How Basecamp grew from an internal project to generating millions in revenue

by Amy Dusto
May 27, 2014

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Web-hosted project management tool and eponymous startup Basecamp garners between 5,000 and 6,000 new clients—per week. Not all clients sign up past the free trial, but the company still gains thousands of new clients from more than 100 countries each year and generates “tens of millions” in annual revenue, said co-founder and CEO Jason Fried. Basecamp has been profitable for 15 years. And throughout that entire time it has maintained a staff size of just 30 to 40 people.

 

Basecamp is not your stereotypical Silicon Valley-type startup. Fried would never let that happen.

 

“There’s a Silicon Valley thing where it seems like every company wants to grow really rapidly, take a bunch of money, sell and do it all again,” he said. “Not being involved in that world, that way of doing business, has helped us to be in business for 15 years and continue doing things our own way.”

 

Instead Fried’s focus is on steady, long-term growth and company culture. “I think Chicago is good for that,” he said. “I love that we can continue to adapt and thrive. If this is the only business I ever run, that would be totally fine with me.”

 

Basecamp began in 2003 as a web design firm called 37signals that was having trouble coordinating its various projects with a scattering of e-mail and other tools. The firm solved that problem by designing its own project management software, Basecamp, which it began using both internally and with clients. The clients were especially impressed and began asking for a version they could use in their own business. So 37signals developed Basecamp into a sellable SaaS tool and started charging for it in 2004.

 

Within a year and a half, Basecamp was generating more revenue than the web design business, Fried said. The company decided to quit web design then and focus exclusively on software development. In 2005, 2006 and 2007, it released three other products: Backpack, a personal information organizer; Campfire, a team communications tool; and Highrise, a customer relationship management tool, respectively.

 

Along the way, 37signals also happened to create the programming framework Ruby on Rails, which it made open-source in 2005. Ruby on Rails today lies behind thousands of web sites and apps globally. Fried and his team also released a few books on design and business know-how, including the 2010 New York Times bestseller “Rework.”

 

In 2012, 37signals released a redesigned version of Basecamp that became “a second huge hit,” Fried said. With business booming, he soon made another pivotal choice for the startup: 37signals would stop building all other products and focus entirely on its top seller, Basecamp. To reflect the change, the company last year renamed itself Basecamp.

 

“The fundamental reason is we wanted to remain a small company,” Fried said. But a small company would be hard-pressed to manage the several versions—web, iOS and Android, for example—of a single product, multiplied by the total number of products it offers.

 

“One option is to hire a bunch more people to maintain all these products, and another option is to not manage all of them,” he said. “We wanted to not hire a bunch of people—our culture is about keeping the company nice and small, family-friendly, where everyone knows each other. I don’t want to come to work and not know someone’s name, not recognize someone.”

 

Fried admits that Basecamp is unusually able to grow profits and revenue each year without many new hires because its product is largely self-service and easy-to-use. That’s entirely by design, he said, adding that many competing products do a lot more than Basecamp—but as a result, they are harder for customers to use and thus less readily adopted. That’s also how Basecamp is able to reach so many new clients each week without spending anything on marketing, Fried said. The tool is simple enough that customers ranging from software developers to church group organizers can get started with it fast, which has helped it to spread globally, solely by word-of-mouth.

 

“Most people have basic problems and we can solve them with basic tools,” Fried said. “A lot of companies keep feeling like they need to do more things—make products more robust and add more features, et cetera—but one of the secrets to our success is fighting that impulse. Most software gets harder-to-use, slower and more complicated over time. We’re trying to go the opposite direction.”

 

Making “great stuff,” he contends, has nothing to do with growth, but everything to do with focus: “It’s really easy to overdo stuff, but it’s hard to under-do stuff, to know when to stop. Your attention is the most precious thing you have—if your attention is diluted, you do a disservice to everyone.”

 

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