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Don’t base your business on a paid app

David wrote this on 5 comments

The App and Play stores have turned out to be exceptionally poor places to run a software product business for most developers. They’re great distribution channels for service makers, like Facebook or Lyft or Basecamp, but they’re terrible places to try to make a living (or better) selling software products.

At a buck or few per app, how could it be otherwise? That type of pricing will work for Angry Birds and a handful of other games, but very poorly for most other types of software products. The scale you need, the sustained influx of new customers, well, it’s a place for mega stars, and people who think they can beat the odds at becoming just that.

That’s why I’ve been discouraging people from chasing dreams of a successful, sustainable software product business by pursuing paid apps. Far better be your odds at succeeding with a service where the app is simply a gateway, not the destination.

Watching users of Tweetbot heckle the team for daring to charge $5 for a 8-month upgrade only reaffirms that belief. It’s a sad sight of entitlement, but at this point also entirely predictable.

Apple and Google both benefit from having apps be as cheap as possible. For Apple, that means people will buy an iPhone more readily when the cost to fill it with software is near nil. For Google, it means app makers have to shove ads into products to make them pay. Win-win-lose.

What’s good for platform makers is often not good for those who build upon it. That’s where the whole picking up pennies in front of a steamroller comes from. Yes, a few may be quick enough to pickup enough pennies to fill a jar, but for most, it’s not a wise trade of risk vs reward.

Forget the paid app.

Making money along the way

David wrote this on 7 comments

Remember the Flip camera? From its premiere in 2006 until the business was sold to Cisco in 2009, the little video recorder was killing it. Lavish praise, booming sales, flying high. And then cell phones got good enough at recording video, and that was the end of that.

If you disregard the acquisition proceeds, was Flip a terrible business? Well, that depends: Were they taking profits along the way?

There’s no natural law that states all products and services must endure forever and always. Some companies are glorious sprints, others are slugging marathons. Both can work, but the former is especially sensitive to making money along the way.

The problem is that everyone thinks they’re going to run a spectacular marathon in technology these days. There’s no amount too great to be invested in future growth, because the future is infinite, and you’d be a fool not to capture as much of that as you possibly can.

But what if the time allotted to your capture looks more like Flip? What if your product is going to have a great, booming run, but not for the next 30 years, just the next five?


Disruption is better when it's other people’s jobs

David wrote this on 14 comments

Many writers and publishers are freaking out after Apple opened Safari to ad blockers in iOS9. Ad blockers have been around for a long time, but the fear is that this is the move that will take the concept mainstream.

That fear appears well justified. The App Store’s charts have been dominated by ad blockers since the release of iOS9 last week. Currently, the #1 paid app is Crystal, an ad blocker, and so is #3, Purify. Clearly some pent up demand.

Another data point is the following poll from The Verge. It was setup with an almost satirically over-the-top slant, and yet readers pummeled them:


Less than perfect

Nathan Kontny
Nathan Kontny wrote this on 6 comments
I want to create something out of nothing but nothing isn’t a great place to draw from.

Mitch Hedberg

On February 21, 2006 a guy launches a video blog. The results, even by 2006 standards, were far less than perfect. The lighting is terrible. The camera unsteady. There’s a use of zoom and text effects that remind me of my mom’s VHS videos of my sister and I figure skating in 1990.

Later episodes have funny text effects where the title of the blog swims into view like a novice PowerPoint presentation. There’s a glass picture frame behind him reflecting whatever light fixture is in the room, and that’s all your eyes want to look at.

The first episode has 14 comments made in its entire first year. This definitely didn’t take off like a rocket ship.

People who’ve been fans of my blog and the writing I’ve done on places like SvN have messaged me that they’ve missed my writing. I haven’t done as much lately. Why? The answer is pretty simple. As Jason Fried might say, I just don’t have the attention. It’s easy for me to spend an entire day writing and researching an article. But, running Highrise is a big job. There’s so much to do. Building a brand new team, managing the current product and its support, and reinvigorating product development on an old product, takes all of my attention.

And there’s a hesitation now in publishing my work.

Success breeds hesitation. Even the modicum of success I’ve had writing has created a hesitation to publish something that isn’t perfect. I want each article to be even better than the last one. But that just makes it impossible to publish thoughts and ideas and observations when I don’t have the attention to make them perfect.

Hesitation becomes this empty void where we stop producing good ideas, because we no longer have that bucket of just fair ideas to draw from.

How do I fix it?

That video blogger kept at it. In episode 1000 the intro graphics are now this fancy professional animation that reminds me of the quality of the Mad Men intro. And he’s definitely found an audience.

