Excellence in Action


Tidemark Founder Dave Yuan interviews Jason Fried, Co-Founder and CEO of 37signals.

If you have ever dived into the world of bootstrapping, you know Jason Fried. He co-founded 37signals nearly 25 years ago and has been a trailblazer ever since. His story is classic: he built software as a teenager to organize his music collection and soon started selling it online. It was a lightbulb moment when he realized that he could make money by building products he wanted. 

After a few stints in corporate, he helped found 37signals. It began as a web design agency that transitioned into a software product business organically. They built Basecamp to solve their own client management issues, then realized others wanted it as well. 

One of the largest benefits of bootstrapping is the independence it grants—throughout our conversation, Jason continually brings up that benefit. In their business, they actively avoid enterprise customers and focus on serving small businesses. Instead of setting goals, the company focuses on a repeatable product process. Rather than be driven by a board’s demands for unrelenting growth, they are driven by the passion for what they build.

Even their marketing is different—they open-source their ideas through books to spread their philosophies and gain influence. They only recently began experimenting with paid marketing (can you imagine not doing that for 25 years?), and everything they make has a deliberate, handcrafted feel. 

At Tidemark, we love these types of entrepreneurs. Their stories and strategies are worth studying. We hope you enjoy this conversation with Jason Fried.

If you’re interested in staying in the loop when new episodes of Bootstrapped Legends launch, you can subscribe here. If you're a Bootstrapped Legend who wants to tell your story or learn more about working with us, please reach out to us at knowledge@tidemarkcap.com.

Dave: All right. Really excited for this episode of Bootstrapped Legends. We have Jason Fried, cofounder of 37signals. For those of you who haven’t heard of 37signals, which is a rare few these days, they’re a provider of a handful of products. Probably the most famous are Basecamp, a project management tool, and HEY, which is an email product. We’ll get into both in a second.

37signals was founded in 1999, close to 25 years ago, which is notable in its own right. The last press release I was able to track down – you can correct me, Jason – but as of 2021, you had over 3 million users and generated over a 100 million in revenues annually. So quite a large business.

Jason:  We never shared the revenue number publicly, so I’m not sure where that came from, specifically. But yeah, we have lots of people using our stuff, let’s just say. [Laughter] Also, [we] never really focused on revenues. We’ve always been profitable, which is our measure. 

Dave: Yeah, hundred percent. We’ll definitely get into that in a second. 

We reconnected over a fellowship in New Zealand, which is a whole other story. I don’t know if you remember, we first connected in 2010. Ironically, I was in Chicago to visit Groupon.

Jason: Yeah. I was on the board of Groupon too, for a while. It’s funny to have been on both [ends of the] spectrum of the way we do it and the way they did it.

Dave: Oh, super interesting. I missed that. I was visiting the company; I’d read a little bit of your work, and I was super interested in what you were doing. 

You were nice enough to host me in your offices [and] the contrast was really stark. I’m sure you lived it at the board meeting, but you guys essentially railed – rail is probably the wrong verb, but you were very negative about the traditional startup mentality. You were really focused on profitability over growth, and probably more than that, just building great products. In a software recurring model, profitability does come from that. That always sort of stuck with me. As we were launching this series, I thought, “Man, I’ve got to reach out to Jason and have him tell his story!”

Jason: Yeah. It’s great to see you again. Thanks for inviting me on.

Dave: Awesome. Maybe you can kick it off with your personal background.

Jason: Yeah. I would probably start in junior high school, [which] is when I first got into computers. I think that’s where it all started. The funny thing is, I didn’t care about computers. What I cared about, or what I was intrigued by, was being able to make something. Like, I can actually make something with this thing! That was exciting to me. Whether it was using, way back when on the Mac (my first Mac was a Mac SE 30 or something) like, Mac Paint. [It was] just like, wow, “I can draw on this computer. This is amazing!” 

Then I got into making software. I learned to make some software because I wanted to keep track of my music collection. I had a growing music collection of tapes [and CDs], and I would lend them out to friends. I would never get them back, and I didn’t know who I lent them out to. “Oh my god, I’m losing all this stuff!” 

And I didn’t have any money. I mean, I was a kid. Losing a CD was like, “I just lost 15 bucks.” That’s a big deal, right? So I made this software to organize my music collection. I used this thing called FileMaker Pro, which was an early database system that you could make graphical interfaces with. It was really quite remarkable. Kind of like HyperCard, for those who go way, way back, but more involved.

Anyway, I made this thing, and I was like, “This is great! I love this thing. I don’t know, maybe other people might want to use this.” I wrapped it up, I compressed it using Stuffit – if you remember, I don’t know if you remember that –

Dave: Yeah.

