Jason Fried: The Founder Who Proved You Don’t Need to Scale to Succeed
How the co-founder of 37signals built a 27-year profitable company with 62 employees, no venture capital, and a radical belief that the business is just the envelope — the product is the letter.
RTD Team
Run-True Decision
In a tech industry obsessed with unicorn valuations, blitzscaling, and "move fast and break things," Jason Fried has spent nearly three decades doing the opposite — and winning. As co-founder and CEO of 37signals, the company behind Basecamp and HEY, Fried has built one of the most enduringly profitable software companies in the world with a team of about 62 people, no outside board of directors, and zero interest in an IPO.
His philosophy offers a counterweight to the growth-at-all-costs playbook that dominates Silicon Valley. For B2B founders — especially those building in markets like Southeast Asia where capital efficiency and sustainability matter — Fried’s approach is worth studying closely.
From Web Design Shop to Software Icon
Fried’s entrepreneurial instinct showed early. As a kid growing up in the Midwest, he was captivated by the beautifully designed corporate annual reports his father — a stock market investor — received in the mail. While still in junior high, he built a product called Audiofile to organize his music collection, posted it on AOL, charged $20, and people paid. That was the moment he realized he could build a business from making things.
He earned a B.S. in Finance from the University of Arizona — not design, not computer science. After a brief stint at a web design job in San Diego that lasted only a few months (he realized he wasn’t built to work for other people), he moved back to Chicago and co-founded 37signals in 1999 as a web design consultancy. The name comes from 37 extraterrestrial radio signals identified by astronomer Paul Horowitz as potential messages from alien intelligence.
In 2002, Fried met David Heinemeier Hansson (DHH), a Danish programmer who became his business partner. By 2003, the growing consultancy was struggling to manage client projects with existing tools — which Fried saw as “ancient relics” obsessed with Gantt charts and statistics rather than communication. So they built their own. The result was Basecamp, launched on February 5, 2004.
Fried’s target was $5,000 per month in revenue within a year. Instead, they had 100 paying customers within the first month.
“The best products are made when the founder is the actual customer. You make something you truly want to use and understand deeply.”
Within a year, Basecamp was 37signals’ primary revenue source, and they became a 100% software company. Along the way, DHH created the open-source web framework Ruby on Rails as internal tooling — it went on to power early Twitter, GitHub, and Shopify. In 2006, Jeff Bezos was so impressed after watching Fried speak that he invested through Bezos Expeditions — a small minority stake with no board control. The company renamed itself to Basecamp in 2014, then back to 37signals in 2022 as it expanded its product portfolio to include HEY email and the ONCE product line. Through it all, the team stayed small and the company stayed profitable.
Your Only Real Competition Is Your Costs
One of Fried’s most distinctive beliefs is that a company’s costs are its only real competition. Not the other players in your market — your own burn rate.
“If you have an abundance of something early on, you don’t have to get good at that. A lot of entrepreneurs who raised money early never got good at making money. And then, when money isn’t available, they’re screwed.”
By keeping overhead low and teams small, a business gains what Fried calls “blubber” — a margin of safety to weather storms, make mistakes, and experiment without existential risk. This is the opposite of the venture-backed model, where companies raise enormous rounds and then race to grow into their valuations before the money runs out.
37signals has been profitable for 27 consecutive years. They serve over 100,000 customers and more than 15 million individual users across 285,000+ organizations. They have no outside board. They answer to their customers and themselves. As Fried puts it: “As long as we make more than we spend, we’re good. Everything else, it doesn’t matter to me.”
The Letter and the Envelope
Perhaps Fried’s most memorable metaphor is his distinction between “the letter” and “the envelope.” He identifies as a product person — the letter. The business itself is merely the envelope: a thin shell that exists only to deliver the product to the customer.
This framing is a direct challenge to the prevailing ethos where the business becomes the product — where founders spend more time on fundraising decks, growth metrics, and org charts than on the thing they actually sell. For Fried, the envelope should be as thin and light as possible. The letter is what matters.
“The business is the envelope — a thin shell that should exist only to deliver the product to the customer, not to be a complex financial instrument or an object of vanity.”
This is a mindset that resonates strongly in B2B software, where the product’s ability to solve a real problem is the ultimate determinant of success — not the company’s headcount or its Series B press release.
Stay Small, Ship Better
37signals has about 62 employees. For context, companies with comparable revenue in the SaaS world often have 500 to 2,000. Fried’s preference for small teams is not accidental — it’s a design decision.
At 37signals, a typical feature is built by a team of one programmer and one designer. That’s it. No project managers, no scrum masters, no cross-functional committees. The rationale: small teams minimize miscommunication, prevent over-engineering, and force clarity about what actually matters.
Fried organizes work in six-week cycles rather than long-term roadmaps. There is no five-year plan. The team makes the best decisions it can, cycle by cycle, based on what they know right now — not on speculative projections about what might matter in 2030.
