37signals have been extremely successful in their niche and I think they have a wonderful product.
However I think their biggest mistake is to try and extrapolate their experience to what seems like all tech businesses and start-ups, with the diversity we see in funding requirements, growth strategies and segments start-ups appeal to chances are slim that the 37signals model is for everyone.
Furthermore considering Sequoia Capitals track record this post is unimaginably arrogant, you need to come up with a better argument than that to take them on in a business model ideology war.