Jason: – and put it up on AOL. This was pre-internet. I said, “If you like this, send me 20 bucks.” I think there were maybe some limits, like you could only organize maybe 10 CDs or something before you had to pay? I don’t know what the number was.

“If you like it, send me 20 bucks.” I got some envelopes in the mail for 20 bucks, and I go, oh, my god, I can make something that I want, and other people probably want. Not everybody, but enough people probably want what I want. I can do that. Through high school and college, I made tens of thousands of dollars selling this software. Then I made a video one, and I made a book one. That kind of got me into making products, and thinking that whatever I need, someone else out there probably needs it too. If I price it fairly, and if it’s good, I can probably make a business out of this.

I see my career as starting in junior high and just continuing. I’ve just always been making stuff that I need and then putting it out there with prices on it. Now we have employees, and 80 people, and it’s a different thing than it was when I was 13 or whatever—but it’s the same idea. Make something we need, put it out there, find other people who might use it too, continue to improve it, improve it, and improve it, and have a unique point of view. I think that’s the other thing that I learned early on.

Dave: Yeah. That’s awesome. You were doing this in high school, and you launched probably the first premium model before there was even a software market.

Jason: Way back in the day, there was a software called Shareware. Shareware was like, “You can use this, and if you like it, send me some money.” That was the model I was following. It predated me, but it was a nice model because you get to use stuff for free for a while. Sometimes they were time-limited; sometimes they were use-limited. Other times, it was just like full-blown, here’s the whole thing, but if you want to support me as an independent software author who made this thing that you like, send whatever you want. Send 5 bucks, send 3 bucks, send 10, whatever it was. There was a cool ethos around that, and that’s what I sort of glommed on to and got interested in.

Dave: Yeah. Absolutely. Now, between that and 37signals, did you take a stint into the corporate world?

Jason: Sort of. I graduated college [and] I was working freelance, just as a web designer. I actually went to work for someone for a few months and realized pretty quickly I’m not built to do that. I quit after three months. I did some more work [and] kind of started to build a little reputation for myself. Then I got hired by this company called Quokka Sports, which is actually out of San Francisco. Do you remember Quokka?

Dave: I totally do. Yeah, they were going to track sports live.

Jason: Yeah. It was amazing. They were doing some amazing, amazing stuff early on. They tracked this event called Around Alone, which is this sailboat racing thing [where] people go around the world alone. I mean, incredible stuff. They did some stuff for the Olympics. Really, really ahead of their time. Anyway, I got tapped on the shoulder to join them on a contract basis for a handful of months.

I took that gig, and I moved out to San Francisco. That was my first taste of the VC world. When I got there, I think I was like the 70-something-th employee. I left three months later, and they had hundreds and hundreds of people. We were all crammed into this one space, card tables everywhere. It was exciting, but it was so clear to me that this is not sustainable. They had raised a bunch of money, and then they just grew as fast as they could. There was no sense of controls on anything. It was just grow and do and go—which was, again, exciting. It was cool to be part of it. I worked with some extraordinarily talented people, some people I keep in touch with today who’ve really done some amazing things in their careers. But it was so obvious that this was just a disaster waiting to happen. [Laughter] And it turned out to be that. Not to say that I called it, just like, it was pretty obvious, if you looked around. 

Maybe it was obvious for me because I didn’t come from that world. I came from Chicago, from the Midwest, where it’s pretty much Business 101: “Let’s run a good, solid business.” I was like, what is going on here? But it was exciting. I did that, and then after that I came back to Chicago, and then started 37signals with a couple of my friends.

Dave: Yep. Did you move back to Chicago… Was that a direct reaction to Quokka? Because I think what they were doing was ambitious, but to your point, that was peak internet.

Jason: It was. [Laughs] I mean, honestly, it was incredibly interesting. They were super ambitious and doing remarkably cool stuff. They had incredible tech and incredible designers—some of the best designers I’ve ever seen worked there. It was extraordinary. 

It was neat to be part of that, but the plan was always to go back to Chicago. That’s where I was from. I went back there and then started this other thing, then the dot-com thing hit in 2001, so I was kind of glad to be out of that scene anyway. 

Dave: Yeah, yeah. It’s funny. I sort of grew up at the same time, and then started investing in 2000 to catch a bunch of falling…[Laughs] Which was educational too.

Jason: You could say everyone knew, but not really. Some of it, you just go until it pops. I get it. You’re not going to wait on the sideline. Sometimes you just get in and see what happens, and the timing is what it is.

Dave: Yeah, yeah, totally. So, tell us the creation story of 37signals. You’re back in Chicago. I think you were doing web development.

