Fried founded 37 Signals in Chicago in 1999, which, for the coast-dominated tech industry, is known as a long time ago in a galaxy far, far away. At first, the company worked on Web design. Given its distance from the epicenter of the industry, it brought a novel sensibility to the business of creating Web pages. The company's own site from the time suggests that even during the boom -- a time when nobody in the tech world advocated minimalism, when even the Pets.com sock puppet had a book deal -- 37 Signals was devoted to less is more. The company's home page was mostly white space, the main feature a list of links to 37 "nuggets of online philosophy and design wisdom." Here's one representative nugget: "What drives us is the knowledge that the everyday person is seeing only the smallest glimpse, 1/100th at best, of the full potential of interactive media today. To most folks, the Web is a scary place. Our mission is to change that perception."

The story of how 37 Signals morphed from a Web design firm that built sites for businesses into a Web software company that builds applications for regular people is reminiscent of the Native American legend about Indian tribes who found a use for every part of the slain buffalo. Here's the quick version: In the course of creating Web pages for businesses, 37 Signals realized it needed a tool that would give its clients an easy way to monitor progress on their designs. The tool it created, a Web-based program meant only for the firm's internal use, was a hit with clients, many of whom wanted to use it for other projects at their offices. So Fried decided to transform the internal program into an application for everyone. In 2003, David Heinemeier Hansson, a programmer who lives in Copenhagen, Denmark, joined the firm to help with the task, and shortly thereafter 37 Signals released Basecamp to the public.

But in creating Basecamp, 37 Signals saw there were still other internal tools it could give to the world. Experienced programmers use a variety of programming languages to build systems for the Web -- you may have heard of Perl, Java, PHP and others -- but for Basecamp, Hansson used a relatively unknown programming language from Japan called Ruby. This turned out to have been an inspired choice, since it allowed him to create all the code he needed to run a Web application -- what programmers call a "development framework" -- from scratch. Hansson saw this framework would not only help 37 Signals build other programs, it would also prove handy for other developers. So last summer, 37 Signals released the framework as an open source software project called Ruby on Rails (about which more in a minute).

Launching a well-liked application like Basecamp and a complete development framework of Ruby on Rails in one year wasn't enough for 37 Signals. In selling Basecamp, the company learned that customers loved the application's to-do list feature. So this January the firm built a stand-alone to-do list site, a service that allows anyone to create a quick list of tasks, for free. The site, called Ta-da List, offers a good peek at the kind of software 37 Signals creates: easy, well-designed, highly functional small apps that ought to come with an addiction-danger warning.

Here's another amazing thing about 37 Signals: Only five people work there. There's no ad-sales department, no marketing team, no H.R. department, no tech support crew (Fried handles all customer questions himself), and no receptionist (there is an office in Chicago, but only Fried and another employee, Ryan Singer, work there; the other three people are in Utah, New York and Denmark). That's what I mean about using every part of the buffalo. The company created all it did in a short time with very little start-up money -- Fried eschews venture capitalists -- and other resources. Instead, it put a premium on its experience, constantly looking for creative new ways to spin what it learned on one project into another one. The M.O. has paid off. Today, 37 Signals owes no money to early investors. Because the company is a private firm, its exact financials are unclear. But the picture is appealing. First of all, the company makes money from its Web applications. To use Basecamp, customers pay a monthly fee of either $24, $49 or $99, depending on the number of projects they manage, and $19 a month for Backpack (there are free versions as well). The firm also does occasional Web design projects and hosts design conferences. Fried says the company is making a profit.

Today, notes Fried, starting a tech company requires very little in fixed costs. Most hardware and software (stuff to host a Web site, for instance) is either free or almost free. Standard business processes like handling accounts and marketing are built into the Web. If you want someone to pay you it's just a matter of setting up a Paypal account. If you'd like to advertise your site, you can buy an ad on Google, or somehow get bloggers to talk about you, raising your profile in Google. (37 Signals, which maintains a popular blog, got a great deal of buzz in the blog world.) "Your main cost is really labor," Fried says, and if you're passionate about what you're doing, if you're willing to go six months without a salary, that's an avoidable thing as well.

Recent Stories