37 Signals: Building Basecamp from Nothing to 6,000 New Customers Every Week - with Jason Fried

Basecamp is used by businesses in every industry and in this interview you're going to hear how it went from just an idea to now adding 6,000 new customers every week.

Jason is the founder of 37 Signals, the company behind products like Basecamp, Highrise and Campfire. But more than that, it’s the company that has continuously challenged the status quo, like by building a thriving business with a mostly remote team and making sure his team doesn’t work more than 40 hours a week.

Today on the show we focus on the birth of their flagship product Basecamp.

In this interview, you'll learn...

  • 8:26  why Jason didn't take venture capital
  • 16:34  how the team chose their pricing model
  • 25:14  why low hanging fruit isn't inspiring
  • 26:21  why Jason isn't interested in marketing to new customers
  • 36:26  how to make it work with a remote team of 40 people
  • 52:45  about their newest product and why they made it expensive on the front end

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Show Notes

Podcast transcript:

Starting from Nothing – The Foundation Podcast
Guest Name Interview – Jason Fried
Introduction: Welcome to Starting from Nothing – The Foundation Podcast, the place
where incredible entrepreneur show you how they built their businesses
entirely from scratch before they knew what the heck they were doing. Now
here’s your host, Andy Drish.
Andy: Welcome everyone to another episode of Starting from Nothing, The
Foundation podcast. Today, I'm super jazzed because we’ve got Jason Fried
on the phone with us.
Jason is the founder of 37Signals, the company behind products like
Basecamp, Highrise, and Campfire. But more than that, the company has
continuously pushed the status quo when it comes to business like building a
thriving team that’s completely remote and making sure his team isn’t
working more than 40 hours a week which is counterintuitive advice but
tends to work out really well for them from what I’ve seen.
Jason’s somebody I have a ton of respect for. We modeled a lot of their
philosophies as we grow The Foundation. Jason, thanks for coming on the
show, man.
Jason: Thanks for having me on the show.
Andy: Getting started, we generally talk about people’s first customer, where they
got their start in business. Today, we’re going to focus a lot of the interview
on Basecamp, their flagship product for the most part. But before we get into
that, can you tell me when everything shifted for you when you built
Audiofile and what that was like?
Jason: Yeah, sure.
Audiofile was the first product that I ever made myself. This is back in … I
think it was in the late 90’s, something like that. Yeah, that was the FileMaker
Pro app. Many people probably don’t know what FileMaker Pro is, it still
exists I'm pretty sure. I know it does actually. It’s a great little database
program that lets you make databases without having to know how to
program technically. It has a scripting language and some stuff but you could
design your own custom interfaces and then hook up databases so people
would do searches and store information, the whole thing.
I was looking for something to keep track with my music collection, my CDs,
and my tapes and stuff back then. I couldn’t find something that I liked so I
made my own and I learned how to -- It’s not really programming but I
learned how to make a program. I used FileMaker Pro to do that and I put it
up on AOL at the time because the internet was -- Actually, this is like mid 90s
and the internet really wasn’t around yet. I put it up on AOL.
Andy: What do you mean you put it up on AOL?
Jason: Fair enough.
AOL had a Mac file section where you could upload Shareware files to AOL
for other people to download. I did that. With the software, I included a little
readme file, a payment form. It said something like, “If you like this, send me
$20,” or something like that.
The next summer -- I forget exactly when it was but I got this envelope in the
mail from Germany and I didn’t know anybody in Germany. It was one of
those airmail envelopes with the red and a blue stripes, you know? My
parents gave it to me because in the mid-90s I was living at home with my
folks. I don’t know how old I was, in high school or something.
They said, “Hey, this envelope came for you.” I checked it out. In it was $20. It
was a $20 bill from someone in Germany who prints out the form and said,
“Love your product,” and they sent me $20. That was the beginning for me.
That was my first customer I ever had in terms of selling software.
That moment, I still remember I was in the kitchen, I remember the whole
thing. That moment gave me the confidence I needed to know that if I make
something that’s good and I put a price on it, people are willing to pay for it.
Andy: How powerful is that?
Jason: It was a big deal for me at the time.
I’d worked for other people. I sold shoots, I pump gas, I’d worked in grocery
stores. I had other jobs and I got paid for doing that work but this is the first
time that I ever -- Man, I sold lemonade, all that kind of stuff too, but this is
the first time I ever made something with the computer and saw the people
pay for it. That was, I think, a defining moment although at the time I didn’t
necessarily recognize that. But looking back on it, it definitely seems like a
really important point in my life.
Andy: What did you do after that? Did you keep building that or …?
Jason: Yeah. I'm thinking now, I got the time wrong. I graduated high school in ’92. I
was in college at the time this was happening. I kept going to college. I went
to school for four years. I went to University of Arizona. That software --
Audiofile. I made a few other ones I made something called Book Bin which is
for tracking your books. I made a video file for tracking your DVDs and VHS
tapes and that kind of stuff. I kept making money off them. Money kept
rolling in. It didn’t put me through college but it put me through college in
terms of all my spending money, my rent, and that kind of stuff.
Luckily, my parents paid for my tuition so I don’t have to deal with that.
Everything else was on my own. I didn’t have to ask my parents for money
and that was a big deal for me. So I just kept doing it. At some point, I
stopped doing it. I think it was in the late 90s I stopped doing it and switched
over to doing web design after college.
Andy: Then you switched to -- if I remember -- studying HTML. Learning more
design, learning a little bit about coding, and eventually founding 37Signals. Is
that right?
Jason: Kind of, yeah.
At the end of college -- I graduated college in ‘96. This is sort of when the
web was starting to happen like ‘95, ‘96. Very, very early days. Mosaic
Browser was out, barely. I mean it was early. You could go to any web page,
there weren’t many, but you could go to web page and like view-source and
see HTML and see how people made a page.