Jason: I was doing web development solo. I don’t know when I realized this, but I kind of enjoyed working with other people, like at the Quokka project—and then I was back working on my own again. I’m like, maybe I should go get a job. I don’t know. I interviewed with a bunch of companies. One of them was called Organic Online—a huge web design firm. I don’t know if they’re still around, but they were huge [and] doing the best work in the industry. They were opening a Chicago office, so I went there and interviewed and met this guy named Ernest Kim – he was the creative director there – I really, really liked Ernest. We hit it off.

I decided I didn’t want the job, so we just sort of kept in touch, and I went back working for myself. I did a few other interviews; nothing happened. About a year later, he was ready to leave Organic. I was still ready to work with someone else, and we had a mutual friend, this guy named Carlos Segura, who was a traditional graphic designer who wanted to get into the internet. (This was in ’99, so it was still early.) We all three just said, “I don’t know, let’s do something together. Ernest is ready to leave, I’m free, Carlos wants to do something new, let’s do this.”

So we did that—we launched 37signals. We each put 10 grand in. That was sort of our seed money, and we had that saved up. That’s all the money that’s ever gone into the business.

I think [after] maybe a year and a half, Carlos left. We’re all still best friends. Carlos just…Carlos was a traditional graphic designer, and the web didn’t really come naturally to him. He wasn’t really into it, ultimately. Ernest and I ran things for a while, and then Ernest left. These were pre-Basecamp days, so he left in 2002 or something like that. And then it was just me for a while. Those are the early days. 

The reason we built Basecamp, the product, which is what kicked us off into a whole new era, was because we needed the product. This is going back to my early days of making the music tool. We needed something to keep track of our client projects, as we were a web design firm, and we were getting more popular and taking on more work. We kept dropping the ball. I didn’t know who was doing what, and things were slipping through the cracks. It’s all the same stories people have today. Everything’s fine with a few people, and then you get a few more people and a few more clients, and before you know it, your DIY system that you cobbled together falls apart and you get embarrassed. A client fires you, or something bad happens. We were like, we need to get our shit together.

We built Basecamp for that. Then we started using it with our clients, and they said, “What is this thing?” We’re like, it’s this thing we made, I don’t know. It turns out more people wanted this, so we turned it into a product and put it on the market in February 2004. It was software as a service very, very early. I think we launched the same day as Facebook, actually. February 5, or 4, 2004.

About a year later, it was generating more revenue for us than our web design work—and it was more pleasurable. We enjoyed making software, so we stopped doing the web design and have been focused on the software ever since.

Dave: Yeah. There’s this narrative that it’s really hard for services companies to turn into product companies. You basically have to take fee-bearing time and turn it into R&D. But if you look at Mailchimp, if you look at a number of [other companies]... It’s a thing. Why have web designers gone into product companies more facile than other services?

Jason: I think there’s a natural progression from making websites for other companies to essentially making your own. The way we looked at it was, we couldn’t put our client work aside until Basecamp could support itself, so Basecamp was like a client of ours. If we had five clients, Basecamp got 20% of our time. It was a smooth transition because we didn’t drop everything to do it. That’s hard; that is a huge risk. But if you transition into it [and] see if it works, and if it doesn’t [make] you back out of it, and you still have your other business, that’s the safe way to do it.

I think Mailchimp, Campaign Monitor—there are a number of others that had a similar path. They were doing something else, they sort of eased into this other thing, that thing took off, they eased out of the first thing, and now they’re fully in this thing. I think that’s just a natural thing, but it helps when you’ve had practice doing the same thing for other people already, which is sort of what’s nice about running a web design firm.

Dave: Yeah. Absolutely. The way you describe it, it seems relatively smooth.

I can’t imagine it was easy, and it’s never easy. What was the toughest part?

Jason: Yeah. It’s never easy, it’s always hard to some degree. I think the hardest part, really – and this is going to sound strange – is to curb your ambition. You always have more ideas than you know what to do with. You always want to build something better than you’ve built. It’s very rare that you build something and you’re like, “This is the best thing I could have ever made!” Everything’s a series of compromises, sacrifices, and trade-offs. Trying to manage those and figure out what you’re still very, very proud of – what you know isn’t what it needs to ultimately be, but it’s good enough for now – figuring that out is really quite hard, actually.

We didn’t have any real financial struggles, because we had this other business that was doing well, and we were small. We had four people. When you have four people, and your costs are low… We were borrowing someone else’s office, subletting five desks from someone else – we didn’t have big overhead, which is another thing that I’ve always believed in very strongly. This is so ridiculous to even talk about, but companies need to look at their costs. I feel like for the longest time no one looked at their costs. All they talk about is, “As long as we can make a lot of revenue, we’re good,” but you’ve got to look at your costs. I’ve always been careful about that. We didn’t have many people. It didn’t take that much to get over the profitability hump with the product. 

