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Jason and David tell Shaun exactly how little he needs to start his amazing new business.
A podcast by 37signals about the better way to work and run your business. Hosted by Kimberly Rhodes, the Rework podcast features the co-founders of 37signals (the makers of Basecamp and Hey), Jason Fried and David Heinemeier Hansson sharing their unique perspective on business and entrepreneurship.
David: [00:00:00 ] Reminds me of that, “WAZZAAAP.”
Shaun: [00:00:03] Oh, what a topical reference, David.
David: [00:00:04] I'm just invoking 2005. Doot doot.
Shaun: [00:00:09] All right, Are we all set?
[00:00:10] Broken By Design by Clipart plays.
Shaun: [00:00:12] Welcome to Rework a podcast by Basecamp about the better way to work and run your business. I'm your host, Shaun Hildner. This week, we're talking about what you actually need to start a business. And I promise you, it's less than you would think. So I'm actually not going to waste a bunch of your time here at the top. Let's get right into it.
[00:00:29] As always, I am joined by Basecamp's co founders and the authors of Rework, David Heinemeier Hansson, how are you?
David: [00:00:36] Good, good.
Shaun: [00:00:36] And Jason Fried. How are you?
Jason: [00:00:37] Doing all right, thanks.
Shaun: [00:00:40] This week, we're talking about how much you actually need to start a business. And we're gonna go through this a little bit differently than we have done these episodes in the past. Let's say, I'm Shaun Hildner. I'm starting a business.
David: [00:00:52] This already sounds unrealistic, Shaun.
Shaun: [00:00:53] Listen, I know, I know, we're just gonna have to suspend our disbelief for a second here. I'd like to go through all the things that I think I would need in order to start this business and I kinda want to hear your arguments against it. And maybe how scrappy Basecamp was there at the beginning? How's that sound?
Jason: [00:01:08] Yeah, let's do it.
Shaun: [00:01:10] Well, the first thing I'm going to need is a bunch of people, right?
Jason: [00:01:14] In your case, you do need probably do need a bunch of people let’s be honest.
Shaun: [00:01:18] Oh, this was a bad idea. Okay, I see what's going on.
David: [00:01:21] What are you making, Shaun? That's really the big question.
Shaun: [00:01:22] Yeah. Okay. Let's say I'm, I don't know, writing and selling Dungeons & Dragons modules.
Jason: [00:01:28] You're a pro. You know that stuff. You're all you'd probably need, right?
Shaun: [00:01:32] I mean, what about marketing? What about salespeople? What about lawyers? What do I need here?
Jason: [00:01:38] Well, you could dress up in like a funny Dungeons & Dragons outfit and just tape yourself and run around the streets and see what happens. That's marketing, right? That’d be enough.
[00:01:47] Well, first, here's the thing, right? First, you have to make something to have something to even market or even to sell.
Shaun: [00:01:53] Right.
Jason: [00:01:53] And then you know a lot of people in that community already, right? Like you're pretty tapped into the D&D world. Yeah?
Shaun: [00:02:00] Oh, sure. Yeah. Yeah.
Jason: [00:02:02] You just start talking about it with people you know and let them spread the word for you and sort of see what happens, let it go somewhere. Before you even imagine that you need something. I think that's the idea. It’s like, what do you need? You don't know, until you put it out there, spread the word yourself, get it out there, do your thing. See what happens. It's just you. So you don't have to support anyone else. And then you'll get a read on what you maybe do need.
[00:02:25] It’s not that we’re saying you don't ever need these things, but to get started, you certainly just need yourself if you're capable of doing the thing that you need to do. Like, if I had to start a business where I had to make medical equipment of some sort, like, I don't know how to do that. I might know that there's a business opportunity there. But I may have to hire people to do that. But you know exactly what you want to do, you know exactly what it is that you're doing. And that case, you have a pretty good head start, I think. So that's where you start.
David: [00:02:49] I think the interesting point here, too, is validate whether need is even a word that’s relevant. Is the thing you're trying to do something anyone else wants? I think that's the number one issue. For a lot of entrepreneurs, they have this idea in their head, and they think in order to test the idea at all, they have to build the most extravagant version of it. When in fact, validating or rather disproving the hypothesis than anyone else could be interested in your damn thing would be to build basically, the shittiest version of it, to some extent. As in, not that the core of it is shitty itself, but all this stuff around it, can you put forward an epicenter of an idea that would resonate with someone else?
