REWORK

A Spin-off Story

Apr 24, 2024

Jason Fried and David Heinemeier Hansson share insights on spinning off products, emphasizing simple contracts and hands-off approach post-transition. They discuss challenges in finding the right partners, the importance of trust and flexibility, and the risks and rewards of taking calculated risks in business transactions.

26:09

Episode guests

David Heinemeier Hansson

Jason Fried

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Episode notes

Podcast summary created with Snipd AI

Quick takeaways

Transitioning spin-off products requires simplicity in contracts and trusting capable partners to run independently.

Assessing risks, stepping back post-transition, and focusing on operational efficiency are critical in successful business handovers.

Deep dives

Reasons for Spinning Off Know Your Company

Spinning off Know Your Company was motivated by several factors. The simplicity of spinning off a relatively new product that was easier to separate from the main business due to its clear structure and distinct business model played a significant role. The decision was also influenced by the opportunity to focus more on the core product, Basecamp. Additionally, the presence of a suitable operator, Claire, who had prior experience and alignment with the product's vision, made the transition smoother and more viable.

Introduction

3min

Simplicity and Effectiveness of Contracts in Business Transactions

6min

Navigating the Spin-off Decision for a New Business Venture

4min

Smooth Transition and Effective Ownership

10min

Navigating Post-Handoff Involvement and Contractual Complexity

3min

In the podcast, REWORK host Kimberly Rhodes talks with 37signals co-founders, Jason Fried and David Heinemeier Hansson, about their journey spinning off products. They stress the value of keeping contracts simple and how once the handover is done, it's best to take a hands-off approach and let the new team run things. They share their experiences with boards and underline the need for trust and flexibility.

Key Takeaways:

00:43 - The steps they took to transition "Know Your Company" into its own independent entity.

04:49 - Contracts don't offer as much protection as people believe.

10:58 - The differences in spinning off a startup vs. a long-established company.

14:53 - Letting capable partners take the reins and run the show independently.

18:51 - The challenge in finding the right partner for a spin-off business.

20:12 - In any transaction, things may not turn out as expected, but it may be worth taking calculated risks.

23:19 - Contracts don't necessarily prevent disputes and can sometimes escalate them unnecessarily.

Links and Resources:

Canopy, formerly known as Know Your Company

‘Know Your Company’ Deal Structure

Books by 37signals

HEY World | HEY

The REWORK podcast

The Rework Podcast on YouTube

The 37signals Dev Blog

37signals on YouTube

@37signals on X