We already had money coming in with the web design, so that wasn’t the challenge for us. [The challenge] was figuring out what this thing is going to be, and how to get the word out about it, because we didn’t have any money to spend on advertising and there wasn’t social media at the time. Now, you can say something and the world can pick it up. I mean, it’s still very hard – it’s noisy and everything – but at least there are avenues and channels. Before, there wasn’t much. We had a blog that we’d been writing for a little bit [with] maybe a couple thousand readers or something, [but] we just didn’t know what was going to happen. That’s actually the beautiful thing about it, and that’s still how we run our business.

We don’t have expectations and we don’t have goals. The only goal was, it should be profitable, we should enjoy the work, and at some point this can’t just drain the company. We don’t set out, like, “this needs to hit this number,” or “we’re only going to be happy if we have 10,000 subscribers in the first 30 days.” Those are all made-up numbers, they’re made-up targets. We try to stay away from that and just put the best work out that we can, and do the best work we can promoting it, and let it happen.

I think, yeah, the trade-offs are hard. We’ve gotten better at this, but early days, you tend to be a bit more of a perfectionist the first time you want to launch something. This is your debut, in a sense, and you want to get it just right. It’s hard to deal with that sometimes.

Dave: Yep. Because you have low cost, you’re able to get to profitability. Time is on your side. Versus, I feel like with many companies, time is not on their side. They’re under the gun. You’re talking about how to ship product in a methodical way, not how to keep the lights on. My sense is, it’s a very different context.

Jason: Yeah. I think that’s a great point to bring up. Something’s always going to occupy you. It can be other people’s stress. [Laughs] Or it can be a sense of equanimity and calm and care for the thing that you’re making, first and foremost. I think a lot of folks who take money, they’re immediately under the gun, under someone else’s thumb. The stakes are huge and high, and expectations are off the charts. Some businesses thrive in that environment, and need that environment—obviously, that is true. I’m glad that the venture capital industry exists. I’m glad that people can raise money if they need it. This all needs to exist. But it does put enormous pressure on you, and it only allows for one kind of outcome, which is big.

To me, there are just so many wonderful places between starting something and “big.” If you’re bootstrapped, you can land in many of those other places and find a place to thrive. If you raise a bunch of money, you’re under massive pressure, and you’ve got to go for it, basically. I’d rather have more options for what kind of company we ultimately want to build, than sign up for huge on day one. That’s just our approach. I think it melts away a lot of the stress when you’re not under someone else’s expectations. And, by the way, the people whose expectations you’re under are very wealthy, and they don’t mess around, and they’re very accomplished, and they’ve raised money from other people who are even more accomplished. It’s just so much pressure bearing down on you. 

I prefer to sidestep that, let’s just say, and build a wonderful company that’s the right size and the right scale for our ambitions and our interests. You can have big ambitions, and you can do a lot. Modestly, I still feel like we have had a big impact on the industry, even though we’re a relatively small company. [We’ve] been around for a long time, contributed a ton, have tens and tens of thousands of paying customers, made Ruby on Rails—all these things we’ve done, we’ve done that with a small group. You can still have a huge impact with a small company, and do it on your own timescale and in your own way. It’s absolutely possible to do.

I think it actually allows us, in many ways, to do many things we would never have gotten permission to do. For me – I’m going a bit off on a tangent – independence is worth so much more than anyone else’s money, because we get to do what we want to do, the way we want to do it, and we don’t have to ask for permission. We can do things that no one would allow us to do otherwise. That’s, to me, what’s so fun about being an entrepreneur. If you’re going to be an entrepreneur, and you’re answering to a bunch of other people, then you’re basically working for someone else. That’s fine, by the way. Most people in the world have jobs. They’re not entrepreneurs. If you choose to be an entrepreneur, don’t you want to go your own way? Isn’t that sort of the point? I want to make sure that that’s our point.

Dave: Yeah. Let’s pull on that thread a little bit – I don’t think it’s wandering at all. One thing that you said, which is heretic to most business canon, is no goals and expectations. The mentality today is, if you don’t measure it, it doesn’t happen.

Jason: Right.

Dave: I’d love to hear from you, as the advocate of that approach, what’s the unexpected benefit of that? What happens that you might not foresee as a metrics and goals and expectations mentality, and what are some of the drawbacks?

