Episode 66: 20 Years of Developing SaaS with David Heinemeier Hansson, CTO at Basecamp
In the latest episode of Subscriptions Scaled, we speak with David Heinemeier Hansson, CTO at Basecamp.
Basecamp is a project management and team collaboration software to help stop everything from falling through the cracks. It’s a way to keep remote workers on the same page so they can organize and share information, discuss ideas, and make decisions.
In the episode, we learn everything from Basecamp’s pricing model to how SaaS has evolved over the years. Keep reading to learn more about the episode.
Basecamp
The Basecamp system aims to help people prioritize meaningful work, reduce wasted time, and restore a work-life balance.
At the beginning of the episode, we learn how Basecamp works and about its competition in the company’s early days.
The company is a SaaS business that started in 2003 and launched in 2004. David has worked on Basecamp ever since with Jason Fried. The two started Basecamp before SaaS was even known as SaaS and before selling subscription software online was a big deal.
As they started developing software so early on, the two had to clear a lot of early hurdles, including how to charge credit cards. David and Jason have spent close to 20 years developing Basecamp through various versions. They’re now on Basecamp version three, working on version four.
Along the way, David and Jason have developed several other businesses. The most recent is a new email service called hey.com for individuals and companies. They also introduced a CRM tool called High Rise that rivals Slack.
David and Jason believe you should share with the competition. They’ve written books, spoken at conferences, and have been blogging for about 20 years about their journey in developing software. They share what they’ve learned about building their businesses, how to run them, and how to build software.
Working as a Team
David has worked with his partner at Basecamp for over 20 years, and we learn how they’ve made it work for so long. We also find out how David has stayed disciplined in his career.
Jason and David have learned that there should be harmony in a team. However, there should also be disharmony and a fair amount of clashing ideas. Despite this, the two have always fundamentally wanted the same things for their businesses.
The two were pointing in the same direction of the kind of business they wanted. They wanted to build a business on independence. They didn’t want to have bosses, as both David and Jason had poor experiences working for other people.
David and Jason built from first principles without just running a playbook that someone else had laid out for them. However, they had to change their minds a lot over their years working together.
Another factor in how well their partnership has worked is that David and Jason have their own spheres of expertise. David brings the programming and the technical side while Jason has the design and product direction. Together they meet in marketing, teaching, and writing.
David and Jason learned who was good at what, which gave them more power together. If the two had disagreements on some of the shared stuff, like the direction the business should go or pricing, they’d often resolve it by going on who cared the most.
David views this as trading of concessions, a cornerstone of collaboration. The arguments are there to come up with the best solution. And when the two couldn’t settle certain disagreements, whoever cared more about that decision got to make it.
The Evolution of SaaS
We also discuss the evolution of SaaS. The term SaaS was coined around 2005–2006, a few years after Basecamp was established. David and Jason grew up building websites and making software for the web. David has been involved with the internet since 1994–995.
When David and Jason paired up in 2001, they started working together on consulting web-based projects, realizing it was their expertise. They fell in love with the internet.
In time, David’s skills developed in HTML, CSS, PHP, JavaScript, and so on.
Jason and David were working in SaaS so early that they had to convince people to do various things, such as using a credit card to pay for their software. At the time, buying software online sounded sketchy to many. The pair had to convince people that it was safe and that they were trustworthy.
In February 2004, for example, David and Jason spoke to their bank about their merchant account and showed it that they intended to launch a product that would be charged yearly. It would cost $499 annually.
David and Jason had built the product and already had a billing process. However, everyone in the bank laughed and said they couldn’t allow them to sell a subscription yearly. So that’s how the pair ended up billing monthly.
The two scaled back, which turned out to be a better business model anyway, as they could raise the prices. The monthly subscription model, which was uncommon in those days, was something the two were pushed into.
Basecamp’s Pricing Model
Towards the end of the episode, we discuss Basecamp’s pricing structure in detail, which is quite different from the company’s competitors.
There’s a free personal plan, a business plan at $99 a month, and 15% off if you choose to do a year. In the episode, we learn why this particular pricing model was chosen.
Back in 2004 when Basecamp launched, nobody else was offering pricing the same way. David and Jason sold their product in that way for many years. Many other businesses cloned the idea and now there are many brands offering subscription model pricing in a similar way.
Now David and Jason are looking at pricing again and testing different models. According to David, one of the things about being in business for 20 years is that you develop a keenness to try new things, even just to keep it interesting.
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