[00:03:37] Which, in the case of Basecamp, was exactly what we did. We started building Basecamp in 2003.
Shaun: [00:03:43] With how many people?
David: [00:03:44] There was four people at the company at the time. And not even all four were dedicated to this from the onset, because the company was doing other things at the same time. But we started putting really basic elements together. And then first proving do we even want it? This is one of those first tests for an idea that, hey, if you're making a thing, would you want to use this? If you can't even convince yourself, which is actually harder than it sounds. If you can't convince yourself that this thing you actually made was something you would actually use? Yeah, you're not going to have any chance convincing anyone else. And we convinced ourselves very quickly, that essentially, I think, the first two features were like, it was essentially a blog plus to dos, or something like that, that we built. And that was enough. And we started using it for real with real things on a real project, and that provided that drive to keep going. And then we were like, alright, we've cleared that hurdle. We want to use this ourselves, again, harder than it sounds.
[00:04:50] I've tried personally, to build a substantial number of ideas where I start building it and then five minutes into it or a day later, I don't even want to really use it. And I'm like, alright, I guess that wasn't it. But in my head, I had this vision. Yeah, of course, it's gonna be great.
[00:05:07] So, first checkpoint, can you convince yourself to use the thing you're building. Checkpoint two, if you show it to someone else, are they just politely saying, oh, that's nice. Yeah, I see someone would want that. Or are they saying, I want that?
Shaun: [00:05:24] Right.
David: [00:05:24] That's sort of checkpoint number two. And we cleared that checkpoint quite early on with Basecamp as well, when we had a handful of features. And we showed it to I think, Coudal Partners or something like that. And they were quite eager to say, I want that. Not that, I could see other people would want that, but that they wanted that.
[00:05:44] So now you have two validations there. And in that way, keep going, right? Building just the epicenter of something that propels itself forward. And during that entire phase, did we have any of these other things? Did we hire a bunch of extra people to work on it beyond the people who were already working at the company? No. Did we raise a bunch of money for it? No. All these other things? Did we hire out a new office in such a way to incorporate this as a new business? No. Did we even incorporate this as a business? No. There was just so many of the traditional steps of hey, this is a serious endeavor I'm on that we just didn't do.
Jason: [00:06:22] Validation’s a tricky thing. I think it's easy to get anybody to say yes to something because it doesn't cost them anything to say yes to it. Like do they need that? Yeah. Would you use that? Yeah. Because it doesn't cost anything. And oftentimes, the people you're showing it to are still people you kind of know, so they're still going to be supportive. So I actually think in some ways, the validation comes before you make anything, which is that you know this thing that you're about to do really well. We knew that we needed a better way to manage our projects with our clients. That was just sort of undeniable because it was sort of a mess for us. And we knew that we were not unique. We knew there were others. There had to be others like us, and we knew others like us. And we knew that they had these problems, too, even without showing them the product. We knew they had these problems.
[00:07:05] And I think in your world, I don't know, D&D well enough. But I imagine someone's like, well, to generate a D&D character, it's a really manual process. And gosh, if there was some automated way to do this, it'd be amazing. Because every time we play, it sucks. So gosh, you know, there's a sense of like, I could feel the demand here. I have the demand. People I know have this demand. I just think it's tricky to build part of it and ask people if they would use it. That's kind of the whole MVP world, which is, I'm not a big fan of that personally. I think you should figure out if you're going to build the thing and make it. You can make a simple version of it. But asking people along the way, if they'd use it, I think is a hard way to get an honest answer.
Shaun: [00:07:46] Well, the next thing I'll need when I when I start this business. I failed to listen to last week's episode. So I assume I will need a bunch of money, especially outside funding,
David: [00:07:57] It all depends on whether you can build it yourself, which I think is the key that unlocks so much of what this book proposes. Because if you can't build things yourself, a lot of the advice needs to be modified. Because then you do need other, if not other people's money, you just need to be very rich. That's also a very good way to start a business. Just already have a bunch of money such that you can hire people and pay them to do things for you. But if that's not the case, which it is not for people.