Now you can do that today too but it’s so much more complicated today. It’s
ridiculously complicated compared to the way it used to be which is basically
a series of H1’s, and [cues 00:05:57], and paragraph tags. Maybe a table or
two, it was so simple back then.
Anyway, I learned how to do that. I was doing that for some people on the
side making a few hundred bucks on a web page or website here and there.
And then I got a job offer, right out of college, to go work for one of the
clients that I’d found doing this web design. He lived in San Diego. He was
staring a web design company and he asked me if I would join him and I said
yes.
So I took a job right out of college, it was $30,000, moved to San Diego, and
worked for him about I think maybe four months, five months, or something
like that. And then I realized pretty quickly that it wasn’t right for me, that I
really need to do my own thing. I just didn’t really agree with the direction
we were going and what was important, whatever.
Anyway, he’s a nice guy, great guy. He was upset, obviously, because he hired
me out of college and took a big risk and I left in a few months which wasn’t
great. But, anyway, it was the right thing to do.
I moved back to Chicago and I kept freelancing on my own for another year
or so. And then I finally got a really big project. I think it was maybe a ‘97 or
something like that, ‘98. I finally hired my first employee. It was just me
though and my company was called Spinfree. That was the name of my own
thing which is just me. I hired somebody and then I met -- There’s some other
things that happened in the middle.
Eventually, I ran into these two guys who I knew. They were looking to start a
web design company. I was looking to branch out and get a little bit more out
of my own apartment, work with some other people. We started 37Signals
together in ‘99 and that’s how that whole thing started.
Andy: Beautiful.
I’ve always felt like I’ve related to you well. I grew up in a town of 600 people
in Iowa and there’s been -- We’re kind of seeing the tech bubble again with
all these startups getting funded. You pretty much lived through the first
round of that.
When I read your books, when I read your articles and stuff, the way you
think -- I wouldn’t describe it as like an Elon Musk I think of somebody who’s
just this tech genius. I'm like “Wow, he’s operating at this whole different
level.” I feel like I really relate to the stuff that you're saying because it seems
very simple, and clear, and concise, and just real is how it feels.
How did you not get caught up in the burst of the tech bubble in the late 90’s
and why didn’t you guys raise money and do some big startup? Did you have
a desire to do that at all?
Jason: Well, first of all, we’re based in Chicago which helped because Chicago wasn’t
obsessed with venture capital money, it wasn’t flushed with it. There weren’t
a lot of options. That said, I got many offers to do things. I don’t know, maybe
it’s my upbringing, maybe it’s my mid-Western roots. I don't know what it is
but I didn’t understand --
Actually, I just didn’t understand that kind of business. I don’t understand the
business that can’t figure out how to survive on its own. It doesn’t resonate
with me. Technically, I understand how to set something like that up, but it
just doesn’t jive with me at all. I just couldn’t get behind it.
I was always a person who want to make something that was meaningful and
keep doing it for the rest of my life, hopefully. Instead of bounce from thing
to thing to thing and sell a company, and raise a bunch of money, and then
be forced out. That just wasn’t my thing. I want to make something that’s
lasting. Those are the things I respect the most in the world who’s been
around for a long time. I think part of it was circumstance. I think maybe if I
was somewhere else --
Actually, it’s funny. I was -- you're reminding me of things. Before I started
37Signals, the last gig I had on my own was actually working for a company in
San Francisco called [unclear 00:09:50] Sports which most people won’t
know.
[Unclear 00:09:52] Sports was a really ahead of its time web design shop that
did some really amazing sporting event, a website for sporting events. They
ultimately did the Olympics, I think, in 2000 or something like that, or maybe
2008. They did some really cool stuff on this sailing race called Around Alone.
It’s a race for people who would sail around the world alone and they
outfitted sailors with GPS devices, with a way to log notes, satellite phones so
you could actually watch the race live. This is back in ‘98.
Andy: That’s a big deal.
Jason: Huge deal, way ahead of their time. Really cool.
People were blogging -- there wasn’t a blog back then but journaling their
days, pretty amazing stuff. They were really ahead of their time and they had
super talented people there. I worked there for six months on a project.
The thing is though, I think I came in as employee number 74 and in those six
months, I think they got up to 200 something employees. I saw them just
pack people in on card tables, you had no privacy, the work conditions are
horrible, and they’re way overpaying me. I just saw how ridiculous it all was.
They kept getting more money and more money and they’re lavishing more
money on people, hiring, hiring. That, again, didn’t make sense to me.
I think that experience was just being more a fan of sustainable simple
business models. You make something great, you sell it, people pay you for it,
and your business survives on its own. It was kind of what I was always into
[unclear 00:11:32].
Andy: It’s so frustrating because that advice is so simple and so real and so clear but
I feel like media only highlights the crazy stories.
Jason: It’s more exciting. The stories are more exciting. It’s fun to hear about some
company that just raised $100 million, or the CEO’s 26, all these things. Or
the CEO came from [unclear 00:11:58] place. They crashed and burn but now
they have new idea.
It’s exciting, I totally get it. I think it’s borderline irresponsible though for the
business press to not challenge these businesses more often. I think there’s a
lot of writing about the excitement about them which is a fair game, but they
rarely come back and challenge them on like, well, you’ve had six, seven
years, why aren’t you still making money? There are very few honest pieces
that way. That’s kind of a bummer to me.
Andy: Let’s switch and let’s talk about how Basecamp got started. So you started
37Signals doing a lot of client work. Eventually, you build this product for
yourself because there’s nothing really out there for you to manage your
stuff. Is that a fair route so far?
Jason: Yeah, we’re getting busy about 2003 getting a lot of clients. We were
basically sending -- been doing what most people still do which is managing
private email which is basically writing up a message, sending it to a client,
getting their feedback, doing the email chain thing, sending files back and
forth.
