inc. (DELL), now serving as Bazaarvoice's vice president of marketing and products.

It wasn't until nearly one month later, in early February, that Bazaarvoice, a word-of-mouth marketing company backed by $4 million in funding from Austin Ventures, made itself officially known to the public with a news release.

Decker is more vocal than most, a throwback to the days when hype was considered to be at least as essential as revenue for a start-up's success.

But the Internet bubble days are long gone. Nowadays, venture capitalists see silence as golden and keep portfolio companies such as Bazaarvoice in "stealth mode." Although there are varying degrees of stealth, the term generally refers to early-stage companies that keep news of their venture funding or technology - or both - only among a small circle of trusted individuals, and certainly away from the media.

Because so many trumpeted deals of the late 1990s failed, more investors today are keeping quiet about big chunks of their portfolios. With too much money chasing too few good deals, the fear of copycats launched by a venture capital market saturated with cash and boxed in by a weak initial public offering market means it may be smarter to stay under the radar.

Though it is difficult to track all of the companies in stealth at any given time, most investors say that a certain percentage of any portfolio is now commonly keeping quiet. Kate Mitchell, a partner at BA Ventures, said that it "used to be more of an exception, and now it's seen as a business practice. For some people, it might be as high as 10%."

"More companies by an order of magnitude are being kept quiet," said Erel Margalit, co-founder of Jerusalem Venture Partners, which currently has two semiconductor start-ups in stealth mode. Margalit isn't alone. At a recent industry gathering in Silicon Valley, John Doerr, the power broker at venture capital institution Kleiner Perkins Caufield & Byers, said the firm had backed five firms in the energy sector in the past four years, all cloaked in stealth.

Relatively mature companies seem to surface out of nowhere almost every day. For example, EQO Communications Inc., founded in 2003 and backed by the Business Development Bank of Canada and GrowthWorks Capital, didn't emerge until February of this year - after it had already secured a partnership with popular voice over Internet company Skype SA. EQO makes software used to extend VOIP calls to mobile phones.

Krugle Inc., a start-up offering a search engine for open source programming code, also emerged in February, after a year spent in stealth. Krugle is backed by Emergence Capital Partners, Omidyar Network and First Round Capital. While Krugle chose to leak some early information to programmers who provided early feedback, other start-ups keep news of their existence strictly to a quiet murmur around Silicon Valley.

Radiate, for example, has been developing location-based, social networking software for mobile phones in virtual silence, at least since last Fall. The Palo Alto, Calif., company raised $1.6 million in funding from high-profile venture capital firms New Enterprise Associates and Sequoia Capital in November.

New Enterprise Associates principal Patrick Chung said that a closed group of testers is now "running around San Francisco" with Radiate's technology, although he declined to offer too many details. Chung said any company that can conceivably be replicated by an Internet titan like Google Inc. (GOOG) must keep details of its technology on the quiet. With its legions of top-flight programmers, "Google is an impressive force," Chung said. €

Skewed Data?

The recent proliferation of stealth companies may be resulting in a skewed take of what's happening in the venture capital world.

Industry trackers overwhelmingly indicate that the bulk of investment dollars are going into later-stage deals, despite investors' claims that they are funneling much of their newly raised cash into what historically has been the meat and potatoes of the industry: wobbly start-ups.

While data from VentureOne, a research unit of Dow Jones & Co. (DJ), publisher of this newswire, shows that 35% of all VC deals in the fourth quarter of 2005 were "early stage," that percentage could in fact be much larger because so many deals are being done under the radar.

Nick Sturiale, a partner at Sevin Rosen Funds in Palo Alto, Calif., agreed that the numbers at any given point may not accurately gauge the real risk-taking going on. "There is a false negative in the statistics on the number of new deals being started," Sturiale said.

Sturiale said that reasons for keeping a company in stealth mode are simple. "There's not a bit to be gained from telegraphing your punch," he said, because things like recruiting staff and contacting customers can be done via word-of-mouth.

As for how many of his brethren in and around Silicon Valley are now maintaining companies in stealth, Sturiale said, "All of them."

(A longer version of this story originally appeared in Venture Capital Analyst - Technology, a monthly newsletter that provides in-depth analysis on trends within venture capital. Dow Jones Newswires, publisher of Venture Capital Analyst - Technology, runs select stories from the newsletter.)

-By John Letzing, Dow Jones Newswires/VentureWire