Leaving the Cloud
In one of the most discussed infrastructure decisions in recent tech history, 37signals began moving off Amazon Web Services (AWS) and onto their own hardware in 2023. Their AWS bill had reached $3.2 million per year. By purchasing roughly $600,000 in Dell hardware and paying $720,000 annually for hosting, they cut their cloud bill to $1.3 million — saving nearly $2 million per year with no additional staff. Total projected savings: over $10 million across five years.
This wasn’t a philosophical stunt — it was a cost decision. Fried and DHH realized that at their scale, cloud computing had become a tax on their business rather than an enabler. The hardware costs were fully recouped during 2023 from the savings alone. By 2025, they began migrating 18 petabytes of data from AWS S3 to on-premises storage, replacing a $1.5 million annual S3 bill with a solution costing less than $200,000 per year.
The cloud exit perfectly encapsulates Fried’s broader philosophy: question assumptions that everyone else takes for granted. The industry consensus was that “cloud is always the right choice.” 37signals looked at their actual numbers and chose differently.
Product Purity Over Feature Bloat
Fried is vocal about what he calls “the great regression” — the trend of making everyday products worse by adding unnecessary complexity. Dishwashers with laggy touchscreens. Light switches that need Wi-Fi. Apps that add features until the core experience degrades.
He admires products with “purity” — designs that are functional, timeless, and don’t add capabilities just because they can. The Concept 2 rowing machine. The original Rolex Daytona. Products that do one thing exceptionally well and resist the urge to become something else.
This philosophy extends directly to how 37signals builds software. Basecamp is deliberately not a Jira-killer or an everything-app. It does project management for small teams and does it cleanly. HEY rethinks email from first principles rather than adding more buttons to a Gmail clone.
“Purity is function. Adding ‘smart’ features often makes the experience worse than the simple version it replaced.”
Profitability as a Feature
37signals shares 10% of annual profits with its employees, distributed based on how long each person has been at the company rather than their title or seniority. This creates an incentive structure aligned with long-term thinking: the longer you stay and the better the company does, the more you earn.
Fried views profitability not as a financial metric but as a product feature. A profitable company can afford to make long-term decisions. It can say no to enterprise deals that would distort the product. It can invest in quality without explaining ROI to a board. It can operate calmly.
“Sustained exhaustion is not a badge of honor, it’s a mark of stupidity.”
The books Fried has co-authored with DHH — Rework (2010, a New York Times bestseller), Remote: Office Not Required (2013, years before COVID proved the model), and It Doesn’t Have to Be Crazy at Work (2018) — all reinforce this theme. Work should be sustainable. Growth should be organic. Forty hours a week is plenty. Success is “making something I’m proud of” and reaching a state where enough is enough.
In 2024, 37signals launched the ONCE product line — software you buy once and self-host, with no subscriptions and no shared data. It’s a direct counter-movement against the SaaS model that Fried himself helped popularize. When your conviction changes, you change direction. No five-year plan required.
Trusting Intuition Over Spreadsheets
Fried makes decisions based on conviction and intuition rather than A/B tests, focus groups, or data dashboards. This is not anti-data ideology — it’s a recognition that many of the most important product decisions (what to build, what not to build, when to change direction) are judgment calls that no spreadsheet can make for you.
“When you don’t know what you believe, everything becomes an argument. But when you stand for something, decisions are obvious.”
He also draws inspiration from outside the software world. Architecture, furniture design, nature, manual crafts. Fried has said that if he ever sold his business, he might not use a computer for an entire year. His 2010 TED talk — “Why Work Doesn’t Happen at Work” — argued that offices are full of involuntary interruptions, and identified the two biggest productivity killers as “M&Ms: Managers and Meetings.” For someone running a software company, these are striking positions — and they speak to a broader point about creative work: the best ideas often come from questioning default assumptions about how work itself should happen.
What B2B Founders Can Learn
Jason Fried’s approach is not a universal prescription. Not every company can or should avoid venture capital. Not every product can be built by a two-person team. But the underlying principles are broadly applicable, especially for founders building B2B products in emerging markets:
- Build for a problem you personally understand. The deepest product insight comes from being your own customer.
- Treat costs as the real competition. Capital efficiency isn’t a constraint — it’s a competitive advantage that buys you independence.
- Keep the envelope thin. The business should serve the product, not the other way around.
- Resist feature bloat. Do fewer things, but do them well. Purity beats comprehensiveness.
- Plan in short cycles. The world changes too fast for five-year plans. Make good decisions now.
- Question industry consensus. Just because everyone uses the cloud (or raises a Series A, or adopts a particular framework) doesn’t mean you should.
In an industry that constantly tells founders to think bigger, hire faster, and raise more, Jason Fried offers a different message: think smaller, stay lean, and build something you’re proud of. Twenty-seven years of profitability suggest he may be onto something.
Watch the Full Interview
This article draws on an in-depth interview with Jason Fried. You can watch the full conversation on YouTube: