Thanks for your response. I didn’t notice Basecamp removed free plans in version 2, I just looked to make sure there was currently a free plan before responding.
37Signals were in a unique position with Basecamp, in that that it was a side project that they built as an internal tool — the business was originally a web design company and they didn’t require Basecamp to make money in order to stay afloat. They simply transitioned to Basecamp being their core business once revenues were outperforming their web design venture.
I’d hazard a guess that the freemium model served them well in terms of growth, but if they were unable to convert free-tier customers to paying customers, Basecamp would have been quickly ditched and business would go on as normal.
SaaS is just a better business to be in than web design/dev, as DHH and Jason Fried have both said. So I imagine, if Basecamp failed they’d have continued to try other projects, all the while looked after by their web shop revenues.