Today you know him as Gary Vaynerchuk and this was his Wine Library TV video blog. Today, with over a million Twitter followers, he hosts another video podcast called the #AskGaryVee show. The production quality is light years past that first episode of Wine Library TV. There’s perfect lighting, multiple cameras, fancy editing and effects that all come off as interesting and professional. And there’s thousands and thousands of people watching. He’s clearly made something many of us aspire to after publishing and publishing and publishing stuff that was less than perfect.

One thing that’s helped recently reinvigorate my writing was to give myself channels where I don’t feel the pressure for perfect. Comments on forums are great for this. Most people have very low expectations of the quality of “comments” online.

I use Reddit to practice. I’ll find someone asking something I think I could riff on, and I’ll just go. I’ll try to work in some personal anecdotes or something I’ve observed and see if I can make it interesting. If I like the result I might polish it a little and put it in more places. Here’s an example of a question on Reddit that I answered.. Seemed like it got some folks interested, so I polished it some, and posted a different version to this blog which sparked a great conversation.

If I didn’t have that first mediocre attempt at an answer, I wouldn’t have ever gotten to publishing the better one. I needed a far less than perfect place to start.

A few weeks ago Jason Fried pinged me with:

We got together to hammer out a few details of what it would look like. Soon after, we filmed a pilot episode that we recorded but didn’t tell anyone about. We wanted to see if it had any kinks. It had kinks.

It took us 15 minutes just to figure out places with good internet connectivity and lighting – so you could actually see my face. After that, we finally got to chatting. The results were still terrible. We had a fun time talking, but it was unlistenable. There’s an echo of my voice in the video. We later figured out from chatting with people who’ve already done this a ton like Chase Clemons and Shaun Hildner, it’s probably from Jason’s laptop mic picking up the audio from his speakers – problem would be resolved if we both used headsets.

Ok, let’s do another. So we discuss, how often can we sustain doing this? What’s the name? Do we need better cameras and mics? What about lighting? Maybe we can get Shaun to help us? Should we use Hangouts or a different app or technology. So many unanswered questions and so much room to keep making low quality attempts at this podcast.

This Monday came and we didn’t have answers to any of our outstanding questions. I debated if we should do another “off air” episode, just so we can practice more. I hesitated. Jason’s reply? “Let’s do it live”

And so we did. Our second “pilot” episode went live yesterday, August 24 at 3pm. And it was as you’d expect, less than perfect. I somehow accidentally turned off the voice detection Google Hangouts uses to automatically decide which face to show in the video, so you see Jason’s face throughout the beginning until Shaun comes in and tries to fix our setup. Then you can see I’m distracted by the monitor and manually switching who is seen in the video.

People still enjoyed it.

This is how life works. This is how most things we enjoy and call successful start. They aren’t as good as we want them. They need a ton of practice. And even when we get something to the place where it is good, now we have a new challenge: our hesitation at being bad again.

Just keep publishing. Keep putting out the stuff that’s not perfect. When you find yourself in a spot where the expectations are too high, just find another spot. We need that place to draw from.

Jason and I are going to keep publishing these “imperfect” chats of ours. You should follow us on Twitter: @jasonfried and @natekontny. We’ll talk about not just the things we see other folks struggling with and asking questions about, but the things still bugging us. Life is far less than perfect for us, and we keep leaning on each other to help us through our current challenges. Hopefully recordings of us hashing them out will prove useful to others going through the same.

If there’s anything you’d like us to ever cover, please hit us up on Twitter or ask in the comments of our SvN posts. We’d love to hear from you.

What kind of company are you?

Claire Lew
Claire Lew wrote this on 12 comments

Last month, we made a huge mistake.

We’d built a new feature in Know Your Company a while back. During that process, we’d accidentally written a bit of code that caused private responses to be revealed to new employees in a company.

This means that for the past six months, when new employees were added to Know Your Company, they were able to view responses that only their CEO was supposed to have access to.


It was a horrible mistake… and we were just finding out about it now. It affected about 80 companies, and hundreds of employees. My stomach still feels sick when I think about it.

One of our customers noticed the error, and was kind enough to tell us. Aside from that, our other customers hadn’t noticed the problem (or, at least hadn’t told us).

Now I was faced with a big decision… Should I tell our other customers about it?

One could argue that, if customers hadn’t noticed, why say anything? Why rustle feathers, especially when the damage had already been done. There wasn’t anything that our customers could do about it.

Saying something could cause our business harm. Customers might be angry. Some of them might even leave.

