Observations on Jason Fried and being a big “small business”

jason-mag-cover.jpgObservations on Jason Fried and being a big “small business”: Sorry folks. This is going to be a long post. And it’s going to link to an even longer article, a profile of Jason Fried that I wrote that has just been posted elsewhere. (More on that later).

This post is long because the announcement by Jason Fried that his company, 37signals has accepted a minority investment from Jeff Bezos (the individual, not Amazon) offers an great opportunity to share some observations I’ve had for a long time. But before I plow into those, first, here is a clarification for those who have characterized this event as “VC funding”: When a private business sells a minority stake to an outside investor, that does not necessarily make it “VC funding.” In fact, it does not sound in any way like VC funding from Jason’s post, but that’s a nuance missed by many folks commenting on his blog and elsewhere. So, just for future reference, a “private investor making an investment,” even if that investment is made though something that is set up as a business, is not the same as “VC funding.” It could be as simple as the desire by the private company’s owners to diversify (translation: buy stuff, pay off debt, etc.). Just guessing, but I assume the vast majority of times when a founder-owner sells a minority stake in a private company, it is not “VC funding.”

Now, back to the point of this post. It may come as a surprise to some readers of this weblog that I have a day job that every once in a while allows me to play writer. (Most of the time, however, my job is mainly saying “thank you” when clients say nice things about things the people who work for me do — that, and trying to find more clients like those.) One of the magazines we publish at my day job is called MyBusiness and it goes to 550,000 small business owners who are members of a national organization called NFIB. The magazine is heavily focused on the how-tos and whys of running a small business, which is great for me, because that’s what I do, depending on how one defines “running.”

Anyway, in 2005, I heard Jason Fried make a presentation at South by Southwest which I thought was perhaps the most articulate and concise overview I’ve ever heard on the advantages a small business has over a large business. Obviously, there are disadvantages also, but Jason’s message is basically a tough-love no-bull one something like this: Stop whining about what you don’t have because you’re small and wake up to the beauty of knowing that when you’ve got nothing, the down-side risk is minimized. In about 30 minutes, he summed up exactly why I enjoy doing what I do and how I do it. This is a topic I’ve written about — and lived through — for much of the past 25 years. Jason’s charisma and his gift to “teach” rather than present or pontificate or perform impressed me that day. After that, I began to read Jason’s blog and to experiment with the tools his company creates, like Backpack and Basecamp.

I began to examine how Jason’s philosophy (and I think it can be argued he’s a philosopher, of sorts) of starting and running a business compared with the myth of the tech start-up “entrepreneur.” I enjoy reading technology-business blogs and VC blogs, but from my “outsiders” perspective, I know there are better ways to end up successful (and happy) than to follow the “myth” that goes something like this: 1. Move to the Silicon Valley. 2. Get VC funding. 3. Sell to Google. Number one, it’s a myth. Number two, if it’s true, I’d much rather spend my time doing something else.

There’s an amazing thing taking place in the economy that gets lost in our obsession with that myth. There are lots of small businesses run by men and women of every race, creed, lifestyle and political belief, who are making lots of money on the Internet without ever making it onto TechCrunch. In fact, there are lots of folks selling tens of thousands of dollars of merchandise on eBay each month who have never even heard the term Web 2.0. You think there is a proliferation of Web 2.0 startups? It’s nothing compared with the numbers of small businesses that are started offline every week. Some will succeed. Most may fail (but not as many as conventional wisdom suggests). But they’ll keep being started and most of us will never notice because there will never be a “trend” story suggesting there’s too many of them chasing VC dollars. These regular small businesses are perhaps boring because they don’t have websites with Ajax interfaces and, frankly, they are run by people who think Ajax is a household cleanser. But more likely, they’re “boring” because no reporter who gets leads on “startups” by talking with VCs will ever hear of them.

Where was I? Okay, I figured many of the non-tech folks who read MyBusiness magazine may like to hear about Jason’s approach: that being small is not only okay, it’s preferable to being big in many ways. However, the more I observed Jason and his company, the more I knew that if I didn’t do the story soon, it would be too late. There is no way that a product like Basecamp can not be purchased or knocked off by a giant company, I felt. However, figuring his business had to be profitable (thanks to the fees thousands of others and I pay him each month) and there is little obvious need for much capital to scale it, I also assumed Jason is in a rather comfortable driver’s seat. (Or, he at least has the freedom to appear that way — the secret to getting a good valuation.)

And so, earlier this summer I spent a good portion of a day in Chicago with Jason and talked with him at length about lots of things. One of them, obviously, was about the whole VC thing. “I’m not a communist,” is one of his quotes I didn’t use in the article as he explained to me that everything has a price. However, our discussion revolved around motivations for building a company that one enjoys running, rather than a concept one hopes to flip. We discussed, off the record, certain iconoclastic business people who are successful because they focus on creating products or services with a user in mind, rather than trying to please a bunch of people sitting around a table dreaming up features. We discussed how being outside of Silicon Valley helps free one from thinking success is measured in funding-rounds and press-releases. We discussed how the role of “private equity” is different than “VC funding” and, well, it became obvious to me that going a mythologized route was not in Jason’s plans. If you read the article, you’ll see why I think it would be difficult for Jason to survive being bought by a big company.

So yesterday, when he announced the investment in 37signals by Jeff Bezos “private” investment company, it made sense to me — even while to others, it may appear he’s selling out or turning his back on the whole “small” thing. I believe Jason’s company is going to get big, very big. But it will do so in a whole new way that we can all learn from. I know I look forward to using their products to run my small business.

The magazine doesn’t come out until next month and is not available on the newsstand, but here is a link to it that we posted early on Mybusinessmag.com. Here are some key points from Jason’s “Get Real” approach to running a small business.

Underdo your competition: Businesses get caught up in a cycle of adding more features and services. Great opportunities exist for those who create the same products, but with more simplicity and ease of use.

Create services you would use: Few great product and service ideas come as a result of groupthink and committee meetings. Democracy is great, Fried says, but in the product-development arena, it rarely leads to great results. Great products are the result of solving problems for yourself and then offering solutions to others.

Fund yourself: The more money you have, the more you’ll waste, Fried says. He admits that outside funding is necessary for capital-intensive businesses, but for many service businesses—especially those utilizing technology or operating online being able to turn your business concept into reality is getting less expensive by the day.

Take half: List all the features you’d like on your product and cut them in half, Fried advises. Then, cut that list in half. Being driven by time and budget rather than by your dream list of features will result in a much more solid, workable product that won’t break the bank.

Call off the meetings: Fried is not a fan of endless meetings or documents filled with specifications and details that no one reads. He’d prefer to focus on the essentials and those don’t require a lot of meetings.

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  • Cam

    I’ve been a fan of 37signals’ approach to doing stuff since they were a design firm, and really like the way they work as a software company.

    Thanks for sharing your impressions, and thanks also for the article.