Building a $100M+ Business Without VC: David Heinemeier Hansson on Leadership, Independence, and the Future of Work

David Heinemeier Hansson built 37signals into a profitable tech company generating hundreds of millions in revenue over 20 years—without taking a single dollar of venture capital. As creator of Ruby on Rails and CTO of 37signals, he’s proven that small teams, asynchronous communication, and independence can outperform VC-funded competitors.

His approach challenges Silicon Valley orthodoxy: three programmers and three designers build major features that larger teams struggle to match. No daily standups, minimal meetings, and uninterrupted focus time create productivity that seems impossible in traditional organizations.

From Solo Developer to CTO While Staying Hands-On

Hansson’s journey began as the sole developer when 37signals transitioned from web design consultancy to software company in 2003. He built Basecamp while simultaneously creating Ruby on Rails, wearing every technical hat from server setup to on-call duties.

“I got a very gradual, very kind introduction into the management role because it happened quite slowly,” he explains. The company grew deliberately—after four years, they had just eight or nine employees. This measured growth allowed him to hire programmers one at a time while maintaining his hands-on coding approach.

Today, with 35 technical team members out of 67 total employees, Hansson still writes substantial code. “Management was never a full-time job for me. For me, CTO always meant kind of the same thing that General used to mean in ancient Greek—you don’t just put down the strategy, you’re on the front line with the cavalry.”

This leadership philosophy creates what he calls “throttle response”—the immediate connection between identifying problems and implementing solutions. “There’s a very short distance, very small flywheel between a programmer complaining about something, me being aware of it, and me being able to effectuate change.”

Learning Management Through Bad Boss Experiences

Hansson’s management education came from an unconventional source: terrible bosses. “The best education I ever got in management was working for bad bosses. I recommend anyone who has an interest in management to work for some terrible bosses.”

These negative experiences provided visceral lessons that organizational theory alone couldn’t deliver. Working for three years in the internet industry before business school gave him practical context for academic concepts about leadership and organizational design.

“I have all these vivid memories of specific instances working for what I considered terrible bosses,” he recalls. “Very instructive lessons.” This foundation helps him evaluate policies by asking: “I’m rewinding the clock here, I’m 21, I’m working for someone else—they come out and say this. What would I think? Would I think that sounds reasonable or would I think that sounds like bullshit?”

The experience taught him humility about the inherent conflicts in employer-employee relationships. “You cannot always be the perfect boss from the perspective of your employee,” he acknowledges. “There are inherent conflicts in the employee-employer relationship that cannot be fundamentally solved—they can only be managed.”

Small Team Advantages: Maximum Impact with Minimal Overhead

37signals operates with remarkably small product teams. Basecamp, their flagship product, is developed by just three programmers and three designers. Most features are built by single programmer-designer pairs.

“The vast majority of work in terms of features that we do is made by one programmer, one designer,” Hansson explains. “One of the major ones we did lately was essentially like we took a version of Kanban and we built that into a feature—that was the work of one programmer.”

This approach stems from their origins and optimization for lean operations. “I built all of Basecamp by myself on the technical side. We then stayed very small for a long period of time, so we’ve really been trying to optimize our processes for incredibly lean teams.”

The key insight: small teams avoid coordination overhead that kills productivity in larger organizations. “The more coordination you need, the more overhead you need. The more cumbersome things become, the more meetings you need, the more coordination.”

Hansson has an intense aversion to large meetings: “The few moments where I go like ‘I don’t like working’ is whenever I’m called into a meeting with more than five people. We’re too big if somehow we need a meeting that needs more than five people.”

Asynchronous Communication: The Productivity Secret

The foundation of 37signals’ small-team effectiveness is asynchronous communication. They conduct 90% of coordination work remotely and in writing, leaving programmers with massive blocks of uninterrupted time.

“We have the majority of developers will have one, maybe two half-hour meetings a week. That’s it,” Hansson states. “There are no daily standups, there are no check-ins with your PM, there are no frivolous one-on-ones constantly.”

This approach creates what he considers their greatest competitive advantage: “We’ve taken all of that shit and we’ve flushed it down the toilet, and what we’ve left is huge chunks of uninterrupted time. It is truly remarkable how productive a single programmer can be if you leave them the hell alone.”

The results speak for themselves: “If you just give them eight hours in a given day to work on the problems that are exciting and interesting to them, they will yield results that teams of 20 will struggle to replicate.”

Hansson’s personal calendar reflects this philosophy—it looks best when “virtually empty.” He doesn’t do traditional synchronous coordination work that requires specific times, places, and invited participants.

37signals takes an unconventional approach to employee compensation. They don’t offer equity, instead providing top-tier salaries pegged to San Francisco’s 90th percentile plus 10% profit sharing distributed by seniority.

“We’re confident that we’re in the top 1% in terms of financial packages to programmers and designers in Europe,” Hansson explains. The company hires internationally but maintains Silicon Valley compensation standards.

What they don’t offer is a “lottery ticket”—the chance to become a multi-millionaire through equity appreciation. “That is not an option at our company,” he states clearly. “But we find that there are plenty of people who are not interested in buying lottery tickets with their career.”

This approach attracts people who prefer stability over the high-stress, high-growth startup environment typically required for equity upside. It also preserves the company’s independence—37signals has no board, no outside investors, and no one to ask permission from.

“Jason and I, the vast majority of even highly consequential decisions are made in blocks of two minutes deliberation. Jason shoots me a message like ‘hey what do you think about raising our prices?’ ‘I don’t know, sounds good, let’s do it.’ Decision done, effectuated the next day.”

The Lifestyle Business Pride: Rejecting VC Orthodoxy

Hansson embraces the term “lifestyle business”—typically used derogatorily by the VC community. “I love that term and I love it because the people who call our style of business a lifestyle business usually do so in a derogatory way.”