Or, we could come clean. I could be upfront about what happened, own up to our mistake, and say how terribly sorry we were. Sure, we risk losing business. But what about the risk of losing the trust of our customers?

Trust, after all, is everything. If you don’t have the trust of your customers, what do you have? If your customers don’t trust you, they won’t be your customers for much longer.

I also thought: If I were a customer, wouldn’t I want to know? As a CEO myself, I would want to know that those private responses had been accessible to my new employees. Even if I couldn’t do anything about those private responses going out, I would want to know that it happened in the first place.

To gut-check myself, I called up Jason Fried, the CEO of Basecamp. I wanted to get his two cents, and make sure I was thinking about this right. (Basecamp originally built Know Your Company, and is a co-owner and advisor to our business).

Here’s what Jason said to me: “I like moments like this. Moments like this are an opportunity to show what kind of company you are. You get to show your customers what you stand for.”

Those words were all I needed to hear.

I knew what kind of company we were. I knew what we stood for.

I decided to personally email the eighty-some CEOs affected by our mistake. In a short note, I explained what we messed up, and how sorry we were.

I offered a small credit as a token of how bad we felt, knowing of course that it wouldn’t make up for it. I gave folks my personal cell phone number and told them to call me anytime if they had questions, concerns, etc.

Then I braced myself for the reaction.

I got a flood of replies from customers. Not a single one was negative. A few folks were concerned (as they ought to be!)

But no one was angry. No one left.

In fact, the response from customers was overwhelmingly positive. People said, “Thank you for letting me know” and, “No biggie, these things happen.”

One of our Dutch customers emailed me saying, “We have a saying in Dutch: waar gewerkt wordt, worden fouten gemaakt that translates to ‘mistakes are made if you’re doing work’.”

Another person replied to me, “We all screw up from time to time. Go have a cocktail ;)”

I even had one customer who said he was so impressed with the email I’d sent, he’d forwarded it to his entire company as an example for how to handle a mistake.

Our mistake became a positive moment for our company. It solidified who we were, what we stood for, and showed our customers that too.

We proved that “putting our customers’ best interest first” isn’t just something we say – it’s something we do. We gained our customers’ trust and confidence as a result.

Mistakes are bound to happen. You’ll never entirely avoid them. So your customers aren’t going to judge you on whether or not you’ve made a mistake – they’ll judge you on how you handle it.

Do you come clean immediately? Do you say how sorry you are? Are you genuine about it?

It’s a hard thing to remember when you’re in the middle of a fire. You’re faced with the prospect that admitting a mistake could cost you customers, your reputation, and a lot of money.

When you’re in that moment, simply ask yourself: “What kind of company are you?”

You’ll know what to do.

Better Half

Nathan Kontny
Nathan Kontny wrote this on 19 comments

Many of us know how much a partner can help with creating a great business. Apple had Jobs and Woz. Google has Larry and Sergey. Basecamp has Jason and David. And for years, I’ve had the help of a really awesome partner: my wife, Lynette. We’ve been together for over 16 years. She’s been there for tons of hard decisions about work or life in general.

One easy to point out example is Draft. A project I’ve been blessed to receive an incredible amount of praise about. But, I had a secret weapon, Lynette.

She was the biggest reason I created Draft to begin with. I needed her help editing my writing and blog posts. She’s the best editor I’ve ever met, and I was sick of passing Word documents back and forth with her. Of course, then she was the first person to tell me when something was wrong or confusing. She helped me prioritize. She had great ideas how to improve the product. I could get her help with anything. But we’ve had a setback in our work relationship. This little one, Addison, entered our lives. :)

Addison is everything to us. But as most parents understand, she comes with complications. Everything has become harder. Leaving to go outside? That takes planning and unforeseen obstacles. You thought you were ready to go? Here, take a dirty diaper. Now are we ready? Nope, needs to nurse. Now are we ready? Damn, now it’s nap time. Maybe we’ll try to go somewhere tomorrow.

Another complication is that it’s been harder to get Lynette’s help with anything related to my work on things like Highrise. Lynette’s swamped with her own job and being an awesome mom. And we’re too busy to deal with work when we’re together. We have filled any free time with new, incredibly rewarding things: teaching Addison to talk and read and share and everything.

But it does impact the quality of what I’m able to accomplish at work. We’ve gained an incredible amount, but in the process I’ve lost my work partner. It’s frustrating, but you know what? I have the resources to change this….

I’d like to introduce to you the new Chief Operating Officer of Highrise, Lynette Kontny.

