Hello Folks 👋,

I spent the past 18 months studying for my masters, and whenever prospective students reach out who want to pursue a similar path, I strongly advise against it.

There are so many things that are wrong with traditional educational institutions right now, but the most prominent is that what I am buying and what they’re selling are completely disconnected.

What I am buying is a step function change in my future trajectory. What they’re selling, however, is a degree from a 100 year-old credible institution.

This is the exact problem that Austen Allred pursued with the launch of his ed-tech startup Lambda School more than 4 years ago.

Leo from Consumer Startups and I (virtually) sat down with Austen this past week to talk about the early days, how the company came about, and, of course, how Lambda School got their very first users!

Let’s jump right in

Austen Allred was homeless for 3 months when he was fundraising for his first company Grasswire, a media platform that lets everyone create collaborative news reports by voting on and fact-checking social media content in real-time.

Austen was so broke that he couldn’t afford to rent a place in Silicon Valley to meet with investors. To still have a chance to raise money for the startup, he decided to take a road trip for 3 months in California and sleep in his car.

An apartment is a place to sleep, a place to shower, and a place to eat. So I slept in my car, and then I would shower and get ready at the local YMCA … After a while, I’d tell people that I was living in my car and they’d go, ‘Oh, that’s crazy.’ And for me, it was like, ‘Oh yeah, people don’t do that.’ [But, by then] it was just part of life.

- Austen, Yahoo interview

Launching Secret Sauce

Unfortunately, the startup did not work out despite having some early traction. But this pales in comparison to what came next: his daughter got extremely sick and had to be hospitalized for some extended period of time.

To pay the bill, he started working for a fintech startup Lendup as a member of the growth team. Even with the job at a high-growth startup, the medical bill far outpaced his salary and he would soon find himself in the red for the tune of $25,000.

Austen tried to pay off the debt as quickly as he could but it was still too slow due to the abysmally high cost of living in San Francisco.

He needed to do something. In a conversation with one of his friends Vin Clancy, they both came up with the idea to expand upon their blog posts and turn them into a marketing book and use all the tactics they wrote about to sell the book.

Austen and Vin were both into marketing and had created content in the marketing space over the years and amassed a sizable following. The book they ended up co-authoring was named Secret Sauce.

What if we took some of our old marketing blog posts and added a few chapters to cover all the bases of marketing. Since we didn’t have enough time to really write the book without knowing if it would sell, we decided to start out by putting it on Kickstarter, which also has a feature that would allow you to continue to sell after the end date is reached. We did around $30,000 in sales within the first day and it kept going up.

- Austen

Learnings from Secret Sauce

The book’s massive success was clutch. It helped Austen pay off the debt and save some money for his next venture (Lambda School). 

Austen shared some key insights from this experience selling Secret Sauce:

1. People desire to improve their life circumstances - The price for the book was high, $40 for the ebook and $100 for the physical book, but people were still buying it because they were interested in the outcome of the book. They wanted to buy it to improve themselves or improve their life circumstances.

2. People don’t like doing the work - Half the people that bought the e-book never downloaded it. Most people were excited about the idea of learning but they were not doing the work to learn.                              

3. People love free content - What made the book a success was that they were giving some chapters away for free which served as a great lead generation engine (the main growth engine for Lambda School today).

Austen started brainstorming ways to improve people’s life circumstances while developing a system that can get people to learn and apply those learnings in real life. 

Lambda School’s MVP

A Haskell course    

Lambda School started off as a Teachable Haskell Functional Programming Course. Considering that the first learning from the book Secret Sauce was that people purchase outcomes and not content, teaching programming seemed like the highest leverage opportunity to tackle.

Haskell presented an interesting opportunity because 1) Grasswire, Austen's previous startup, was written in Haskell 2) the market was small enough that there just wasn't enough coverage of the language. The very first Lambda School Haskell programming course was a set of recorded lectures that cost $69.

To acquire customers for the course, Austen ran the same playbook that he did for Secret Sauce, leveraging a Kickstarter campaign to bootstrap the initial audience (which he expanded over time by giving away free lectures).

The Haskell course ended up making over $10k. An outcome that did not commensurate with the effort they put into building and promoting the course. 

The market for Haskell was just too small to sustain the business.

Second Lambda School iteration

Javascript Bootcamp      

The actual market hiding in plain sight was Javascript. This time, instead of running a Teachable course, Austen switched to the boot camp model.

The Lambda School, the JS boot camp, differentiated itself from other coding boot camps by focusing on tight-knit cohorts with a much higher standard of admission than other boot camps. The plan in the early days was to run a quarterly 10 student cohort while charging $9k-10k per student.