It works, it’s fine, but we didn’t feel very organized, we couldn’t refer back to
things, we didn’t know where things were. The status of a project was always
up in the air. We need a better way to deal with that.
We looked for some tools that exist at the time and none of them -- they
seem like they were designed for very different people, very different
process, very different problems than the ones we had. We were just looking
for a way to communicate with our clients. We weren’t looking for a way to
make really extensive charts and publish road maps. We just wanted to send
something to them, and get their feedback, have it all archived to one place,
have a schedule in one central place; some of that basic stuff.
Andy: Yeah.
Jason: So we ended up building our own internally just to see what would happen.
And as we started using it, our clients were saying, “Hey, I have projects like
this. What is this thing you're using? This works. It’s really easy. What is it?”
We said, “It’s just this thing we made” and the light bulb goes off and then
you're like, “Hey, this is a product. Other people could use this too.”
We sort of wrapped it up, cleaned it up, gave it a name which is Basecamp,
and then released it February 5th, 2004, so almost ten years ago, which is
amazing. About a year later, it was doing more business for us than our
consulting business was. So we stopped doing the consulting web design stuff
and started just doing software exclusively and that’s what we’ve been doing
for the past ten years.
Andy: So February 4th, you put it online and launched it. Did you have a bunch of
customers waiting for that day or how many people signed up on the 4th?
Jason: Oh man, I don’t remember. Probably a few hundred people checked it out.
We had a blog since ‘99 or 2000, just writing about design and our opinion
about things. We started to build up a little following of other web design
companies, other like-minded people, designers, whatnot. About, I don’t
know, maybe a month prior to actually releasing Basecamp, we started
teasing it on the blog. We started getting more people, more people
interested. We had a mailing list set up. So there was anticipation.
I should actually go back and find out how many people signed up on the first
day. I think it was probably a few hundred though. I could check it out. It was
more. I'm not sure. Maybe it was a few thousand. I don’t know. I could check
it out.
It was exciting. We launched the thing on the blog. We didn’t spend any
money on advertising or marketing, we still really haven’t in ten years. It just
took off and word of mouth eventually got a hold of it. A lot of people wrote
up stories about it because it was this new thing. Software as a service was
brand new back in 2004; very few companies doing it, subscription software,
very rare.
So I think we blazed some new trails there and that got us a lot of press and a
lot of people talking, a lot of people using it, people telling other people
about it. That’s how it got started.
But I think it was key that we had a blog that was -- we were writing about
things in the blog regularly so we had this built in audience. When we
released the product, there are people waiting to check out what we had.
That was a key for us.
Andy: Yeah. What’s really neat about Basecamp is it’s got the whole virality built
into it with how Hotmail kind of expanded by putting, “If you want a free
Hotmail account, a free email account, go to hotmail.com and sign up.” And
then everybody sees at the bottom of their emails. With Basecamp, you start
working with a designer and they’re using Basecamp. They’re like, “Oh, what
is this?” and it’s just naturally built to expand quickly.
Jason: This is actually a core idea that went into our pricing because at the time, and
still today, a lot of software’s priced by seat, by the person, you sell seats. We
never liked that idea because we always called that participation tax. The
idea of being that the more people you have involved, the more expensive
the software got which would encourage you not to add more people to it.
We wanted more people to use it because more people who use it, more
people have an experience with it and then they’d tell the people about it. Or
people switch jobs and they take it with them, like all those things.
We wanted more people to use the product so we always have allowed
unlimited users to use Basecamp. We don’t charge by the person, we charge
by the project. That way you could have 50 people on a project if you want
and it will cost the same as if you have three people on the project. That was,
I think, a big fundamental decision we made early on to let people use it, and
that’s what we want, we want people to use it. Why put something in their
way?
Andy: When you're making marketing decisions about this of whether it’s design for
conversion or pricing, we talked a little bit before this, it seems like you made
a lot of decisions based off feeling as opposed to hard numbers at times.
When you're looking at conversion rates and stuff, how do you balance that?
Do you generally go with what feels right?
Jason: We’re mostly gut driven but for the past couple of years we’ve been a little
bit more data driven or trying to get more data driven. Not to replace the gut
but to supplement it or to enlighten us in ways we hadn't considered. I think
that data can help paint pictures that you can’t -- can bring some facts to
pictures that you paint in your mind. The data can either push you in new
directions, or change your mind, or whatever but it’s good to have that. So
we’re doing more and more of that.
But a lot of the stuff we do is still based on field, just let’s try it. It’s like an
experiment. Let’s give it a shot. We can AB test it if we want. That’s
something we become more rigorous about. We still just try things too and
ideas just come from anywhere and anybody. If it’s a good idea and someone
can fight for it, we’ll try it, and see what happens.
Andy: Beautiful.
After a year, Basecamp’s doing more than you guys are doing in consulting
revenue. Did your entire focus shift then and did you drop all of the service
stuff? Was there a moment where you’re like, “Okay, we’re actually building
a software company, we’re not doing services anymore.”
Jason: I think it was sometime in the middle of 2005 when we just said we don’t like
doing client work anymore. It just wasn’t for us. You do it for a while and it
gets frustrating because you work hard to deliver something and then it
either doesn’t make it out or it gets changed after the fact. It just wasn’t
satisfying anymore. So we were very excited that we could support ourselves,
support our business just doing our own thing.
I think that was sometime in 2005, mid 2005. That was when we took our last
client project on and we haven’t done one since.
Andy: How big was your team then?
Jason: Four people.
Andy: Just Basecamp?
Jason: Maybe five at that time, I'm not sure. We hired our first --
So it was me, Ryan Singer, Matt Linderman, David Heinemeier Hansson,
that’s four, and then we hired our first new programmer, a guy named Jamis
Buck in 2005 I believe. I'm not sure when he came on in 2005, but we
would’ve been four or five people back then. Out of those five people, four
people are still here.