Shaun: [00:08:30] Right.
David: [00:08:30] The key is you have to be able to build things yourself. Because if you can, then that investment and that need is like your time. And for your example, I think a lot of info products. Essentially, it's never been easier if you even just know the domain. If you just know the the D&D stuff. Can you set up billing? Can you sell things online? Do you know what? 2004, that was surprisingly hard still. Gumroad. And if you can dig a little further Stripe and some of these other things that makes it possible to sell information products online, they're essentially off the shelf items now. So the whole need part becomes a lot easier if you can just simply use a mass market tool.
[00:09:16] Alright, can I set up Gumroad, plus, Squarespace plus a MailChimp plus a Twitter account plus a YouTube channel? Yeah, you probably could without even having any particular skills beyond the epicenter of what you're working on.
[00:09:35] Like, hey, I'm really good at D&D stuff. I can talk it up. I can develop that audience. A lot of this, as the first question you went with, I need a lot of marketing, yeah? Yeah, you do. You do need marketing. That doesn't mean you have to buy it.
Shaun: [00:09:47] Right, you don't have to hire a PR firm.
David: [00:09:49] Right. You don't have to hire a PR firm. You don't have to buy ads. Our entire approach, which we cover in some of the other chapters is essentially building that audience.
[00:09:58] Are you just interesting enough that people would want to listen to you? And then if people want to listen to you, do they eventually, perhaps, want to buy from you? If you can't even make them listen to you, what you have to say, can you identify the problems that they have and speak to those? If you fail at that task, your odds of being able to sell them something, very low.
[00:10:20] One of the things I always loved about Steve Jobs’s demos, whenever he was demoing something big was he always started with the problem. He always started with, like, here's why this thing needs to exist. And you'd be nodding along before you even knew what he was selling. Because he was illuminating the problem and going like, and you'd go, yeah, that's a thing that annoys me, too. That's so much of what marketing is. You're illuminating a demand that didn't know it was there. Right?
[00:10:50] With Basecamp today, half of the business that we get are people, we essentially convert from email. Five minutes ago, they didn't know they needed a project management or collaboration tool. They’d just like, I'm just sending emails, like what's wrong with that? Well, maybe they find out on their own after they dropped the ball a few times, and things fall through the cracks that like something is wrong, but they don't necessarily even know 100%, what that is. Basecamp, and if you land on the site tries to eliminate that problem.
[00:11:21] Hey, all this stuff is falling through the cracks, you're not following up in a timely manner, all these ways we're identifying for it. And you can do all that before you even have anything to sell. And I think that that's a way to just figure out like, do you actually have the chops to illuminate the problem in such a way that you can excite others to a potential solution? If you can't do that? Yeah, it's gonna be a little harder.
Shaun: [00:11:44] One of the other things I'm going to definitely need is time. I mean, I should probably quit my job and hang up my podcast hat. And get down to work full time on this project in order to start this business, right?
Jason: [00:11:57] Um, you know…
Shaun: [00:11:58] If you say yes, right now, Jason, this is—
Jason: [00:12:01] No, of course not. I'm just trying to delay the inevitable. I mean, what we recommend typically doing is you start something on the side, and you see what happens. Now, you've got to make sure that you can start something on the side with your employment contract, wherever you are. Not all companies let you do something on the side, especially if it's close to the business that you're in.
Shaun: [00:12:16] Right.
Jason: [00:12:18] But let's say that's cleared, you’d start on the side. A few hours here, a few hours there, figure it out. We advocate good night's sleep and no work on the weekends. But if you're doing something on the side, you might need to take an extra hour here and there. You might have to take a Saturday here and there to try something on the side. The point is that you don't want to sustain that forever, you need to make a sacrifice here, perhaps and do a little of that. So don't quit your job. There's a really good chance what you're about to do is not going to work. Actually not even a really good chance, like almost certainly it's not gonna work.
Shaun: [00:12:45] Right.
Jason: [00:12:45] So you don't want to give up what you're doing. So you want to keep your paycheck coming in, keep your job, keep your focus on that. And then on the side, figure this out and see where it goes. At some point, it might pull you away enough where you’re like I could do this now. Or I see there's potential here. Or maybe there is money coming in and I can actually quit my job or whatever it might be.
