A stealth startup is a startup company that operates in stealth mode, i.e. that avoids public attention. This may be done to hide information from competitors, or — as part of a marketing strategy — to manage public image. The phenomenon is well known in the venture capital (VC) community. Normally a company would only operate in stealth mode for the first couple of years.
Protect ideas/intellectual properties: If the startup is working on a revolutionary product that would be easy to replicate - especially software ideas or relatively cheap new technology - 'going stealth' will avoid any details about the idea being brought in public and it being copied by another company. Usually employees will have to sign an NDA with the company.
Less pressure from public: With only a close group of people working the product, the team can focus on getting everything working in the way they have in mind.
Harder to build trust with potential investors and advisors: Without any news articles or public demos the startup will have to put more effort into convincing potential investors and advisors that the idea is being developed seriously already.
Finding new employees is more difficult: Without any track record in media and no ability to explain the candidates what they will be working on exactly, finding people willing to work for the company can be a challenge.
Harder to do (public) testing: Getting the product tested will have to be done under a different name, or with a small group having signed an NDA.