Andy: Wow, ten years later. That’s really impressive.
Jason: Nine really if we’re talking 2005.
Andy: That’s really impressive.
Jason: Matt who was the first employee, he worked at 37Signals for 11 years and
then left a couple of years ago. He’s the guy behind Vooza, if you guys know
Vooza. It’s sort of a -- Well, I'm not going to tell you what it is. You can go
check it out. It’s a video series sort of lampooning the tech scene. It’s very,
very good, very well done. He’s the guy behind that now. That’s his own
thing.
Andy: When you had four or five people on the team a year into Basecamp, where
was the majority of your time and energy focused? What type of activities
were you doing?
Jason: Product development work and customer service. For the first maybe year or
two, I did all the customer service. So I would answer all the emails and stuff.
But there weren’t that many because it was small still. I mostly spend time on
improving the product, adding some new stuff, refining other things, cleaning
things up, dealing with that stuff. That’s always my favorite part of anything
is making a product, and improving the product, and redesigning a product,
or designing something. That’s my favorite activity. That’s all we were doing
because that’s all we had to do. It was fun.
Andy: What are your thoughts on becoming a good marketer versus building a great
product? It seems like you guys air on the side of building a great product
because you have really solved marketing as well.
Jason: I don't know. I don’t know what our marketing really is because we don’t
actively market. We don’t have a marketing person here; we don’t have a
marketing department. We don’t spend any money on marketing,
technically.
I think -- yeah. We use our blog a lot to talk about what we do and what we
believe in. We write books; that helps, too. We speak a lot. That helps too.
We do interviews. That helps too. People write stories about us. That helps
too. But we don’t have a tight sort of vision for marketing, and I think we
should but we don’t, we never have. I think it could be really interesting if we
did. [Unclear 00:22:13].
I just feel like still the product has to be great. You got to make a great
product. Marketing can be used to cover up a bad product but only for so
long. At a certain point, you have to deliver. People will see through the
marketing. If you make promises you can’t deliver on, they’ll leave you. I’ve
been always a big fan of making something that’s as good as we can and then
a lot of the rest of the stuff takes care of itself.
Andy: Is there a reason you guys haven’t done the marketing thing yet, because the
product’s already incredible?
Jason: Part of it is I don’t even know what marketing is, to be honest. I’ve talked to a
bunch of people about marketing and I’ve interviewed a bunch of people
about it. They all have very different stories. Some people talk about SEO,
some people talk about customer acquisition, some people talk about
advertising, some people talk about PR, some people talk about conferences,
affiliate marketers. All these things you can do and none of those things
resonate with me.
I kind of, honestly, don’t even know how to hire a marketing person. Most
people I talk to, I don’t understand them. I really don’t. I don’t know what
they can do for us and I have a really hard time understanding how to
evaluate them. That’s it. It’s actually a lack of understanding on our part
because we --
I look at other companies and I go, “Wow, great marketing, great
advertising,” that sort of thing. I respect. I love great advertising. I love -- I'm
a student of advertising. I absolutely love advertising. So much of it is so poor
and so bad that I really want to make sure that if we’re ever to go in that
route, go in that direction, that we did exceptional work.
I haven’t found the person or the team or the -- whatever that would give me
the confidence to say “Let’s go all in on this and try it out.” Because I think
some of the stuff you have to go all in on. I think if you just experiment on
the sidelines with marketing, you're not going to make any headway anyway,
and so then what’s the point? I don't know. I'm ranting here a little bit.
Andy: It’s cool to hear your thoughts on it.
Jason: It’s something we’re talking about now at the company actually a lot which is
-- we built a business that does tens of millions of dollars in revenues and
profits. We [unclear 00:24:29] ourselves with our own money. Basecamp
right now is picking up 6,000 new customers every week.
Andy: New paid customers?
Jason: Not paid, just sign ups. A fraction of those [unclear 00:24:41].
But 6,000 still. No effort really on our part in terms of marketing or
advertising, getting the word out. So that’s exceptional, but what could we
do? What could it look like if we made an effort? A real effort.
We’re talking about that again and interviewing a few more people but it’s
still just really challenging. I feel like if we hired somebody to do this, I don't
know what they would do. We don’t have that clarity yet so we haven’t done
anything.
Andy: Are you familiar with retargeting?
Jason: Retargeting?
Andy: Yeah.
Jason: Yeah.
Andy: It seems like you guys have a lot of low hanging fruit when it comes to
marketing. Really?
Jason: I'm sure we do. I'm sure there’s tons of opportunity. I don't know. I'm not
inspired by low-hanging fruit stuff right now. If we’re going to do something
like that, like really go forward with a real marketing campaign and really
make something happen and try to double or triple or quadruple our sales,
whatever it might be. It’s not a low-hanging fruit for me, like I want to go
bold and do something really interesting.
Andy: Yeah. Is that generally how you work with things?
Jason: No, it’s not.
Andy: Yeah.
Jason: When it comes to marketing, you kind of have to go in that direction because
I think -- It’s not interesting for me to pick up a few percentage points
because we don’t need to. I think if you're a public company and you're
trying to move your revenues, move your needle and stuff, you hit your next
quarter and that kind of thing. You need to pick up a percent here and a
percent there. For me, that’s not interesting because I don’t care about those
kind of measures. The things I want to do I want to have a big impact and
that’s sort of how we’re thinking about it.
To be honest, the thing I'm more interested in in terms of marketing which I
never hear from anybody when I talk marketing is I'm not interested in
picking up new customers. I'm interested in marketing to our existing
customer base which we have tens of thousands of paying customers and not
trying to sell on things.
