David Heinemeier Hansson is a partner at the 37Signals start-up extraordinaire.
In this presentation (A Secret to making money online) David goes through the business model and beyond that, all the basic principles that have guided 37Signals to become beyond the very successul company, a genuine example for the whole industry.
This is amazing stuff. Do yourself a favor and spend these 35 minutes with DHH, this is priceless in particular if you’re in the startup business.
On Start-up myths
How lonely I feel up here. At 37Signals, we’re not looking for VC funding, we’re profitable, we’re not hiring. I think there’s not enough talks here after all these guys (note : P. Graham, M. Arrington et al …) on how to build a profitable online business.
On Business Models
The classic conundrum : You have a
- great application and then
- ?????? (something magical happens and then)
- Youmake profit.
We have been doing research, experiment etc … we found out that the best option for us was to 2 – put a price on the application to make profit. It’s too simple to be true but believe me it works. It has been working for hundreds of years (…) People try to be the next Facebook or Youtube or Myspace and become millionnaire .. and what are the odds ? On the other hand what are the odds for you to build 1M$ a service ? It takes 2000 customers paying each $US40 a month each month. You then have your million dollar company.
On target companies
We are targeting Fortune 5,000,000. There’s a ton of such companies who have many problems not currently being addressed (…) There’s a huge untapped market here.
On Money
In this business there is about 1 chance out of 10 for making a million and one out of 10,000 for making a billion. You can be pretty happy on a million dollar. Well, most people would be. And people lost sight of that (…) The difference between having one Million and one billion is a lot smaller than the difference between having negative 10,000 and one million.
On marketing 2.0 buzzword
But how about the network effect ? Are you going to be viral ? Are you going to infect the entire population ? Well : forget viral.
On Innovation
Good innovation comes from just solving simple problems that you’re intimately involved with. (Reminder : DHH invented RubyOnRails web development framework, so he knows a couple of things on genuine innovation)
On overtime
(Answer to a question in the audience) The problem is you’re trying to be productive while working 14 hours a day. Who the hell can be productive working 14 hours a day ? Try working 5 hours a day. If you only had 5 hours a day to work on something, you would focus your time a lot better (…) At 37Signals we just went down to 4 day week, we’re trying to work just 8 hours a day. The amount of productive time I get out of that ? 2 hours 3 hours ? People are not willing to accept the fact that in a creative programming environment, working 14 hours a day is jusrridiculous. If you could just get 3 great hours in per day you’d get a lot more done.
On 37Signals Arrogance
(at the beginning) We initially thought we would call this presentation The Secret to Making Money Online. But I revised that because at 37Signals we’ve been accused of being arrogant. To preempt that we call it A secret to making money online.
(and at the end) And If it does not work, we have awesome news : blame it on us and save your ego like that : this is a full proof plan, you get always Techcrunch to write that 37Signals drove you to the deadpool.
Irreverent, arrogant, talented, funny and full of common sense : I want to marry this guy.
#hypertextual 
Hi Cecil,
I watch this talk a while ago. It’s always interesting to listen to success stories and how people do business.
Their advice of “build a business and not a startup” is true and it’s amazing how many startups forget about that and only look for early-stage acquisition.