[00:13:07] You also might find out that you don't really like it. You built it and you're like, I don't actually want to do this, though. And this is the thing that I think is missed by a lot of people when they’re starting a business is that starting something is actually relatively easy. Maintaining something is considerably more difficult.
Shaun: [00:13:24] Right.
Jason: [00:13:24] It requires sustained effort, it requires a lot of monotonous work and dealing with things and people you don't want to deal with sometimes and problems and all this stuff. It's like, keeping the lights on is really, really hard. It's exciting to make something new, but then you're stuck with it, in a sense, and you can be stuck with it in a good way and enjoy it. But you could also be stuck with in a bad way and be like, ah, you know what, I don't actually want to be doing this? I'd rather just keep my job and keep this thing a side project. And that's fine, too.
David: [00:13:51] What I've also found, along the same vein, is that, as we've talked about before, it's easy to fall in love with the idea of being a person who starts something.
Shaun: [00:14:01] Right.
David: [00:14:01] Rather than actually being like, this specific thing is the thing I want to go with. I’m gonna go somewhere, it's not just a thing, because I want to be an entrepreneur. I want to be a starter, I want to do some of those things. Because that's sort of an image or an identity to fall in love with, which is quite different from okay, now we actually have to do it.
[00:14:22] And what I find when I talk to a lot of entrepreneurs is that they spend a lot of time thinking about that. Thinking about all the things they want to do. How much time have you actually sat down and worked on the idea itself. Not the around, not the considerations of where this might go or what you might need something. Just the thing itself, what I find is that quite often, it's a surprisingly low investment in the epicenter of the thing itself.
[00:14:52] So for example, if you're doing your D&D generator, whatever, have you actually invested 20, 30, 40, 50 hours in that to try to really work on it? A lot of people haven't. So getting into and validating, first of all, is this something you want to do? Because as Jason says, it sucks.
[00:15:12] And one of the heuristics I've used on a lot of different projects is would I want to do this, even if it doesn't work? Would I want to do this even if it becomes a failure? Would I look back upon that time and say, the sacrifices I made to create the space for this side project, the Saturdays, the Sundays, the evenings, the whatever, that I give up to some extent to try this? Totally worth it, even if it doesn't go anywhere. That's a harder question than it sounds, I think. And a lot of people would not ultimately answer yes to that. And I think, then, the odds are just difficult. As Jason says, the vast majority of everything doesn't work. Why would you give yourself almost certain odds that you're going to say like, well, geez, that sucked.
Shaun: [00:15:55] What about physical space? I'll definitely need an office. I might need. You know, if I do print books, I might need a retail space. I'll need some warehouses, right?
David: [00:16:04] I think that question would have worked better, like two years ago. Like now—
Shaun: [00:16:09] Now that we’re all at home.
David: [00:16:10] Exactly, it's preposterous on its face. But it is interesting, like literally, two, three years ago, let's say, that was a serious thing that people would ask themselves. And now it seems ridiculous to even propose it. That that would be one of the first things.
Shaun: [00:16:25] Yeah, so, I mean, Basecamp, 12 years ago, where were you guys?
Jason: [00:16:30] When we started Basecamp, subletting some desks, from another business, I think we were renting five desks or three desks or something like that, out from Coudal Partners who was a company or still is a company in Chicago that we were friendly with. And we needed some space, we didn't have a space, and they had more space than they needed. So like, yeah, could we have a few desks? And it wasn't like a separate office. It was just like desks.
[00:16:57] And then of course, David wasn't, I mean, wasn't even here. David was in Denmark. It was me, Ryan, and Matt, at the time, in Chicago, in this small office, this rented space, alongside another company. Then David in Denmark, and it was fine.
[00:17:13] We didn't even need an office in Chicago, but we just we had one, it was fine. We only had people in Chicago. So we did that. But the office didn't really give us anything, it just, we had one. But it wasn't required for sure. And to your point about like warehousing and all the other stuff like, you know the answer. Like you don't need any of that you don't need a warehouse. But also, like, for example, we have, we sell some HEY merchandise and some Basecamp stuff and we just outsource this to some companies. Send them a pallet of goods, and they just take care of the whole thing and you offload that stuff that isn't really a core competency. And it's never been easier to do any of those things than now. And so you really don't need any room to store anything.