Jason: Well, first, because we’ve tried it both ways, let me tell you our experience with setting goals and expectations. First of all, you typically make up the number. Then you either hit it, and then you set another number, or you don’t hit it, and then you’re upset. [Laughs] It’s like, I don’t see the point, frankly. What we do is just do the best work we can. I mean, you should be doing the best work you can, whether or not you have a target.

If you’re going to make up the target, and you’re going to fall short, what’s the point? This revelation came to me when I was running once. I wanted to run like a six-minute mile at some point. You go out, and you try to run a six-minute mile, and you run a 6:04 instead. If you had your heart set on running a six-minute mile, you’re maybe upset that you didn’t get your six-minute mile. But why would you be upset about going out for a run, where you feel good, and you exercise, and you breathe the fresh air? What is it about six minutes? Why not 6:01? Why not 5:59? Why not 6:04? I’m making something up, and I’m determining whether or not I’m going to be happy about it [based on] whether or not I hit this made-up thing. The right question to ask is not, did I get the six minutes? It’s, did I enjoy myself? Did that feel challenging? Was that worthwhile? Those are the right questions. 

When you don’t have these false goals and expectations, you can ask different questions, like, is it worth doing this? Are we enjoying ourselves? Do people seem to like what we’re doing? Is what we’re doing working for us well enough? You ask different questions, and I find that to be the most beneficial side of working this way. It really does change the way you think about the work that you’re doing. 

The down side [is], some people are really driven by goals. If that’s who you are and that’s what you need as the carrot or the motivation to get you there, then you should do what works for you, but I think a lot of people probably actually aren’t—yet they think they must be, because that’s how you’re supposed to do it. I’m just here to say, you don’t have to have those expectations and goals. We look at our numbers, because we need to make sure, again, we’re making more money than we’re spending. We can’t sink the company on something stupid. We’re aware of that. But whether or not we get 9.8 million in something or 10.1 million in something, as long as it only costs us 2 million to build it, I don’t care where it lands. It doesn’t matter. I don’t want to feel good or bad based on some random number; I want to feel good or bad about the work itself.

Dave: It probably also helps if you have a smaller group that has similar expectations for themselves and others, whether they’re goal-ed or not. There’s probably some consistency of just getting shit done. Building a product, getting it out in the world, and all that, that you probably benefit from having a really small, tight culture.

Jason: Yeah. I know some people here are very goal-driven. In some parts of the business, there are plenty of goals, like performance metrics. Not performance metrics for sign-up or product, but operations—speed of servers and that kind of stuff, making sure we get back to customers quickly. There are numbers that we look at over there. But in general, we’re just out to do the best work that we can and let the chips fall where they may. [We] ask ourselves, do we like doing this? Is this what we want to show up to work and do every day? Not, did we hit that number we made up? 

I would say the other thing is that, if you take outside money, you’re going to have expectations and goals and growth numbers to hit. You almost certainly can't do what we do if someone else is expecting something of you. By not having anyone else expect anything of us – other than delivering a good product and taking care of our customers and employees, that’s all internal stuff – we don’t need to chase the big thing that someone else wants us to do. Obviously, if someone’s putting 10 million bucks in, and they want a return in a certain period of time, you’ve got to hit those numbers for them. I don’t want to be beholden to that.

Dave: Yeah. This may not be the case anymore – it’s been a long time since we’ve talked about it – but another fundamental difference from the rest of the world, I thought, was your approach to how you engage with employees. If I recall correctly, this wasn’t about getting rich quick. It’s not big equity grants. It’s more [about] having great work [and] really high cash compensation. I think I visited you close to the summer, [and there were] four days a week in the summer, and you pay for people’s hobbies. I think it was guitar lessons or waterskiing or something like that. Did I get that right?

Jason: Mostly all the same. We stopped doing the hobby thing; I can get into that in a minute. Basically, what we’ve done is marked our salaries to the top 10%, or the 90th percentile, of San Francisco rates. San Francisco [is] the highest paid city in our industry. We use a service called Radford, which surveys hundreds of companies to figure out what people’s salaries are, and we pin it to the 90th percentile, San Francisco. I don’t care where you live. Everyone gets paid the same, no matter where they live. We just pin to that. Yes, there are a couple companies that pay more than us, but they’re typically massive. If you want to work for a massive, massive company, it’s a different thing. If you want to work for a relatively small company, a company you can have a really big impact on, [you’re] probably not going to find anyone who pays more than us.

We don’t do equity at all, but we do profit-sharing. Every year, we put aside 10% of our annual profits and distribute them to employees based on how long they’ve been here. It’s not based on their salary. It’s not based on their position. If you’ve been here for 12 years, you’ll get more than someone who’s been here for six years. We have people in customer service who have been here for 12, 13 years, and their salary is lower than, let’s say, a programmer who has been here for four years, but they’re going to make more on the profit-share because they’ve been here longer. [We’re] very generous there.