But I want to think of marketing as a different way which is I want to help
them understand the product that they’ve already purchased, how to get
more out of it, how to help them kickass with it. The idea is that if we can
make our existing customer base more effective with their product and help
them kickass and make them into heroes at their company. They’re going to
tell more people about it and new business will take care of itself again.
That’s actually what’s a little bit more interesting to me. I don’t know if that’s
marketing or …
Andy: That’s interesting. It’s almost putting an amplifier behind what you’ve already
been doing.
Jason: Existing customers, yeah.
Andy: Yeah.
Jason: That’s something we’re talking -- we talk about a lot of stuff, I don't know
what we’ll end up doing but that’s [unclear 00:27:22].
Andy: Do you find yourself taking more risks at this stage in business?
Jason: Not really. I’d like to get a little bit riskier, but we’re not really that risky
company. We’re pretty measured and pretty careful about what we do. I
think it would be fun sometimes to make bolder bets. We’re going to be
making some bigger bets actually in 2014 so you’ll hear about some of those.
This is the start of making some bigger bets and bolder moves. I hope to see
more of that.
Andy: Cool. What was the audio that just came on?
Jason: That was on Campfire. Campfire which is our group chat tool where we talk
all day, there’s a feature where you can play sounds. That was the men’s
warehouse guy saying I guarantee.
Andy: Nice.
Jason: What’s going on in the room, people play different sounds. That’s all that is.
Andy: You’ve been pretty risk averse since the beginning. When you see people
getting started in business, what are the common mistakes you see them
making? Especially where they’re in that phase where they’re validating the
idea that makes sense, they might be working a job full-time, or freelancing
on the side. What are the common mistakes you see people run up against?
Jason: Biting off too much upfront I think is something I see happening a lot.
People’s ambitions are a little bit too grand I think often times. They could
build a really great solid company with a smaller ambition and then take that
smaller ambition, use it as a great foundation to do something bigger next.
I think a lot of people set themselves up to fail because they try and do too
much. So there’s that. I think raising money upfront is another example. I
think you need to raise much money upfront if any. Tons of business, but
when you’re talking about software, you don’t. You just don’t need to in
most cases.
I think also hiring so many people upfront. I’ll see a lot of companies with 12
people already. They’re less than a year old. They all have senior vice
president titles or vice president of this, vice president of that. A company of
12 people should not have any titles. You should work on stuff. To have fancy
titles like that is another sign to me that the priority is in the wrong place.
Trying to be like other companies I think is another example where people
are like, “Wow, we want to be the Uber of this, or the Airbnb of that,” or
whatever. I think that’s another mistake because -- I don't know. Those
things don’t work for me. I think it’s important for you to know what you're
trying to do, be yourself, keep it small, be thoughtful about things. There’s
always time to grow whenever you're ready, but you only get a few things
right first before you start biting off way too much stuff.
Andy: Yeah. It’s such a struggle, I think, for people. And I think, at the end of the
day, it’s a lack of priorities. They’re focused on the wrong stuff.
Jason: It is. And, by the way, they can focus on one thing and make it small and still
fail. All the stuff’s hard and there’s a lot of risk involved with all of these
things. I think that you want to play the odds with [unclear 00:30:47]. I think
if you want to play the raise the money odds and go big odds, it’s like you're
playing the lottery. There’s only one way for you to win which is basically
selling your company, or IPL-ing.
The other way is like if you don’t raise money and you do it on your own, you
try and make sustainable small business and get something going. You have a
lot more options. You can just keep doing that, you can make a nice living,
you can decide to take money later if you want, you can decide IPL later if
you want, you can be in business for 40 years, you can be in business for five.
You can do whatever you want, it’s yours. It’s your business, it’s your
schedule, it’s your money, and it’s your time.
When you present yourself with those options, you increase your odds and
you give yourself more flexibility. I'm more a fan of that.
Andy: Why did you guys bring on Jeff as an investor?
Jason: In 2006 Jeff Bezos got in touch with -- One of his people got in touch with us
about -- Elizabeth Korrell got in touch with us. She worked with Jeff on his
investments, personal investments. He was starting to invest in some
companies that he really liked. He learned about us through a few different
ways. I think one of his other companies who’s invested and used our
product, used Basecamp. We’ve seen him speak at a conferences in San
Diego at E-Tech in 2005. A few things came together and he was interested in
what we were doing. He liked our message. We’re a very long-term focused
company; he’s a very long-term focused guy.
We’ve been approached by dozens of venture capitalists and whatever
before that, I just rejected all of them. I don’t want their money but Jeff
Bezos is an idol. Well, not an idol but he’s a personal hero of mine, definitely
an idol. I don’t think idolizing people’s smart. But he’s a hero of mine. I have a
lot of respect for him, what he’s built, how he’s built it. He’s smart, he’s risk
taking.
Anyway, to get an email from Jeff and they’re like, “Hey, you want to come
out and talk to Jeff?” I said of course. I went on to fly out to talk to Jeff.
Honestly, I didn’t want his money. I really didn’t think I was going to take any
money from anybody. But sitting down, speaking with him for a couple of
hours and having a really good conversation, I could see that our interests
were aligned. He’s a multi-billionaire. He’s not interested in selling, and
getting out in three to five years. That’s not his thing. He wants to invest in
things for the long term.
For me and David, my business partner, it was good because -- This was 2006.
We weren’t sure if this Basecamp thing was going to last. We didn’t know. It
was an opportunity for us to take some money off the table and put a little
bit of money aside just in case. That’s what that investment was for. So it
wasn’t to run the business. None of the money went into the business. It was
sort of founder shares.
So Jeff owns a small piece of the company. We get to talk to him a couple
times a year. He’s available if we need more advice from time to time. It’s
been great. We’ve learned a lot from him. We haven’t used him that much. I
feel like we could probably use him some more although he’s very, very busy,
he’s hard to get a hold of. It’s a challenge always to learn from someone
who’s that busy.
