211 - "We built a BIG software company with no investors" | Jason Fried, 37signals

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Podcast Summary

Episode Overview

Podcast: Making It with Jon Davids
Episode: 211 — "We built a BIG software company with no investors"
Date: September 12, 2025
Guest: Jason Fried, Co-founder of 37signals
Host: Jon Davids

This episode features an in-depth conversation with Jason Fried, founder of 37signals (the company behind Basecamp and Hey). Jason shares how they built one of the most respected bootstrapped SaaS businesses, growing it to tens of millions in profits without external investors. The discussion explores the company’s origin story, pivotal product decisions, lessons learned from bootstrapping, the importance of founder-driven risk, and strategies for sustainable growth.

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Key Topics and Insights

1. Company Origins and the Birth of Basecamp

[00:09 – 01:25]

• 37signals started as a web design firm, doing client work.

• Basecamp, their flagship project management tool, was originally built internally to manage client projects, not as a commercial product.

  “We built Basecamp for ourselves to manage the projects we were doing for clients... Clients kept saying, What is this thing? We could use this too. Light bulb goes on... then we turned it into a product and we decided to charge monthly for it.”
  — Jason Fried [01:36]

2. Pioneering SaaS and the Accidental Birth of Subscription Billing

[01:36 – 04:58]

• 37signals was among the very first companies to use and popularize the SaaS model (starting in 2004).

• The decision to charge monthly was not purely strategic — it was forced by a bank’s risk policies.

  “We tried to charge annually for [Basecamp] initially. The bank wouldn’t let us... so that’s actually what kicked off the monthly subscription model for us and for many, because the bank wouldn’t let us charge annually.”
  — Jason Fried [02:17]

• Fun anecdote: They launched Basecamp without a billing system, giving themselves a 30-day window to build it.

  “We shipped Basecamp... with actually no way to bill them. So we had 30 days in which to build a billing system so we could begin to charge them...”
  — Jason Fried [04:13]

3. Company Growth and Product Portfolio

[05:29 – 06:23]

• Basecamp has always been the major driver — a “10x product.”

• Other products like Highrise (CRM), Backpack, and Campfire also achieved multimillion-dollar revenues but were ultimately sunset or spun off.

  “Basecamp is our big winner... Highrise is our second biggest product... Backpack was a multimillion-dollar business... but many of those aren’t around anymore in terms of selling them.”
  — Jason Fried [05:47]

4. The Decision to Consolidate and Focus

[06:29 – 08:48]

• At one point, 37signals switched its name to Basecamp, focusing the entire company on just one product for several years.

• This meant folding, spinning off, or retiring non-core products, something seasoned leadership hesitated to do until Jason took the initiative.

  “We just can’t do four things at once. ...Let’s consolidate and get back into Basecamp... I just made this pitch. I’m like, look, let’s just simplify... It was a huge decision, but it was also like... there’s oftentimes these decisions everybody is ready to make, but no one is willing to make. So I just made it and everyone’s like, yes, that makes sense.”
  — Jason Fried [06:29, 08:37]

• Later, with the launch of new products (notably Hey), the company reverted to its original 37signals name to reflect its broader ambitions.

5. Founder vs CEO Mindset: Embracing Risk

[08:48 – 09:45]

• Jason distinguishes between a founder’s and a CEO’s job:

  • CEOs generally manage and mitigate risk.
  • Founders inject risk — they're empowered (and required) to make bold moves.

  “The job of a founder is to inject risk into a company. The job of the CEO is to sort of mitigate risk... A founder should be like, no, we're going in this direction. I've got this gut instinct, I'm letting it ride. I have the most to risk here.”
  — Jason Fried [08:52, 09:16]

• Jason notes such radical moves are easier and more appropriate for founders, given their stake and understanding of the company’s ethos.

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Notable Quotes & Memorable Moments

• On accidental monthly billing:
  “The whole monthly recurring revenue model came because the bank wouldn’t let you charge on the annual basis. That’s ridiculous.”
  — Interviewer [03:28]

• On company pivots and decision-making:
  “There’s oftentimes these decisions everybody is ready to make, but no one is willing to make.”
  — Jason Fried [08:37]

• On founder risk:
  “The job of a founder is to inject risk into a company. The job of the CEO is to sort of mitigate risk.”
  — Jason Fried [08:54]

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Timestamps for Important Segments

• [00:09] — Introduction to 37signals and Basecamp’s origin story
• [01:36] — Building Basecamp for internal use, clients’ demand, and pivot to a product
• [02:17] — How banking risk created the monthly SaaS model
• [04:13] — Shipping Basecamp before the billing system existed
• [05:47] — Which products drove revenue and how growth evolved
• [06:29] — Decision to focus entirely on Basecamp, consolidating/sunsetting products
• [08:37] — The weight and relief of making hard company-wide decisions
• [08:54] — Founder’s role: Injecting risk, versus a CEO’s risk mitigation

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Summary & Takeaways

This episode is a masterclass on bootstrapped growth and founder-driven entrepreneurship. Jason Fried provides candid, detailed insights into the history and evolution of 37signals — from accidental SaaS pioneers to industry mainstays. Listeners learn how innovation sometimes emerges from constraints, why focus and consolidation can be powerful for small teams, and how the founder’s role is uniquely positioned to inject bold direction (and risk) into a business. Jason’s reflections are relevant for entrepreneurs, product builders, and anyone interested in building lasting, profitable companies without outside investment.