We also have a 10% carve-out. Let’s say we do sell the company at some point. We carve out 10% of the proceeds and distribute those on the same basis. Based on seniority—or on tenure, I should say. Not seniority, but tenure. 

We do four-day work weeks in the summer. We’re in the summer months now. For May through September, we do four-day work weeks. People don’t work on Fridays. Or you can take Monday off instead, whatever you want. Standard eight-hour days, so we work 40-hour weeks, but in the summer, roughly 32 hours. We don’t pack more time into fewer days, we actually take time off. 

You know, people here have the full eight-hour day to themselves. There are no required meetings. There are very few [meetings] at all, period. Sometimes people who are working on things together directly, they will get together to have conversations, but there are no daily stand-ups, or weekly this, or company-wide this. Every six weeks, we do an all-hands, but that’s like, what, six or seven times a year, something like that. Different teams, like designers get together once a week for an hour, and different teams do their sort of thing. But it’s a place where you can focus on your craft. You can do wonderful work. You can get paid very well. You get to participate in the profits of the company. And you have a lot of time to yourself.

That’s a really ideal situation for a lot of people. We’re a very stable company. We’ve had a number of people who have been here for 14, 15 years. We’ve been here for almost 25 years. It’s not a startup, it’s not a delicate situation. I mean, anything can happen, of course, but it’s a reliable place to work, and you can do exceptional work with exceptional people in an environment where there’s nothing in your way to allowing you to do the best work you’ve ever done.

Dave: Jason, you’ve thought through so many different aspects of your business, and rather than go through them all, you’ve actually published a lot of stuff in Rework and various books, so I encourage people to read that. 

To move on from this section, maybe just spend a couple minutes on why you chose to open-source a lot of these ideas and publish the playbook, so to speak.

Jason: You know, there are a couple reasons. There’s the “why not?” If we’re going to write this stuff down for ourselves, codify these ideas, and want our employees to know about these things, why not just make them something everyone can benefit from—or at least be exposed to. To that end, I’ve always been inspired by chefs. Chefs write cookbooks. They’re not afraid of giving their recipes away. Yet businesses feel like everything is proprietary, and so secretive, and whatever. It’s not. 

Here’s our most recent book. It’s called It Doesn’t Have to Be Crazy at Work. This book here is all about finding equanimity and calm at work. It’s exactly the kinds of policies we have and the kinds of approaches we have. It’s all here, and anyone can read it and be influenced by it, or take some of it, or disagree with it, whatever they want. 

It’s good to share, I think. We’ve open-sourced software for the same reason. But it’s also good marketing. We don’t really have a marketing budget. This year, we’ve started to spend some money on marketing for the first time ever, really. Up until now, it’s been word of mouth and influence, in a sense—sharing, teaching, getting the word out there, and building a reputation as a company with specific points of view. “If you want to run a business like this, maybe you should check this book out, because this is how they do it.” All that kind of stuff. It just makes sense.

We enjoy sharing. We enjoy writing. We enjoy poking the industry a bit. Obviously, as you know, we enjoy taking different positions, not because we enjoy the counterculture side of it, or the irreverence, but because we truly believe these things. We’re outliers in our industry for these reasons, and we think it’s important to put this stuff in a format that can spread. Books are really wonderful ways to have ideas being taken more seriously.

Most of these ideas started out as blog posts, but to link someone to 83 blog posts is just hard [as opposed to,] “Here’s a book. It’s 20 bucks. Go check it out.” Getting Real is a book that’s free online. Shape Up, which is at Basecamp.com/shapeup, is technically our latest book. It’s everything about how we work day to day, very distinctly laid out, clearly laid out. Here’s how we pick what we do. Here’s how long we work on these things. Here’s where ideas come from. Here’s how we decide what to do. All that stuff is all in that book, and that’s free as well. There’s a paperback version that you have to pay for, but it’s also online completely for free. It’s just part of who we are and how we’ve always done it, and we’ll always do it that way.

Dave: It’s funny, I interviewed another bootstrap founder who runs a very large business in Australia. It’s not just a software business; it’s a theory of work. It’s a way of work. They created their own task management system. I think that’s the opportunity you have, to really mold it the way you want.

You built this special business in a very big, competitive space. Project management, collaboration, and productivity tools, is probably one of the bigger spaces out there. In some ways, it’s existence proof for taking more of a methodical approach in a market where there are network effects. The more people use a tool, the more value it might have, or certainly familiarity. How have you thought through that over the years? Has there always been a little bit of a tension around, gosh, we need to get to market share – not for money, but for the value of the product?

