Jason Fried, 37signals: Old-School Wisdom From A Software Pioneer

07/22/2011 03:29 pm ET | Updated Aug 11, 2011

In many ways, Jason Fried seems like a throwback to the dot-com days, when countless young entrepreneurs believed they had found a better way to do business. And, in truth, the founder and CEO of software maker 37signals, does have a philosophy about business that runs counter to traditional thinking. But to stereotype Fried, who has written three books, including the recent bestseller, Rework, as just another dreamer would be a mistake. Unlike his Silicon Valley predecessors, Fried's company not only has millions of users for its products such as Basecamp, Highrise, Campfire, and Backpack -- it has been profitable from day one.

"I grew up in a suburb of Chicago. My parents always taught me to work and make money. I remember my dad, who is now an independent investor, taking me to get my work permit when I turned 13. I worked a bunch of different jobs, like selling shoes, bagging groceries and pumping gas.

"I went to college at the University of Arizona, because I wanted to get out of Chicago for a while. I always knew I would come back, though.

"I was a finance major, but I got very interested in the Internet as it was starting to really take off in 1995. I also happened to love design, so I taught myself things like HTML so I could build Web pages. I started to make some money freelancing by looking around and contacting websites that I thought I could help make look better. A few people hired me, which allowed me to cut my teeth and get some experience.

"After I graduated in 1996, I moved to San Diego to work as a full-time Web designer for one of my clients. I lasted only a few months before deciding to move back to Chicago. By 1998, I started thinking about working for a big Web design company to get a different experience. That's when I met Ernest Kim at Organic Online, a big Web shop in Chicago. I didn't take a job, but the two of us really hit it off and kept in touch.

"A year later, Ernest was sick of working for a big company and was looking for something new. So, we teamed up with another friend of ours, Carlos Segura, a designer, to start our own company in 1999. Carlos left the business in 2000 and Ernest left in 2003, but we remain good friends.

"Back in 1999, Carlos was watching an episode of Nova on PBS about the SETI project, which involves the network of radio telescopes in New Mexico that is listening for signs of life in the universe. There are apparently billions of signals and sources of noise out there, but, according to the show, there are 37 signals that remain unexplained. When Carlos told us about that, we all thought it was a really cool idea, so we named the company after that. And, as it turns out, the domain name was also available.

"By 2003, things were getting busier and we needed a better way to manage our products than just e-mail. We started looking around, but every product felt like it was 100 years old and was solving the wrong problems. So, we decided to build one ourselves. I hired David Heinemeier Hansson to build the back end, and I designed the front-end of what eventually became Basecamp. We decided to start offering it to our clients and, before long, we were making more money off the software than the Web design business. So we decided to focus entirely on Basecamp, which is what most people know us from today. That put us on the map.

"We continue to build products that we need for ourselves, which means we focus on doing just a few things. It seems everyone else is trying to do new and innovative stuff. We are more focused on usefulness rather than innovation. We take our inspiration from things like the stapler and paper clip. It might not be as sexy and newsworthy, but it gives us the opportunity to be around for a long period of time.

"I've always believed in sharing the things we learned along the way, which is why we have written three books. Since we don't do any advertising, they have been great promotion as well as a way to give back. The latest, Rework, is our take on business and entrepreneurship. It focuses on the things that have worked well for us over the past 10 years.

"We always believed in making money, so we focused on building a profitable business. I don't understand why our industry seems to be afraid of profits, which really just means you make more money than you spend. Money isn't everything, but it does provide you freedom, choices, and the opportunity to do what you want to do. We are debt free, which means, if we keep that up, we don't have any pressure to sell the business, or go public or anything. We are not beholden to anybody.

"The growth of our company has been a slow and steady climb. There is no hockey stick graph. I am turned off by the super rapid growth companies. It's not stable. Just look at oak trees. They grow incredibly slowly, but they have the kind of solid foundation to withstand storms and other disasters. You need a solid core, which is why I'm such a big fan of consistent and steady growth."

The original version of this article appeared on AOL Small Business on 5/26/10.

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