"HYPE IS A DOUBLE-EDGED SWORD".

Venture capitalists are notorious for insisting their portfolio companies should create a buzz, even when these companies don't yet have products, customers, or even employees. Ruthann Quindlen, a veteran investment banker who helped take Microsoft, AOL, Aldus, and other software companies public, is one of the few VCs who takes the contrarian view that most startups should keep a very low profile. "Hype makes me squeamish," she says. "Anything that needs to be hyped is probably not real."

Quindlen, who recently authored an insightful book called Confessions of a Venture Capitalist, admits that hype sometimes does attract investment dollars and real revenues. But she warns that premature visibility can also be a "two-edged sword" that does more harm than good. Her advice:

H Don't wake the giant: "Hype can focus the attention of larger competitors on a small company before it's prepared or able to compete with them," says Quindlen. GO Corporation and Netscape are good examples of companies that were overhyped early on, she says; both embarrassed Microsoft as a technology laggard until the software giant decided to retaliate by announcing its own entry into their markets.

H Don't rally the critics: "All of Silicon Valley, and I mean all, yearns for the failure of overhyped companies. Everyone keeps one eye out for the slightest stumble, so they can proclaim the whole thing was air all along."

H Don't inflate expectations: "Even though your company may be making normal progress, the expectations created by too much hype render normal progress as subpar," Quindlen warns. "This puts even more pressure on employees in the most difficult stages of building a company, and employee defections can result."

Ruthann Quindlen, general partner, Institutional Venture Partners, 3000 Sand Hill Rd., Menlo Park, Calif. 94025; 415/854-0132. Confessions of a Venture Capitalist, $25.95.