Jason: You know, when we first started, there was nothing else, really. There was Microsoft Project, and then nothing. People used email. People used Excel. People used the phone. People used meetings. That’s still our primary competitor. Email, phone, spreadsheets. DIY, cobbled-together systems of things. There are, of course, wonderful products out there today that we compete with directly as products. There always will be more, and they’ve all gotten very good. In some ways, it’s kind of a commodity market now. You can probably make do with many of them, right? Basecamp is more of an all-in-one product. There are others like it, where you just need one thing. You don’t need to buy a separate chat thing and a separate task thing and a separate schedule thing, and all the complications that go with trying to piece stuff together.

There are other all-in-ones too. The thing is this – this isn’t talked about enough, and I should write about it some more, but we’ll talk about it here – competition is also based on your economics. So yes, there’s Asana. There’s Monday. There’s ClickUp. There’s Trello, Notion, you name them all, right? These companies, most of them, have a lot of people, have raised a lot of money, and they need massive numbers of customers—primarily enterprise customers—selling many, many, many, many seats, to justify their ridiculous valuations. I’ll even eliminate the word ridiculous. That’s subjective. Valuations. They might need 300,000, 400,000, a million customers, or seats, to make their business work. I don’t care what they need to make their business work. I care what I need to make my business work. 

In our case, we could have tens of thousands of paying customers, or 100,000 paying customers, and be great – throwing off tons of cash, and be very profitable – because our economics are different. We have 80 people, intentionally. We don’t blow tens of millions or hundreds of millions on marketing. I mean, some of our competitors collectively lost billions and billions and billions of dollars, literally. Some of them are losing hundreds of millions of dollars a year, right? To make that up, they’ve got to sell a lot of product. I don’t need to sell that much product to do well. Yes, we compete, but the slice that I need… It’s not even a slice. I just need what I need, and it’s a lot less than what they need. 

There’s a lot of opportunity for us because, first of all, we focus on different kinds of companies. Primarily, we focus on small businesses. I love the underdog. I love small teams. I love people who are fighting up against bigger organizations, bigger groups. They only have six people, they’re fighting against companies with 50 people. I love those. That’s our crowd. These are the people who buy our products. Most of the other companies in our industry are selling to the enterprise. I don’t care about the enterprise. I don’t want enterprise business. It’s not interesting to me. 

We actually have a cap: no one can pay us more than $299 a month for Basecamp, [for an] nlimited number of users. I know so many companies that are paying $40,000 or $50,000 a month for Slack, which is just completely obscene, in my opinion. No one can pay us more than 300 bucks. I don’t want 80,000 people at a company using our product, really. I want the small companies. Those are our people. We focus on them, which is different, and we don’t need that many of them, ultimately, to have a really wonderful business. 

The point here is that your economics, your company structure, has a lot to do with what you need. It’s not what your competitor needs. A lot of people look at their competitors and go, “They have more customers than us.” “They have more this than us.” “They’re plastering ads all over the place.” “They have more exposure than us.” They do, but they need to. And guess what? They’re still losing tons of money. You have a smaller base and fewer customers, but maybe you’re making money. You’re actually in a much better position than they are, even though it looks like they’re in a good position because they’re everywhere. They’re everywhere losing money.

That’s how I’ve always thought about this. Yes, there are more competitors than there have ever been, and it’s become harder to stand out clearly—but the advantage you have when you’re smaller is, you don’t need to stand out as much. That’s the really key advantage, actually, of being smaller.

Dave: Yeah. Maybe we can close on a couple personal questions, if you’re okay with that.

Jason: Yeah, sure, of course.

Dave: So much of starting this business—I imagine for all entrepreneurs, but particularly ones that do it on their own—is this integration of who you are and what your company does. It’s also how you spend your time. Everything I do is integrated into Tidemark. I imagine, certainly in early days, that was the case with you and 37signals. As you think about life holistically, do you ever start pulling those two things apart? How do you think about doing that, and when do you start thinking about doing that?

Jason: Yeah. When I started the business, I was in my early 20s. I had no obligations. I was single. [Now] I’m married. I have kids now. I have less time, and also other obligations that are more important than work. That’s the difference. That changes. I don’t think, for example, I could ever start another business again. I also kind of don’t want to. Or if I did, it would just be [a] me thing. I don’t think I have the endurance to do that anymore.

