Jason Fried of 37Signals has taken the stage at Y-Combinator’s Startup School this morning at UC Berkeley. I’m taking my notes below on his talk.

Fried has started off by talking about bootstrapping startups. Startups that bootstrap are more “money hungry” then companies that are funded. If you are a funded company, you generally have money to spend that investors encourage you to spend as well. If you’re a bootstrapped company, you’re hungry to make money.

Fried also talked about the art of making money. He mentioned that making money is like playing the piano. If you started playing piano at 5, you have a lot of time to practice playing piano to get better. If you want to be a good piano player, you start young, and you practice. Same goes with making money. It’s a skill and a talent. The more practice you have making money, the more successful you’ll be.

Fried also used an interested analogy to crack cocaine, comparing crack to funding. Crack is like funding, because it’s addictive. Investors want you to come back for money — they want you to be addicted to the money.

One of the major points Fried mentioned is picking the right price. You have to find the right price to sell your products to consumers. Customers will pay if it’s worth it. Don’t make products that aren’t useful for others — you have to have people using your product, and if they use it, charge for it.

Thing will go wrong as well. Be real and honest about your mistakes. Also, you don’t have to be in Silicon Valley to be successful. Fried mentioned that 37Signals is based in Chicago, but they have employees all over the world. Location doesn’t matter to build great products. You’ll know if you have a great product if people use it.

Q: How do you know if your product is useful for a lot of people?
A:Build something you would use yourself. When you put stuff out for free everyone goes “ah, that’s cool.” Put a price on it, then you figure out if it’s really useful.

Q: Regarding virtual offices.
A: Need to find a good team. People who can work from their home a lot. We’re in touch all day using our tools, but you can put that away if you need to. You can’t put a ‘real’ office away like that. But some face time is essential sometimes. Should be the exception not the rule.

Q: Pricing?
A: First question is ‘would I pay for it?’ It’s a science. You have to worry about margins. Walmart doesn’t use 9s for their prices. They do 8. But for me, is it worth paying for. We have multiple tiers. Every price point is double, but you get more than twice as much in each tier.

Q: I’m a scientist, skeptical about luck.
A: I think luck plays a part somewhere. BUt I think for the most part make your own success. You can’t wait for something lucky to happen. Maybe timing/meeting right person is luck. I think it’s the kind thing to say, PC to say. But I think if you ask people honestly they won’t say that.

Q: How long did it take you from having idea to launching paid project?
A: We launched basecamp as a side project. We were a web design company at the time. We made it in a few months, then we put a price on it. Built it for ourselves, we needed it for ourselves. Hit $5k a month in about six weeks, has since increased. We don’t share exact rev numbers. Job wars made 1.5 mi. book material about a million. Advance from new book is handsome. We make millions in rev and profits. We did take one investment in 2006. We bootstrapped. We didn’t need the money (from Jeff Bezos). We did it for liquidity and someone like Jeff available, he’s built a business from scratch.

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