Andy: What’s an issue you would bring to him, or a question, or a perspective you
would want from him that you can’t get from anyone else?
Jason: There’s something we’re about to do which I can’t tell you. We’re talking to
him about, want to get his take on. Expansion stuff, customer service stuff,
some fundamental business challenge stuff like hiring, and growing, and that
kind of stuff is good for him. I also just like more strategy talk with him,
branding things.
One of the things that we talked to him about at one point was like launching
a new product with a new name versus extending a current brand. For
example, if we launch another product, would we give it a new name or
would it be called Basecamp something? So that kind of stuff which I don’t
have any experience with and he has a lot of experience with.
The Kindle could’ve been called the Amazon Reader but he decided that it
was called the Kindle by Amazon, the Amazon Kindle and there’s a whole
family of Kindles now.
Those little subtle things are the kind of decisions and advice that we can ask
him and he can give us some good insight on. But the truth is when you talk
to Jeff -- most of what Jeff tells you is trust your own gut. He’s like, “You guys
have done a great job. If you think it’s right, do it.” He’s more of a confidence
inspiring person than he is telling you or ever telling you what to do. So that’s
nice.
Andy: Let’s talk about your team. You just had a book come out, Remote, which is
really, really cool. I think it makes a great case for companies. I think a lot of
companies at this point are starting to look into that. We’ve kind of built our
company with that framework from the beginning.
We just moved six of our team members to Boulder to experiment what it’s
like working together in one location because we’re in the middle of this
launch and stuff. It’s been really interesting but the culture shifted a lot, I’ve
noticed. The bonds of people have increased a lot. Productivity, I would say,
has went up. When you're building a virtual company, how do you build that
culture? Because I know culture’s really important to what you guys are
creating.
Jason: You have to have a central -- I think you need a central place where most
communication happens. For us, it’s Campfire and Basecamp. The idea is that
there needs to be a central place where the conversations happen, where the
company talks, regardless of where people are. Because if there’s a local
culture and a remote culture, you start to splinter things. You want to make
sure the decisions are made in the universal place, and discussions are
happening at a universal place rather than just in a physical office.
If you just make all your decisions in a physical office, in a physical location,
people who aren’t in that location don’t feel like they’re included. We want
to make sure people are included, people have good ideas. Just about
everybody in the company has full access to every Basecamp project, almost.
Pretty much everything that’s being worked on in the company is available to
anybody to chime in on and to see. I said almost because not everything is
this way but most things are. All of our conversations happen in Campfire and
Basecamp and they’re all right there. I think that’s how you have to do it. You
have to treat people equally in that way.
I think also it’s much easier to start early this way. I think if you’re a company
of a hundred people and everyone’s in one physical location and you try and
hire five people outside of that location, it’s going to be really difficult. So I
think it’s important to start that culture really and ours is right from the
beginning.
David, my business partner’s from Copenhagen. We worked together for a
few years without even meeting each other. And then the first programmer
we hired was Jamis who lived in Utah at the time, now he lives in Idaho. Right
from the beginning, we just decided to hire the best people we could
regardless of where they were and it’s worked out quite well for us.
We get together though from time to time and we get together a few times a
year. It’s hard to get together more frequently. FaceTime is very important
still but I don’t think it’s required to do most things. I think it’s a nice tool to
use when you need it, but you don’t need that super high bandwidth stuff all
the time. That’s not good.
Andy: Is it more important for you to focus on your customers or your employees,
your staff?
Jason: I think you got to have -- Well, both. But if your employees aren’t happy, it
reflects in the product. [Unclear 00:38:21]. It’s going to make a lot of noise.
Sorry.
If your employees aren’t happy, and aren’t well taken care of, don’t respect
you, and you don’t respect them, and all that kind of stuff, nothing else
matters because customers will not be happy in that scenario. That angst will
filter to the product, the product won’t be good, the service won’t be good. I
think you got to start with your employees and start with your own team
because you produce things that your customers consume.
If you're making bad food, they're not going to eat. If your kitchen is dirty, no
one’s going to want your food. I feel that’s the same way about a company.
You got to care about customers absolutely but you got to get your house in
order first in order to care for them. I don’t believe that you can care about
customers if your own team is in shambles and you don’t respect people and
they don’t respect you.
Andy: In 2005, four or five people on a team, most of your energy was going
towards product and customer support. Where is your energy now? You have
30 some people?
Jason: Forty. We just hit 40 people.
Andy: Forty people. Wow! How has that shifted? Where’s your --
Jason: It’s different. We have discussions all the time about size, and we’re very
careful about hiring, and we’re still -- we hit 40 which is still incredibly small.
We have 11 developers, we have five designers. These developers and
designers, we have ten people in our support team, we’re able to accomplish
a ton of stuff with a relatively small team. We’re really proud of that.
But we bump into do we need more people; we want to do more things.
Right now, all of our support is done via email, what if we want to do phone
support and what if we want to be 24/7. We’re not 24/7 right now. It’s going
to take more people and that’s going to increase the company size. What’s
that going to do with the culture? You have to weigh all these things.
Andy: Yeah.
Jason: A lot of my time is spent on business stuff thinking about these things,
thinking about new ideas, trying to push the company, trying to push
everybody, challenging everybody to push harder in terms of their own
creativity and their own ideas. Not to work longer but to just think more
about what they’re doing. Increase our quality, keep that really high.
Right now, I'm working on some new stuff, some new ideas that we’re going
to be doing in 2014 which is really exciting because you’ll see there’s some
cool stuff happening in 2014. It’s really fun to work on that.
I still love product stuff, I still love big picture thinking stuff, I still love talking
to individual people and helping them, and trying to push them, and ask
questions with them, and help them solve the problems on their own or jump
in if I need to, things like that. So it’s sort of all over the place, but that’s my
role and I like it, I enjoy it.
