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Lesson 5: Use cheap Web tools

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September 26, 2006 14:25 IST

37signals: Founded by Jason Fried with $150

In 1999, Jason Fried set aside $10,000 to start a Web consulting company, 37signals. Turns out he didn't need nearly that much. "It costs virtually nothing to start a software business these days," he says.

Using open-source tools that are free on the Internet, Fried and his partners began to devise applications, including project management software, for internal use. Realizing that there might be a market for their programs, they began distributing free and paid versions of them on their website.

They marketed these products on a company blog, and Fried directed customer support questions to a Gmail account, which he answered personally -- fielding questions helped him design better applications, he says.

Today, Fried's Chicago-based company has five products, which have been used by 500,000 people. Though Fried declines to share revenue figures, he claims that sales in 2005 were up 400 percent over 2004.

Another way of looking at the company's growth is through its Web-hosting expenses, which have jumped from $150 per month in 2004 to $10,000 a month today. The growth of that line item doesn't bother Fried much. It tracks the popularity of both his paid and free software.

Cheap Web Tools

Free source code isn't the only resource on the Web that's deflating start-up costs. There are other sites too that offer a variety of business services at low, low prices.

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Mike Fitzgerald,