David Heinemeier Hansson 311
anything when you first sign up. If you just need to manage a single project, the
product is free for life. So a lot of people got in just testing it out for a certain
project.
As soon as they realize that they’d like to use it again on another project,
there’s an upgrade path for them to go down. They can buy the first paid version
that gives them three projects and gives them file uploading for $9 a
month. So we have a shallow upgrading curve where you can go from paying
nothing to paying very little. The most expensive version is only $99 a month.
And because we charge on a monthly basis, customers get the advantages of low
risk. People can sign up for two months, and if it’s not what they want, they can
cancel easily. And that’s been one of the most powerful marketing tools.
Also, Signal vs. Noise had a fairly large following in the web development
community. The first big market for Basecamp was these creative services
firms. Since they were already reading about what 37signals was doing, we went
the other way around: first we built the audience and then we figured out a
product. We blogged about Basecamp even before its launch, making previews,
and it was viral from there. So it helped that 37signals had a big audience and
had an easy way of selling into that audience.
The majority of our new customers have heard about it from someone else
or read something about it on the blog. They sign up for the free version and
then, that’s the best lead you could ever get. It doesn’t cost us anything in the
first place and doesn’t cost us that much to keep the lead, because, though they
get one project for life, we have a large group of people who are now friendly to
the product we’re selling because we just gave them something for free that
they’re actually using. And we’re not yanking it away in 30 days. So this builds a
lot of goodwill in the early phases of the relationship with the customer. It’s
a really powerful way of selling.
Livingston: Did anything go wrong?
Heinemeier Hansson: We made a bunch of mistakes. We got the launch
pushed back by almost a month. Initially, we thought that we were going to bill
people once a year, $99, $299, and $499 for the different plans. We built this
entire billing system, which was a sizable amount of the development time. We
didn’t figure out that the bank wouldn’t let us bill this way until about 3 days
before we were ready to launch. The bank wouldn’t let us sell a service that we
were going to promise for an entire year, because they’d be on the hook for the

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