Andy: Cool. Why do you think you and David make great partners?
Jason: I think we have a lot of things in common in terms of the way we see
business. We both believe in keeping things as small as we can, we both
believe in focusing on one thing at a time, we both believe on building
sustainable business and profits, over spending and all that stuff. We both
believe in taking care of people well, all those core things. We see that world
the same way. But then we also have very different opinions about a variety
of other things. It’s very good because I think it creates a really good balance.
Sometimes I'm more -- pushing for more creative solutions and he’s pushing
back on that sometimes. Other times he’s pushing forward and I'm pushing
back. There’s a lot of that back and forth, but we have enough share to
overlap in the middle in terms of our outlook on things and our core beliefs
that it’s a really good situation.
I think it’s good if you have a partner in a business to have different view
points, but it’s also important to have a solid, stable base somewhere in the
middle that you can always depend on. That you can always go back to, that
will keep you grounded. Because if you're always disagreeing all the time,
that’s not a very comfortable place to be.
So David and I disagree a lot, but we also agree a lot. That’s a good set up.
Andy: You just got married. Congrats on that.
Jason: Thank you.
Andy: Do you see similarities on that? Like overlaps with your business partnership
and your relationship?
Jason: Yeah, I guess in some ways.
It’s very different, though. Technically, I’ve been -- Well, I’ve only been
married for a couple months and I’ve been in business with David for ten
years. So David and I have a much longer track record.
I think any sort of thing you get involved with someone else in a dedicated
way requires a lot of respect, it requires a lot of common ground, but I also
think it’s healthy to have different points of view because you want different
people and you want to see things from different perspectives and different
ways and I think that that’s really viable. I think that there probably are a lot
of similarities.
I think one of the key things too -- Actually, this is going back to an earlier
question of yours which is if you're going to go into business with somebody
else, you kind of need to date them first in a business sense, right? You need
to -- I see a lot of people who are just looking for co-founders. They’ve never
worked with this other person, they don’t know the person very well, they're
just looking for a technical co-founder or a designer co-founder. If they find
one they go into business with them. That’s like just marrying someone
you’ve never met.
Andy: Which is dangerous.
Jason: Yeah.
David and I worked together for a few years. First, I hired David as a
contractor. He was still in college at the time. He gave me ten hours a week
of his time, then more time. Then we hired him as an employee, then he
became a partner in the business. We worked together a lot and done a lot of
things together prior to me making him a partner in the business. I think that
that’s really important.
It’s similar to marrying someone. You got to get to know them first. You can
get married in a week if you want, but I think it’s probably better to give it
some time and make sure you iron out certain differences, and they see what
your commonalities are, that sort of thing. [Unclear 00:44:36] similar in that
way.
Andy: Yeah. It’s cool because you get to experience fighting together.
Jason: Yeah.
Andy: I think that’s honestly where a lot of the rich innocent partnership comes
from is through the fighting and learning to do that in a really healthy way.
Jason: I think so too. I would agree.
Andy: You guys just did a complete redesign of Basecamp, an overhaul, where you
started totally --
Jason: Two years ago.
Andy: Was it two years ago?
Jason: Two years ago.
Andy: Holy cow!
Jason: Almost two years ago. It will be two years ago in March.
Andy: Man, time flies.
Jason: We did a whole thing. Well anyway, sorry. What was your question [unclear
00:45:10]?
Andy: What inspired that? Was it innovator’s dilemma type stuff where you guys
are going, you’ve got a great product. It’s working. Why redesign from
ground up?
Jason: I was personally not happy with the way Basecamp was anymore. I felt like it
had gotten as far as it could go in its current form. There’s some fundamental
changes that I wanted to make to it that was sort of possible by modifying
the existing code base. There’s a time in every software product’s life when
there’s a little bit too much legacy that you can’t make the changes you want
to make. It’s either stick with what you have or you do something new.
We’ve decided to do both which was that anybody who liked Basecamp
Classic -- which is what we call it now which is the original Basecamp -- can
continue to use Basecamp Classic until the end of time. We don’t shut
Basecamp Classic down, we never shut it down. You can keep using it, you
can keep paying for it, you can keep doing it. We’ll never push you to
upgrade, anything like that.
What we did was then we launched a new version of Basecamp which is now
called Basecamp. Classic is the original and Basecamp is the new one. It’s
entirely new version. You can pull your projects over from the old one if you
want or you can start fresh. We don’t sell the old one anymore. But if you
have it you can keep using it forever. That’s a core thing that we’ve decided
to commit to which is supporting those customers until the end of time. They
loved Basecamp the way it was, keep using it. I don’t want to pressure them
to ever switch.
So that’s what we’ve done and the new Basecamp has been hugely successful
for us and it was a long term one-year project. It was something we said we
would never do which is a complete rewrite which is usually the worst thing
to do in software; unless it’s a new product. What’s bad is to rewrite
something from scratch like in a new language just to switch languages but
match the old functionality. But if you're going to bring new ideas to the
table and have a new interface, new ideas, new functionally, then we think it
makes sense and it did. I hope to do that every few years.
I hope to constantly redefine Basecamp and hope to make it better and
better overtime. Because at a certain point, even today’s Basecamp which is
very modern, very fast, excellent, top of its game, will not be in a few years
just because of the nature of software, the nature of the movement of the
market, and all these things. I want to continue to reinvent it and make it
better all the time.
Andy: You recently handed over the reins to Basecamp. How did that feel and what
inspired that?
Jason: Basecamp is now primarily run by a guy named Jason Zimdars who lives in
Oklahoma City. He’s one of our designers who sort of leveled up to product
manager/designer. Still does design on the product but he’s sort of in charge
of writing projects now on it. Jason had really stepped up a lot over the past
year. He had really taken on a variety of projects on his own, he’d run them
to completion, he gotten them done really well, he’s super detail-oriented.