To drum up interest for the 12-week full-time course, Austen ran a slack community of aspiring programmers, created a free online mini-boot camp, and put up the free boot camp lessons on YouTube. Over the years, Austen became somewhat of a master at generating leads, getting over 8k prospective students into the online mini-version of Lambda school.

He managed to convince 10 people from this 8k lead list to join the 12-week immersive Full-stack computer programming academy (i.e Lambda School).

Third Lambda School iteration

New Business Model

The model was working, creating free content upfront adding value to potential members and converting a small percentage of people who were motivated enough to up-level their careers to join the 3-month $10k course. 

Something interesting happened in the second cohort: a student dropped out in the nick of time.

Because Lambda School was a full-time in-person 3 months commitment, it wasn't like people could just drop everything they have and join an open slot tomorrow. So Austen tried something a little crazy. He announced the open slot to the 8k people mailing list with the twist that the person taking the spot would not have to pay Lambda School anything. They would only pay Lambda School full tuition after they got hired. The company was in a relatively good financial position that it could cover the cost of this one person upfront.

Result: 200 people applied for the single spot!

Fourth Lambda School iteration

Lambda School as we know it today

This was "the aha moment" for Lambda School: shouldering the risk of the outcome of their boot camp was inherently more valuable to their students than a high-touch boot camp with an extremely low admission rate.

The next iteration for Lambda School was to switch to a 6-month model and increase the pricing to $20k, but this time, the students did not have to pay anything upfront. They would pay only if they got placed after completing Lambda School in a software development job (a percentage of their earnings go to Lambda School until they recoup the $20k tuition).

This new model got Lambda School into Y Combinator (YC). One of the pivotal moments during YC was when Geoff Ralston asked Austen why they were not running more parallel cohorts. Since YC lasted only for 3 months, Lambda School, with its new model, would not have any graduates until 3 months after demo day. One way to demonstrate the magnitude of the opportunity would be spinning up another cohort.

At first, Austen was hesitant, fundraising was not certain, and depleting whatever money they had in the bank on recruiting instructors would not do right by enrolled students. Geoff personally offered to front Austen $250k if he did not manage to fundraise, and a month later, Lambda School would run its second study-now-pay-later cohort.

Lambda School ended up raising over $4m after demo day and soon thereafter started expanding into more programs. Their unique study-now-pay-later model, which places a heavy premium on student outcomes, translates into a different operating model compared to more traditional coding schools.

To fully wrap our heads around the Lambda School’s differentiation, we went ahead and interviewed a friend of ours who is currently going through the program.

Lambda School: What actually happens there?

The excerpts below are based on our interview with our friend Justin, who is currently completing Lambda School’s Web Development program. 

1. Why Lambda School

People choose Lambda for different reasons. I graduated from an undergraduate business program and received several offers in Marketing, but I wanted to get into Tech. After chatting with some friends on Twitter, I decided to take a risk and pursue Lambda School.

I have met people my age and also people who are way older than me. One of my friends in the program worked in Management Consulting for a few years and decided to quit his job for Lambda School.

-Justin

2. Structure of the program

Lambda School offers different programs that last 6 months. Each month has a specific unit, from HTML to advanced React. Every day, there is a 2-hour lecture followed by a daily project that you have to finish by 8 pm. On Friday, there is a weekly project to complete. People can also repeat a unit if they are struggling.

- Justin

3. Overall experience

I am satisfied with the experience so far because it has given me what I need from a coding school - practical programming skills that can translate to real software jobs.

I think most of the negative reviews come from a misaligned expectation for the program. You get from Lambda what you put into it. Learning to code is extremely hard and recruiting for a programming job is also very challenging.

- Justin

Big shout out to Justin for chatting with us. 
Quick plug - Justin just started his job hunt process - hit him up on Twitter if you are interested in hiring an ambitious young developer with a marketing background.

Future of Lambda School 

Traditional education is clearly broken. Every year, students take on tens of thousands in debt with the hope that the education will pay off with a job on the other side. Lambda School wants to disrupt the system by up-leveling a new set of talent and helping them access lucrative, in-demand careers in technology. Doing so is no easy feat

We have been working for years on making incentive-aligned education work. It’s harder than we initially thought; we’ve had to invent a lot from scratch simultaneously and we have to get a lot of things exactly right.
- Austen

Despite the challenges, there is no doubt that Lambda School is changing many lives. This is just one anecdote from last week. 

Thanks Austen for sharing your story! 

Leo & Ali