We’ve debated this for awhile, making sure it was the right move for us and Highrise. Given our ability to collaborate over the years though, and the attention Highrise needs, this was a pretty easy decision.

Lynette was both excited and sad to announce she was leaving her job, as she enjoyed a ton of it it. I overheard her phone conversations with colleagues as she announced she was leaving. They were sad too, letting her know she was doing the job of 5 other people. But now, Highrise gets to benefit from having Lynette in its corner.

If you are a Highrise customer, you are lucky! Lynette started this week, and you’ll begin to see her work all over Highrise and our ability to get impactful things done quickly. Even being here two days, she’s taken a ton of important things off my plate I was having trouble getting done. If you aren’t a Highrise customer, now would be a great time. :) Things are really getting interesting.

We are thrilled to have Lynette. I can’t describe how awesome it is to get my work partner back.

P.S. There’s a lot going on at Highrise. Lynette isn’t the only new addition. We also have had some more really great people join the team, and we’ll make introductions in the near future. If you want to follow the Highrise journey, my Twitter account is a good place. You should follow me: here.

CEOs are often the last to know

David wrote this on 18 comments

I’m not surprised that Jeff Bezos didn’t recognize the Amazon depicted by Inside Amazon: Wrestling Big Ideas in a Bruising Workplace, a NYT exposé on its culture. Jeff would never have heard those stories, because nobody would ever tell him. These are the stories you have to dig for, and the NYT did.

Whether the overall, pretty glum, picture painted of Amazon work culture is perfectly accurate isn’t even that interesting. It’s certainly not an adequate defense to deflect the questions raised, as one Amazon high-level but rookie manager tried to do. There are more than enough anecdotes, supposedly gathered by more than 100 interviews with current and former employees of Amazon, to raise more than a few red flags.

How you respond to a red flag is what matters. You can deny its very existence. You can argue that it’s not really red, but more of an orange pink. You can argue that the people holding the flag aren’t true Amazonians. You can argue that the people who caused the red flags to fly were rogue actors, going against the intentions of the company. Or you can simply just claim that since you hadn’t personally seen any of the incidents, the flags are illegitimate on their face.

But the bottom line is that culture is what culture does. Culture isn’t what you intend it to be. It’s not what you hope or aspire for it to be. It’s what you do. There’s no way to discredit, deflect, or diffuse that basic truth.

Here’s how that can play out: High-level manager A gives mid-level manager B a tough, maybe even impossible, goal. Maybe A ties a bonus or dangles a promotion to the fulfillment of that goal. Now set that in context of WE ARE THE SMARTEST, WE WORK THE HARDEST.

How hard do you think B is going to push subordinate C to reach the goal? To not fail BEING SMART, WORKING HARD? Do you think that some meaningful number of times, C might feel such aggregated heat from two layers of management that it could resemble some of the anecdotes from the NYT article (and then imagine 3-4-5 layers of management)? If so, do you think A is blameless, and do you think the organization that serves as context for this scenario is blameless? I don’t.

“But that’s not what I meant” is an adequate, if somewhat naive, excuse the first time you see the consequences of your actions. The second, third, or fifth time, it’s a lot less so. At some point “unintended side effects” becomes “predictable outcomes”.

The NYT did Amazon a favor. They shone a bright light on some dank corners of the organization and its work culture. Corners that had long been rumored to exist. Now it’s out in the open, and Amazon can seize the catalyst for a thorough audit of the gap between what Jeff wants the place to be and how it sometimes isn’t.

To do so, Jeff, and other senior management at Amazon, need to remember that nobody tells you anything when it comes to bubbling-up abuse from the trenches. It’s completely unrealistic to expect someone five levels deep in the bowels of the organization to reach out to the fifth-richest man in the world and trouble him with his or her toils. It doesn’t matter how many invitations to open doors, escalators, or elevators you extend, it’s just not going to happen.

The only reliable way to get this sort of information is to ask. You cannot just extend the “open door” invitation, lean back in your executive chair, and think that you’ve done all you can.

Jeff, or a team he charges with finding facts (and not protecting egos or appearances), has to follow up on the leads, examine the stories, identify root causes, and propose sanctions and remedies. And Amazon has to be willing to accept that maybe some of its systems are producing consequences it does not desire, and that they should change.

Disclaimer: Jeff Bezos personally owns a minority, non-voting stake in Basecamp acquired in 2006. That makes this case personal for me. Factor in that bias. Also, this exact problem, top-level management being the last to know, is why we created

Graceful goodbyes

David wrote this on 11 comments

Run a business long enough, and you’re bound to say goodbye to employees along the way. You might not think it matters how that goodbye is said – hey, they’re leaving anyway! – but you’d be wrong.