Shaun: [00:17:49] What about a support team? I'm going to be getting a bunch of emails. We're gonna have to deal with returns and that kind of thing?
Jason: [00:17:56] Yeah, you're gonna do that yourself for a long time. And it's the right thing to do. It's the best way to learn about does this thing work? Does it not work? What are the flaws? What have I missed? What's not quite right? What is great about it? What kind of words to people use to describe it? Good and bad. I've always enjoyed doing support because you you hear how people describe something in a different way.
[00:18:17] So for example, for a while, people were calling their Basecamp projects like Basecamps.
Shaun: [00:18:23] Yeah.
Jason: [00:18:23] And like you pick up on that. And you're like, we don't call them Basecamps. But we did for a little bit, actually. But you just, you start to hear what people are actually calling things. And like people might call them checklists, when we call them to do's and you're like, oh, people are calling these checklists. That's interesting. I don't know what it means, like in terms of where do we go with it? But it's kind of interesting. And maybe you’re like, maybe we should allow you to rename these tools that we have. And it turns out, now we do that. You start to pick up on these little subtle things that you won't pick up otherwise. So it's very, very healthy. You don't want to do it forever, probably. But certainly for the first few years, I did. I did all the support for the first couple years for Basecamp. And it was great.
Shaun: [00:18:57] Yeah, our listeners may not know that, that all of the support emails went directly to you in the beginning, right?
Jason: [00:19:03] Yeah. And then David and I shared some of those responsibilities. And you just learn a ton. You also, people are amazed, like, oh my God, you're the person who makes the thing and you're answering my email and like, this is a good, it's good connective glue, really, to do that with your customers.
David: [00:19:21] And it's those advantages that you will only ever have in the beginning. And they're so powerful. I mean, I remember while Jason would answered the support questions, and then whenever anything was broken, I'd get the email. Damn well better fix what's broken. We actually, even at Basecamp, have fallen into the trap sometimes when you isolate the people building the things from the people getting the feedback about the things that it is a little too easy sometimes to say, well, I mean, just put it on a list.
[00:19:55] When you're actually the person fielding the requests and you hear about the same broken thing four times in a row, you're just like, I can't write back, again, to a person, I'm just going to go in and fix it. And it's that speed and that agility that really makes startups startups. You should not be in a hurry to get away from that, because so much of the fundamental terrain is mapped during that time.
[00:20:22] And if you jump past that too quickly, you end up in that space where it's all fuzzy, it's all hearsay. Now, at Basecamp, a lot of it is hearsay. Jason and I don't answer hundreds of support tickets every day. I think Jason at the end was, you were doing like 250, 300 emails.
Shaun: [00:20:41] Jesus.
David: [00:20:42] They were very terse replies, I'll give it that. But that was just the volume of feedback that, we don't get that volume anymore.
Shaun: [00:20:51] Yeah.
David: [00:20:51] And something is definitely lost, the bigger the business becomes the more is lost, the further you are away from your customers, the further away you are from the direct feedback how they talk. Because now you're having essentially their requests paraphrased by other people who will paraphrase them in the language of the business. So you miss out on the subtleties, you miss out on the on the specifics, and you miss out on the gift of annoyance. Of fixing so many things through the annoyance that you gotta cherish that time, and be like, this is really good. And that foundation, that's gonna have to carry you for a long time afterwards, all the stuff that we build up in those early days around that core, to what Basecamp is, even today.
Jason: [00:21:39] David had a great point there, which is something, which is probably a whole different podcast, but there are significant advantages to being small. And oftentimes companies want to blast right through that phase and move away from that as fast as they can, because they think that they're inferior, they feel like they're not where they want to be eventually. That it's like, they’re amateurs or whatever.
Shaun: [00:22:01] If I can just get to this size, then it'll be a success.
Jason: [00:22:03] Yeah. And we do we do this thing called everyone on support, or we kind of rotate a support thing, but it's not quite the same, you're exposed to that every once in a while. There are just advantages to being small. Big, huge advantages, and that's one of them. You are forced to be closer to the customer. This is really valuable.
Shaun: [00:22:21] Yeah.