He challenges the assumption that venture capital is necessary for impact: “Do you want to compare CVs? Do you want to compare accomplishments or lasting impacts on our industry? Go ahead, let’s do that. I feel very confident in our CV.”

37signals has generated hundreds of millions in revenue over 20 years while maintaining complete independence. “We’ve been able to run this company for 20 years doing whatever the hell we wanted, whenever the hell we wanted, literally making hundreds of millions of dollars in revenue over those years, taking a very large chunk of that and keeping it as profits and distributions.”

The company proves that software businesses don’t require large capital investments. “For software-primary companies or software-only companies, I find it much less convincing that VC money is necessary.”

Step-Function Wealth Analysis: Optimizing for the Right Goals

Hansson’s approach to wealth creation focuses on step functions rather than linear growth. He identifies the largest wealth jump as going from zero to one million dollars: “A whole swath of normal human problems simply evaporate once you have a clean million euros in your bank account.”

The next significant step function occurs between one and ten million, but subsequent jumps provide diminishing returns. “The difference between having 10 million euros of liquid funds and having 50 million euros of liquid funds is very modest actually.”

This analysis informs his business strategy: “What are the odds, what do I have to do as an entrepreneur to reach the first step function—get a million euros in my bank account? Is that the same thing as trying to optimize for becoming a billionaire? No, it’s not. In fact, they’re very much in opposition.”

The billionaire path often requires sacrificing independence and control. “The billionaire shot is in many cases a very long shot, and the rewards—I know a fair number of billionaires, and to large degrees their lives kind of suck. Most of them have full-time security details that follow them everywhere.”

AI Perspective: Daily Use with Healthy Skepticism

Hansson uses ChatGPT daily as a programming tool, but maintains skepticism about replacement predictions. “I use it as a pair programmer who doesn’t get to drive. I want to type it all. I don’t actually like the auto-completing LLMs.”

He draws parallels to previous “no code” movements: “When I got started in the 90s, we had a no code movement and people believed we were five years away from not writing code. None of those movements came to pass. People are still writing code—they’re writing more code than ever.”

His broader concern about AI predictions stems from the short timeframe of progress: “AI in its modern understanding is two years old. That’s not enough time” for accurate future predictions.

Using historical examples like aviation progress, he illustrates how exponential-looking curves often plateau: “Modern aviation stopped posting fundamental progress in the late 60s. They fly at the same speed, they’re barely any faster than a plane that flew 60 years ago.”

Despite skepticism about replacement timelines, he believes AI adoption is inevitable: “I think every single developer within two years is going to use an LLM to do their work, and anyone who does not is going to be at severe disadvantage.”

Once Product Strategy: Disrupting Subscription Models

37signals’ newest venture, Once, challenges the subscription software model by offering one-time purchases. Their first product, Campfire (a Slack competitor), costs $300 once versus thousands monthly for comparable solutions.

“There are organizations literally paying tens of thousands of dollars every month for Slack subscriptions,” Hansson observes. “We can literally launch a competitor that’s 99.9% cheaper.”

The strategy targets subscription fatigue in organizations drowning in recurring costs. “Companies go like ‘wait, why do we have 80 subscriptions per employee?’ That’s real money.”

Hansson frames this as providing “generics” for commodity software: “The patent has expired on Slack. It’s ludicrous to pay patent fees to continue to have that service, so we’re providing a generic version that is up to 99.9% cheaper.”

The challenge lies in re-educating markets conditioned to subscription pricing. “People don’t believe this is possible. If you’ve been conditioned into thinking that having chat for your company should cost hundreds of dollars a month, you’re simply not going to believe that you can buy that utility for a one-time fee of $300.”

Implementing Organizational Change: Start with the Next Project

For companies wanting to adopt asynchronous communication, Hansson recommends starting immediately with a real project rather than waiting for perfect conditions.

“Inspiration is perishable,” he warns. “If you’re inspired this second, the next project you run asynchronously. You sign up for an asynchronous tool that’s fully integrated and you say ’this is what we’re doing.’”

The key is commitment through the difficult transition period: “You stay the course for two weeks at least. If you bail after a day or two or a week, you’re a wimp. You have to stick through it.”

Cultural change requires top-down support and crisis-level commitment. “It’s very difficult to get bottom-up cultural changes if there’s not buy-in from the top and there’s not a crisis to serve as the accelerant.”

He draws inspiration from David Goggins’ philosophy: “It’s so easy to be great these days because everyone is a wimp. No one can stick to anything that’s uncomfortable for more than five seconds.”

The reward for persistence is significant competitive advantage: “It’s not common, it is difficult to reconfigure organizations once they’re in flight, but if you can pull it off, you can have a material advantage.”

The Path Forward: Independence Through Execution

Hansson’s 20-year journey with 37signals demonstrates that alternatives to venture capital orthodoxy not only exist but can thrive. Small teams with uninterrupted focus time, asynchronous communication, and independence-preserving business models create sustainable competitive advantages.

His message to entrepreneurs is clear: “If we want to have alternatives to American tech in Europe, we need European entrepreneurs to make it happen. We cannot keep living like this where we just have hand-me-down technology platforms and ideologies.”

The path requires rejecting received wisdom about scaling, funding, and organization. “I wanted to revisit every single thing that was a best practice. Everything I’ve been exposed to like ’this is the way we do things around here’—that could be bullshit.”

Success comes from first-principles thinking applied to current context: “We’re going to find the path for our company from first principles, from being skeptical about everything that has come as received wisdom.”

For leaders willing to challenge conventional wisdom and commit to difficult transitions, the rewards extend beyond financial success to something more valuable: complete independence to build exactly what you believe the world needs.