Web Summit 2015 is sizing up to stage some hardcore debate.
He hasnt been VC funded, he never wants to be VC funded, he thinks VCs suck. He believes in starting lean and staying lean.
He describes GitHubs taking of VC funding as going to the dark side. Hes a Unicorn Slayer.
Even though Basecamp 3 is just out, David claims hes not coming to Dublin to pitch it, Im not there to sell a product. Im there to sell a different vision for how to build companies. Basecamp didnt take venture capital. It never went public. It has no plans to. Its an oddity, a company thats stuck around for 12-plus years and never had the aspiration to become a unicorn.
Basecamp 3 packs the most potent lines of code I’ve ever written AND also the most of them ever for a version 1: pic.twitter.com/TOV6094RbN
DHH (@dhh) September 24, 2015
Theres the tiny minority of startups that end up fulfilling the VC destiny of becoming a unicorn, and then, theres everyone else, who end up having a really shitty time building something that ends up getting killed off. I hope to come to Web Summit to inspire at least some people to look at an alternative. I think its time to reconsider and redefine what startup means, because the whole word has just been hijacked to fit this narrow category that serves the interests of financiers. Lots of the marketing material around Web Summit is all about paying homage and respect to this venture capitalist model of startup, which I think is complete bullshit.
At a conference with thousands of companies pitching for funding, Davids stance singles out Basecamp as, well, weirdos. I ask him if thats intentional. I think weve always been weirdos, David laughs. Some people start calling us names. One of the names weve been called is a lifestyle business. I actually took it as a compliment. Yes, absolutely, Im running a lifestyle business. Im running a business thats compatible with a lifestyle I desire.
With Basecamp, we decided that we were going to live our lives while we built the company. That meant real hobbies that are outside the world of computers. One of those hobbies is driving a racecar, which helps me stay focused on this notion that 40 hours a week is more than enough to create something great in business.
Twelve years into the Basecamp story, David and his co-founder Jason Fried have baked this philosophy into their basic business tenets. Their fifty-strong team works from wherever they choose, and the most a customer can pay Basecamp is $249 a month. A limit they have set so no one customer becomes too important, influential or painful to lose.
Their worldview does not fit into the matrix of 88% profit margins and planned liquidity events. As David explains, I would rather see more sustainable, slow-growing companies that sell products and services directly to end consumers for money. I believe that in the long-term, the stock market is a weighing machine. In the short run its a popularity contest. Right now, were in the popularity contest phase for a lot of companies. Ive done a fair number of analysis pieces on companies where the chickens are all ready to come to roost. If you look at Groupon, they IPOed about 3 years ago to fanatical fanfare about how they were going to dominate the daily deals market, and today the company is a shell of its former self.
In 2006, Basecamp took on their only investor, Amazon CEO Jeff Bezos. I asked David what Jeff thinks of Basecamps strategy and what makes taking money from him different from VC funding. Jeff bought a small minority stake, David explains, That minority stake was not a venture capital investment. It was buying some shares to give us the money to believe in what we were going to do and stick with it. It gave him no rights to dictate what we were going to do, what we were going to say, which products to push out, or whether to have a liquidity event.
I think its time to reconsider and redefine what startup means, because the whole word has just been hijacked to fit this narrow category that serves the interests of financiers.
The investment that he made in Basecamp is a rounding error on his personal balance sheet of $13 billion. The terms of our deal didnt give him any options of that kind. The option he got was to come along for the ride that were going to take, and that ride was probably going to take 30 years or 50 years. In that time, he would get paid out of the same profits that were getting paid out of, and that was the deal. Usually, when we talk to Jeff his advice is, ‘Keep shaking things up’. So we do.
Basecamp happen to be in a space thats very hot right now: some have even called B2B SaaS sexy. Whether VC backed or not, Basecamp are benefitting from the heat that Unicorns like Slack are generating. Basecamp 3 features a renewed focus on chat that some would see as a direct reaction to Slacks massive growth.
David contends that chat is a useful business tool, but that its not a total solution. Right now, he says, theres a mania going on in the industry, because theres some great new tools that have come up that do a great job at pushing that chat agenda. Theres going to be a slacklash against the concept that if youre not paying attention 24/7, youre going to miss out. Chat is a wonderful tool for a lot of things, and its a terrible tool for a lot of other things.
A lot of people, when theyre in the chat room, feel compelled to weigh in right there at the moment. Everything happens sort of snap, snap, snap. Sometimes theres a dearth of considered thought. Basecamp combines this high-speed version of chat, which is great for a bunch of things, with this low-gear version of message boards, other forms of documentation, other forms of collaborations that take more of an asynchronous, slow gear approach to this work.
The subtext of Basecamps anti-unicorn rhetoric is quite level-headed. Basecamp are smart marketeers. They are willing to use their opposition to the status quo as a way of getting publicity. Rather than attacking one way of doing business, theyre actually shining a light on their own longevity.
David agrees. That is a big part of it, absolutely. We believe in the long-term. We started a publication dedicated solely to that (called The Distance) that profiles privately-held companies that stayed in business for more than 30 years. My goal is that in 30 years, were still operating the first version of Basecamp. In much the same way that if you bought a Leica N3 in 1957, you can write to the factory in Germany and still get a spare part.
I love those stories of longevity, of businesses that are around for the long term. I think weve lost some of that in the transition to digital, that I dont think we need to lose.
There you have it: lesson one from Basecamps guerrilla marketing playbook: Find an enemy.
Lesson two, when youve found an enemy, stick to your guns. Tell and retell a story thats consistent with your proclaimed values. Making a great product is only the beginning.
Build It And They Will Come expired as a valid business concept a long time ago (along with Field of Dreams star Kevin Costners box-office clout). As David explains, ‘There are incredibly few cases where someone just built a good piece of software and never told a soul about it, and all of a sudden it just took off. For the vast majority of everyone else, you have to be the salesman. When I say the salesman, I dont mean in terms of the annoying person that keeps spamming you about, ‘Buy! Buy! Buy!'”
Its that you have to build and cultivate your own audience. What we continue to believe is, the best strategy is to stand for something, believe in something, thereby building an audience of people who are interested in what we have to say, and by extension, some of them will also be interested in what you have to sell.
Basecamp remains Davids only job. He started working on it before he finished college. In terms of success and work/life balance, hes living the dream.
The only thing David seems to be missing, apart from those extra zeros at the end of his bank balance, is being lauded as a business superhero.
Its going to be super-interesting to see how the unicorn fanciers react to him at the Web Summit.