Jason: [00:22:21] Incredibly valuable, and it comes for free. You have no choice. You have to embrace that versus now, we kind of have to force it. And when you have to force it, you don't really have to do it, you kind of just sort of don't really. And there’s a there's a variety of other things, too. But that's a huge advantage of being small.
David: [00:22:40] I think the integration that comes from doing everything, all the things we've talked about, you don't need, they're all functions that someone needs to do, it just happens to be that that someone is you, for all of it.
Shaun: [00:22:52] It’s one person, right?
David: [00:22:53] It’s one person. Like Jason or I, we've done every position at this company. And that allows you to have a “Spitzengefühl”
Shaun: [00:23:04] I'm sorry?
Jason: [00:23:06] That was Danish.
David: [00:23:06] Um, it's actually German.
Jason: [00:23:08] German.
David: [00:23:08] Just like, it's on your fingertips, that you sort of, you know what the thing is, itself, because you've done it yourself, which gives you all these advantages when you then go on to hire or when you have to check up, or someone's reporting to you. That you actually know the domain somewhat, because you've done the work. And I think that that education, you're getting in your own business, don't truncate that.
[00:23:31] I mean, maybe there's a way you could boil a four year college degree into three months, just reading, I don't know summaries. Hey, here’s Crime and Punishment summarized in two pages with the major points. Yeah. It's not the same thing. You don't get the same thing out of it. And your business in the early days is allowing you to have this education. Don't try to truncate that. Take a good couple of years of education in your own business and your own problems. When you have to get lessons in all of it and you don't really have another choice, it's fabulous.
[00:24:09] And in fact, I'd say it's fabulous for another reason, which is there's a motivating factor, or at least there was for me about doing everything because you're jumping around. You never end up sort of stuck in a rut somehow. Because there's not even really time or space for that. There's just too many problems and too many different spaces that you're constantly rotating through them in such a way that you don't grind to a halt, which is another reason, I think that the early days are so much more productive.
Shaun: [00:24:35] Yeah.
David: [00:24:37] Now, sort of what I need need to do is a relatively small list at Basecamp. In the first year, second year, fourth year, the things I need needed to do was a very long list and if I didn’t do those things, the servers were down, the whole thing stopped working. So your productivity is just a completely different thing.
[00:24:58] Now, you can go overboard with that and plenty people do. And that's how they end up working 80 hours because there's always more and all these other things. There are pitfalls to it. But there's also some positive to it. That sense of at least, hey, I spent 40 hours doing 400 different things. And those 400 different things were really important to the business. It's deeply satisfying.
Shaun: [00:25:17] Yeah.
David: [00:25:17] In a way that I find myself sometimes now not having that same level of satisfaction, because more of the things that Jason or I are working on are longer term, or they're a little more abstract, or they have more gears before it gets down to reality, because we're trying to organize teams and organize people and all this other stuff versus when you're doing things yourself on the product itself. It just has that sense of like, this was a really good day's work. I feel exhausted in all the positive ways of feeling exhausted as though you just did a great workout.
Shaun: [00:25:55] Well, fantastic. I think that's a great place to stop. I am ready to go out there and start a business on my own.
Jason: [00:26:01] Good luck, Shaun.
Shaun: [00:26:01] Thank you so much. Next week, we're going to be talking about the word Startup as we discuss the essay “Start a business, not a startup,” which should be pretty fun. So I want to thank Jason Fried for being here.
Jason: [00:26:15] Great to be here.
Shaun: [00:26:16] And I want to thank David Heinemeier Hansson, thank you.
David: [00:26:19] Always.
Shaun: [00:26:20] All right, we'll see you next week.
Jason: [00:26:23] Adios.
[00:26:21] Broken By Design by Clipart plays.
Shaun: [00:26:25] Rework is a production of Basecamp. Our theme music is by Clip Art. We're on the web rework.fm, where you can find show notes and transcripts for this and every episode of Rework. We're also on Twitter at @reworkpodcast. If you're following along with the book, next week, we'll be discussing the chapter “Start a business not a start up.”
[00:26:51] If you like the show, I'd really appreciate it if you would leave a review on Apple Podcasts. And if you have any comments or questions for Jason or David, leave us a voicemail at 708-628-7850. Or better yet, and this is because the sound quality is a little bit better, record a voice memo on your phone and email it to hello@rework.fm.