He’s a solid guy you can trust. He makes good decisions.
I was looking at exploring some other ideas in the company and spending
some more time with some other things and I couldn’t give my attention fully
to Basecamp. Basecamp deserves our full attention because it’s our number
one product and it’s loved by millions of people around the world. Tens of
thousands of businesses depend on it every single day and it needs to have
someone dedicated to thinking about it all the time and making it better all
the time. That wasn’t me anymore.
Jason was the natural person for it. He’s risen to the challenge and is really
kicking ass on it and doing a great job. The product’s gotten a lot better
under his guidance over the past few months. There’s some more stuff
coming out for it shortly which is great.
It was kind of a hard decision but also not really because I had a lot of
confidence in him. It’s the right thing to do. I'm really pleased with it and he’s
really pleased with it. It’s a good learning experience for him. I think
everyone’s better off.
Andy: Beautiful.
Jason: Yeah.
Andy: In the last couple of years, it seems like you really spent more time helping
other entrepreneurs run their companies, start their companies with the
release of Rework, with the release of Remote, writing more articles. What’s
inspired that? Do you see yourself doing more of that with this extra free
time or this extra space in your life?
Jason: I have free time but not business free time. I enjoy giving back and sharing
what I’ve learned because I think it’s valuable. I’ve gone through some stuff
and if I can help someone else not have to go through those things or
encourage them to go through those things and learn for themselves or
whatever it is, I'm all for that. It’s very much like we open source a lot of
software here at 37Signals; from Ruby on Rails, to writing structure projects,
to web servers, to some things that we’ve built.
For me, writing is a way to open source my ideas, kind of. When you write an
article, it’s out there now. It’s in the public domain essentially. Anyone can
use it and think about it. They can build upon it, they could take an idea in it
and make it better, whatever. I'm not a programmer, so I don’t really open
source stuff but I try to open source my ideas through writing and I enjoy and
I love writing. I really love the challenge of writing and editing and all that
stuff. So for me it’s great exercise as well as it is a great way to give back and
share, I think.
Also, like I said, we don’t really do traditional marketing but for us writing is
probably our best marketing. The more we can share our ideas and our
thoughts, the more people pay attention to us and indirectly they find our
products. I think it’s very valuable that way.
Andy: Beautiful. Anything else before we wrap up? Any final thoughts?
Jason: No, I'm very excited for 2014. You’d see cool stuff happening. I suck at
keeping secrets so I'm going to shut up because I would [unclear 00:51:08]
something. But there’s stuff happening in 2014, I'm looking forward to it, it’s
going to be a fun year for us.
Andy: Can you hint anything?
Jason: No. I'm not going to hint on anything. It’s only a few months away, 2014.
People will know about it soon enough.
Andy: Can we talk real quickly about the product for managing your team that you
guys talked about?
Jason: Oh, Know Your Company.
Andy: Know Your Company. How is that going?
Jason: Great. Know Your Company is doing exceptionally well. It’s something we
launched five months ago. It was just sort of an idea that I had. I found myself
being unable to keep in touch with everybody at the company and really
know what was on their minds as well as I used to. When we were smaller, it
was a lot easier. When we got to 30 and 40 people, it was a lot harder. We
built a tool to make that a lot easier and for me to learn new things every
week about how people feel, about how we’re doing as a company, quality of
our products, leadership, the competition, things people want that we don’t
provide, whatever. It’s been doing great. We turned it into a product.
The really unique model for us which is that it’s not self-service, we actually
have to sell it to you. You have to contact us. Ye have to give you a 30-minute
demo of it; personal demo. If you want to buy it, we’re happy to sell it to you.
But it’s $100 per employee one time. So it’s not a recurring thing but it’s a
bunch of money upfront; minimum of $2500 upfront, big deal. So far, in five
months, it’s generated over $300,000 in sales. About 90 different customers
are on it now and about 3,300, 3,400 employees are using it at these
companies so it’s been a huge success.
Andy: Why do you price it that way?
Jason: Because to me feedback or learning things from your employees should be
seen more as an investment in an employee, not as an ongoing expense. I
don’t want feedback to be an ongoing expense. I want you to invest in your
employee. For me, the idea of charging $100 per employee one time is like
saying, “I'm going to invest $100 in an employee once. And for as long as they
work for me, I will get to learn things about them. From them, I’ll get to hear
from them.” To me that just makes more sense.
Also, it means there’s a lot more money to spend upfront so we’re basically
taking companies that are between 20 and 80 employees. So minimum it’s
$2000, $2500 which means that if you're going to spend that kind of money
upfront, you're committed …
Andy: … to implement it.
Jason: Yeah.
If you spend $20 a month, you're just going to blow it off. It’s just going to
happen. But if you put $2,000 on the table, or $3,000, or $8,000, or $9,000
on the table, you’re going to make sure it’s going to work, and you're going to
implement it, you're going to give your fair shake. I think that signals a lot to
customers that it’s worth exploring or infusing and it has been. So far, it’s
been really, really great. I hope it continues to do well.
Andy: Beautiful.
Jason: It’s a side project. I mean it’s not our primary focus by any means but it’s a
really cool product.
Andy: It’s cool. I love how you're constantly solving your problems that you
experience.
Jason: We’re trying to, yeah.
Andy: That’s awesome.
Jason, thanks for coming on today.
Jason: Yeah, it’s fun. Thanks for having me on. I hope I answered all the questions
thoroughly.
Andy: You did. Thanks, man.
Jason: Cool, man. You bet. Take care.
Andy: Yeah, you too.
Closing: Thank you for joining us. We’ve taken this interview and created a custom
action guide so you know exactly what action steps to take to grow your
business. Just head over to thefoundationpodcast.com to download it for
free. Thanks for listening and we’ll see you next week.

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