My personal life and 37signals are quite separate, but they collide when it comes to time, attention, energy, that sort of thing. I work 40-hour weeks. I’m done at 5 o’clock, [and] I do my family stuff. I don’t work on the weekends. But what happens on the weekends, and what happens in the mornings when I’m trying to get the kids ready for school and it’s chaos, you lose some energy. That does affect work as well, which is why I just don’t think I would have the energy to do this again. 

I don’t like being identified with the company. I don’t want that to be what my life’s about. It’s what I’ve done, [and] I’m very proud of it. I’m continuing to do it. I enjoy doing it. But when it’s all over – not life, necessarily, but when this work thing is – I mean, I’m not going to do this forever. I want to close my laptop, walk away, and still feel complete—not like I lost something, and now I don’t know who I am, and I don’t know what I’m about. I don’t want that to be the case. I don’t believe it will be, but I do know a number of people who were very closely identified with their work, and I don’t see a lot of health in that, because they can’t let go. I want to be able to let go. That’s at least what I hope is true.

Dave: What’s your heuristic for when it is time to let go? Do you have any sense of that?

Jason: You know, it’s something I’ve been thinking more about over the past few years because we’re coming up on this milestone of 25 years, which is a long time. It’s a long time for anyone to run something, I think. I’ve always been curious about what would it be like if someone else ran this place. How much better would it be? How much worse would it be? I’m sort of curious about that. I’d still want to be involved in some way, but the question would be, do I really want to run it? 

We hired a COO last year. She’s been great, because she’s taken a lot of the day-to-day and fundamental operations and oversight of a variety of different teams off my plate, and off David’s plate, so we can get back into the product side of things and be more like founders—inject risk into the business, push unusual ideas into the business, and be able to focus on that stuff. I think that gives me a lot more energy and interest in the company than the day-to-day stuff that I just don’t like to do as much anymore. I’m still the founder and CEO, but I like to be more of a founder these days.

There’s a big difference between founder and CEO. It’s weird that the same person can be both, and often is, especially in start-ups. They’re very, very different jobs. Founder, I’ve realized, is a job. It’s not just a moment; it’s actually a job. The job is to inject risk, to bring new ideas, because you have a position that’s different than anyone else in the company in that you can’t be fired, essentially—especially when you don’t have a board. A lot of people wouldn’t take the risks you would because their job is evaluated differently than yours. I think it’s important to come to terms with the fact that David and I both have a unique position, and we need to use that position in the organization to keep making sure we’re innovative and pushing things forward. 

As long as I’m able to do that, I think it’ll keep me here longer. I also recognize that it’s probably unhealthy, ultimately, for someone to be running something for a long, long, long time. It’s not good in government. It’s not good in the private sector either, I don’t think. I don’t know what that looks like. I mean, I’m turning so gray now that, maybe when I have 7% more gray, I’m out. [Laughter] I don’t know what it’s going to be. 

Dave: Sorry, man. Too much gray hair…

Jason: I don’t know. It’ll be obvious. It’ll feel like it’s time. We’ve always run the company on feel. We figure things out six weeks at a time. We don’t have any long-term plans, any long-term goals. Just stay in business and figure it out six weeks at a time. I think this is going to be the same kind of thing. There’ll be a point where a few six-week periods have gone by where it’s like, I don’t know if I’m in this anymore.

Dave: Yeah. If you were to step away tomorrow, what would you be most proud of?

Jason: That’s a really good question. I love the team we’ve built. A couple days ago, someone celebrated their 14th year here. Recently someone celebrated their 15th year here. We have extraordinarily good, kind, talented people. There’s no infighting. There’s no backbiting. There’s no backstabbing. We have a really good crew, and I’m really proud of that. I’m proud of seeing how people have progressed and grown, and found a place where they can settle in and do the best work of their lives.

The fact that we were able to create that environment is a wonderful thing. I’m really, really proud of that. I mean, I’m proud of the products we’ve built and all of that stuff too, but the actual environment we built is, I think, ultimately the real product that we’ve made that I’m probably most proud of. I think your company is a product. It’s your number one product. And I think it’s our best product. I’m very proud of that.

Dave: Awesome. Jason, thank you so much, both for the time and just everything you’re sharing. Really appreciate this, and loved hearing the story.

Jason: Yeah, anytime.


Dave Yuan

Founder and Partner, Tidemark

June 2023

The information presented in this post is for illustrative purposes only and is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by Tidemark or any of the securities of any company discussed. Tidemark portfolio companies identified above are not necessarily representative of all Tidemark investments, and no assumption should be made that the investments identified were or will be profitable. For additional important disclaimers regarding this post, please see “ Purpose of the Site; Not Investment Advice; No Recommendations” and “Regulatory Disclosures” in the Terms of Use for Tidemark’s website, available at Terms of Use (tidemarkcap.com).

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