To be honest, we haven’t always had graceful goodbyes at Basecamp. To be even more honest, I’ve said goodbyes that weren’t graceful. And that still bugs me, and it serves as a recurrent reminder of why it matters.

A bad goodbye is abrupt and unexpected. It’s curt. And it’s like that because it’s easier to bottle up small frustrations, on both sides of the table, until they aren’t small at all anymore. By the time shit is spilling over everywhere, the time for small corrections has passed, and cutting ties can feel like the only option. A goodbye that sails through like a break-up text out of nowhere is the last thing you want, and it’s one of the worst ways to see an employee go.

Of course, not all goodbyes are bad. Far from it. People grow, people change. Like all relationships, not all roles are destined FOR LIFE.

In a relatively small company like ours, the career path at Basecamp is generally to become better at your craft. Level up within your domain of competency. Not to climb a managerial ladder, because there isn’t much of one.

We’ve also had people leave Basecamp to go build their own company or to change careers. Those are generally good goodbyes, because they’re the easiest to make. Wishing someone well for pursuing something you couldn’t offer them anyway shouldn’t take much skill (although I’ve been surprised).

But underlying all goodbyes is that they reflect not just on the relationship you maintain with the people who leave, but also with the ones who stay. They set a tone for how you treat people when things get rocky or take a different direction. It seeps into everything else. No goodbye is a single, isolated event.

Say goodbye with grace.

How much are we worth? I don't know and I don't care.

Jason Fried
Jason Fried wrote this on 11 comments

I was recently speaking to a class at a local university and the topic of valuations came up. One student asked me what our valuation was. I gave her the honest answer: I haven’t a clue.

How is it possible that a successful software company today doesn’t know its worth? A valuation is what other people think your business is worth. I’ve only ever been interested in what our company is worth to us.

Startups these days are bantered about as if they were in a fantasy football bracket. Did you hear Lyft raised another $150 million at a $2.5 billion valuation? But Uber got tossed another $2.8 billion at a $41.2 billion valuation! Then there are the companies barely off the ground getting VC backing with 25x valuations, despite having no product or business model.

Entrepreneurs by nature are competitive. But fundraising has become the sport in place of the nuts and bolts of building a sustainable business.

The last time I considered Basecamp’s valuation was nearly a decade ago. We’d been approached by dozens of VC firms looking to invest. But with a solid product, a growing consumer base, and increasing profitability, we didn’t entertain any offers.

Then, in 2006, I got an email from Jeff Bezos’s personal assistant. Jeff wanted to meet. I’d long admired him for what he was building at Amazon, and how he generally sees the world. I took the meeting.

After a visit to Seattle and a few more calls, Jeff bought a small piece of our company. I didn’t take the cash out of some fantastical desire to turn Basecamp into a rocket ship. Instead, his purchasing shares from me and my co-founder took a little risk off the table and gave us direct access to the brain of one of today’s greatest living entrepreneurs.

In the years since, we’ve been approached by nearly 100 private investors, VCs, and private equity firms. They want to put money into our company, but we don’t want it. It’s not hubris; it’s the cost that comes with the cash. I want to deliver a product that our customers want, not one that our investors want. I want to grow our company according to our timetable, not one dictated by a board. For many startups, funding has worked to their detriment—unnecessarily raised stakes, a path to unnaturally rapid growth. Venture capital is not free money.

Years ago, during the investment discussion with Jeff, we had to place a financial value on our company. The process of constructing a valuation was pretty silly, to be honest. We drew up charts, made some educated guesses, negotiated back and forth, and ultimately came up with a figure. We made it up, as everyone does. Let’s just admit it right now: Financial projections are big, fat guesses. They are best-case scenarios. Since they’re hypothetical, why not pull a number out of a hat?

Jeff knows this. All investors know this. Yes, you can look at revenue and profit and multiples, but so many tech company projections these days aren’t based on anything real. They’re based on fantasy. And too often, the more profit you have, the lower your valuation is. Because nothing pops the valuation bubble like reality.

My not knowing how much our company is worth doesn’t affect our business on a daily basis. I know our revenue and our profit. I know how fast we respond to customer service inquiries and how many people signed up for Basecamp last week. Those are real numbers to me. A valuation is an invented number that ebbs and flows on the basis of how much someone else thinks you’re worth. It’s nothing more than a distraction.

Want to see this in print? This article appears in the September 2015 issue of Inc. magazine.