Transcript

[Jason Fried]

This clip of Making it with John.

[John Davids]

Davids features John talking to Jason fried, founder of 37signals.

[Interviewer]

That takes me to your company, which is one of the Most enviable software SaaS bootstrap companies out there. And you were doing it long before anybody was talking about this stuff. I mean, you were doing it when it was cool to raise vc, when it was a badge of honor to say, we just raised 17 million from Andreessen Horowitz. And. And you were like, hey, I'm just making a bunch of money here by myself. And. And. And that. That's what you were doing during the whole craze. So I have a couple questions about the business today. Let's start with what? Well, why don't you just describe. So for people who don't know, what is your business today.

[Jason Fried]

So we sell Basecamp, which is a project management tool, been around for about 20 years. It's gotten a lot better over the years, as you'd expect. That's a SaaS tool. We sell something called hey, which is an email service and a calendar, which is also a SaaS tool. So we're a software company, and now we sell Campfire under the Once brand. We're making another Once product, which will be out in about eight weeks, and then we're going to try and work on two more products this year, which probably won't be out till next year. So we make software products, and we have historically done them as SaaS tools. We actually were one of the pioneers back in 2004 when we launched Basecamp, initially one of the first SaaS tools. So we've been big believers in this model. Prior to that, though, we were a web design firm, so we were doing web design for hire for other companies.

[Interviewer]

And you flipped to the SaaS model because you had, I'm guessing, a client that asked for something, or you built something for yourself and then you said we should sell this.

[Jason Fried]

Built it for ourselves. Yeah, we built Basecamp for ourselves to manage the projects we were doing for clients because we were just using email and just. It was a mess. We were dropping the ball, as people tend to do when they're doing a lot of things and don't have a system and an organizational principle behind, you know, how they're. How they're organizing the information and collaborating and sharing. So we built this thing for ourselves, use it with our clients. And they kept saying, what is this thing? We could use this, too. I'm like, ah, okay. Light bulb goes on over your head. You're like, there's an idea here. And then we turned it into a product and we decided to charge monthly for it. In fact, what's funny is we tried to charge annually for it. Initially. The bank wouldn't let us. The bank wouldn't let us because we had to get a merchant account. This is way back in the day, before Stripe and before this was easy, okay, And Braintree. And we had to go to Chase bank and say, hey, we want to accept credit cards. And there's like, you know, this, this arduous form. Like you literally could drop the papers on the desk and it would make a sound. It was like this thick stack of papers and credit checks and the whole thing. And, and they came back saying, you want to do what exactly? Because you had to describe your business like, well, we want to sell the software online and charge monthly for, for people to use it. They're like, what do you mean? Because this wasn't a business model. Really? And they're like, they said no to that because they didn't want to take on the risk of us charging someone for many, many, many months. The customer then quitting and then we not being around. We're, we're a fly by night organization at this point. And then Chase is on the hook basically for fraud or whatever. It would be that. I'm sorry, that's what we want to do annually. So we want to do it annually. And they're like, we're not, we can't charge a thousand bucks. And then, you know, maybe you're out of business in two months, customers are going to come back to us asking for a refund, whatever. So they said, you're going to have to do this month to month to month to month to make the charges smaller, to make the risk smaller for us, us being Chase Bank. And so we're like, okay, fine, we'll try that. So that's actually what kicked off the monthly subscription model for us and for many, because the bank wouldn't let us charge annually.

[Interviewer]

That is so funny. So you wanted to charge by the year, but like you said, if someone pays up front and then you're out of business in two months, there's 10 months worth of money that now Chase would owe them. And, and so the whole monthly recurring revenue model came because the bank wouldn't let you charge on the annual basis. That's, that's ridiculous.

[Jason Fried]

That was it. So we're like, what about if we do it monthly? They're like, we could probably do that because now we're talking about, you know, 19 bucks a month or 29 bucks a month or something. And. And we just like had to beg, really, to make them see that this was okay. Or like magazines have subscriptions and like, subscriptions aren't new. It's just, yeah, their software subscriptions are kind of new.

[Interviewer]

If they had said no, we might have weekly. It might be wrr might have been the thing.

[Jason Fried]

Who knows, right? I mean, eventually I'm assuming this would have changed, but initially we just were like, we have to do whatever we can. And the funny part about this is that we were ready to launch the product, but because we had to change the way billing worked, we didn't actually even have a billing system. So we shipped Basecamp. We launched Basecamp to customers with actually no way to bill them. So we had 30 days in which to build a billing system so we could begin to charge them on a monthly basis. So it's kind of a fun, like the ultimate constraint driven process. Like, okay, we're shipping this product, we're selling it, although we're not collecting. So we don't ask for people's credit cards. We didn't build anyone for 30 days. I think we did ask for their credit cards, but we didn't build them for 30 days. So we had 30 days. Otherwise it was on us. We'd be losing money. So it's kind of a fun, fun little challenge there.

[John Davids]

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[Interviewer]

How did the company evolve? So you have this product, and I should say for context, you describe when we say how big is your company, you say tens of millions in revenues and profits. So it's a big company.

[John Davids]

How did you get to that level?

[Interviewer]

Was that basically one product that took you there, or was it a few different products that. That got you there?

[Jason Fried]

Yeah, I mean, Basecamp is our big winner. So that's kind of a 10x product, but we've had a number of decent ones. So Highrise is our second biggest product, which is a CRM tool which we launched back in 2007. We still offer to existing customers, but we don't sell it anymore. But that became a more than $10 million business for a while. It's not anymore because we don't sell it anymore. So there's just natural churn over, over time. But it's still a multimillion dollar business. Backpack was a multimillion dollar business, which was another early product of ours. But many of those aren't around anymore in terms of selling them. We still exist. We still support them for existing customers, but we don't. We don't improve them, and we haven't sold them for years.

[Interviewer]

How do you decide what to keep going, what to cut off? Like, is there a lot of thought in there or it just kind of happens?

[Jason Fried]

So the company used to be called 37 signals. It is again today, but for a number of years, I think it was about six years in the middle. It was called Basecamp. And what we decided was at some point, we're like, you know what? Let's just focus on Basecamp. We had four products at the time, actually, a few others to. We had a relatively small company. We were 20, 30 people, I think it was maybe. Yeah, something like that at the time. And we're like, we just can't do four things at once. We're not doing them well. We're letting some of these die in the vine in a way where we're not getting back to them. It doesn't feel good. So let's consolidate and get back into Basecamp. So we kind of made that decision all at once. We, like, took Campfire, which was our chat tool at the time, rolled that into Basecamp. So that became part of Basecamp. We actually spun off a couple products. Know youw Company, which is now called Canopy, we spun that off to. To a different team. We spun off High Rise. We eventually reabsorbed that. And then we decided, like, Backpack, we're just going to support, but we're not going to sell anymore. So we made all these decisions at once, which actually made it a lot easier to make. Just here's the plan. Basecamps, we're going all in. We're going to change the name of the company to Basecamp. So everyone knows we're all about Basecamp. So we know we're all about Basecamp, and that's all we're going to do. Let's fold these other things in, spin these other things out. Let's just make a grand change now. Since then, we launched hey. Which is doing Very, very well multimillion dollar business. And because of that, we went back and renamed the company to 37signals again. So we're now a multi product company. Now we have Campfire again as a standalone thing. We're going to make more products and more products and more products. So now it makes sense to, to jettison the Basecamp name as the name of the company. And, and, and now we're back to 37 signals. But I had this, this, this idea to, to, to consolidate around Basecamp. And I just called in a few people from like our. We don't have an executive team in, in the traditional sense, but like three or four of the other kind of long timers at the company. And I just made this pitch. I'm like, look, let's just simplify. Like we're just doing. We know, we all know, like, let's just be honest. We can't get back to this, we can't get back to that. We're doing too many things at once. We don't have enough people. But we don't want to grow in a big way to service all the products and the customers. Could we just consolidate? And it was like this big sigh of relief. So it was a huge decision, but it was also like, there's oftentimes these decisions everybody is ready to make, but no one is willing to make. So I just made it and everyone's like, yes, that makes sense. You know, it was like all this weight off our shoulders.

[Interviewer]

So that's the job of the CEO to make. I love. I should write that down.

[Jason Fried]

It's actually the job of the founder.

[Interviewer]

The founder.

[Jason Fried]

I think this would have been a hard decision, I think for a CEO to make. This was a decision that a founder could make in a sense because it was pretty radical. I've had, I wrote this thing about founder. The job of a founder is to inject risk into a company. The job of the CEO is to sort of mitigate risk. I think in most cases, CEOs typically don't take big risks. They sort of manage risk. A founder should be like, no, we're going in this direction. I've got this gut instinct, I'm letting it ride. I have the most to risk here. If a founder who owns most of the company makes a call, they have the most to lose too. So they just have a certain position in which they can force big changes through. That would be very hard for other people to stomach in a sense. But because they still have most of the risk on their own plate, people are willing to follow.

[John Davids]

Thanks for listening. Get my best stuff to your [e-mail].

[Interviewer]

I'll talk to you next time.

[Jason Fried]

10.