Lambda School - the future of higher education
An online coding bootcamp that takes a share of future income instead of charging tuition
Welcome to the third entry of Next to Disrupt! Today we are taking a look at Lambda School, which while it is yet to reach the multi-billion dollar valuations of the other companies I’ve covered, it’s growing super fast and is already making a splash in the world of higher education. Plus, the CEO is a great twitter follow (@austen).
Introducing Lambda School. A coding boot camp in itself is nothing new, but Lambda brings more to the table. For one, the program is entirely online, which greatly increases the potential market by removing geographic restrictions. Perhaps more importantly, Lambda uses income sharing agreements (ISAs), taking a share of future income rather than charging tuition up front. While that may seem like just another payment option, in reality it completely flips the higher education model - Lambda invests in its students, not the other way around.
Founded in 2017, Lambda graduated from Y Combinator and wasted no time raising a $4M seed round. The two co-founders, Austen Allred (CEO, pictured above) and Ben Nelson (CTO), who both dropped out of BYU almost ten years before Lambda. Austen had a go with his own startup in Utah, and after that failed he moved to the west coast to work on growth for LendUp. During that transition, he saw how inefficient the labor market was - the talent is out there, but not everybody has the opportunity to learn to code and move to California to work at a startup. He then teamed up with Ben, who had completed a coding boot camp, to create Lambda.
At its core, Lambda School is an online coding boot camp, and a damn good one. They offer four types of courses right now: data science, full stack web dev, iOS dev, and UX design. You can take it full-time and finish in 9 months (9 hours/day, M-F), or take it part-time and finish in 18 months (3 hours/day, M-Th). They design their curriculums with the goal of getting you hired, and it shows. Not only are you working on real products and building a portfolio along the way, but they also have real instructors and on-demand mentoring. Lambda doesn’t stop there, they go the extra mile to help you find a job. They work with tech companies that are looking to hire, they help you with your resume and interviewing skills, and even have dedicated career coaches. And according to Lambda themselves, an astounding 86% of graduates are hired within 6 months with a salary over $50K!
As I mentioned earlier, Lambda uses a new business model for higher education - income sharing agreements (ISAs). They do offer a traditional up front tuition cost of $20K, but their main focus is on ISAs and the potential candidates they can unlock by de-risking the education aspect. With an ISA, you pay 17% of your income for 2 years. This only applies once you’re making more than $50K, only continues until you’ve paid $30K, pauses if you stop working, and expires after 5 years (no matter what). While those terms limit the upside that Lambda can see for its investment in its students, it certainly falls in line with their mission of making the skills and means to get a career in coding available to everyone.
Some published articles suggest they are around 1,500 enrolled students, which represents between $30M-$45M in eventual income (depending on up-front tuition or ISAs). Those are pretty impressive numbers given their size, and the delay of income from ISAs make Lambda a prime candidate for VC-funded growth.
Lambda’s growth has been awesome to watch, I highly recommend following @austen on Twitter to see it develop. As I mentioned earlier, they raised a $4M seed round fresh out of graduating Y Combinator in November of 2017. Just 11 months later, they raised a $14M Series A in October 2018. And then just 3 months later, they announced a $30M Series B in January of 2019. The investors behind them are equally noteworthy - Y Combinator, Tandem Capital, Google Ventures, Bedrock Capital, and even Ashton Kutcher’s venture firm.
The growth makes sense - they proved that combining a career-focused coding boot camp with ISAs to fully align student and educator incentives resonated, and now they are applying it to more markets. They want to expand their existing courses to Europe and Canada, as well as expand their course offerings to include topics like cybersecurity.
Right now, Lambda has gained a lot of attention for disrupting the norm of vocational schools. On a longer time frame, it’s interesting to think about where it stops. Can this model expand outside of technology focused areas? Can they continue to refine it and ultimately replace fully-fledged universities? There’s no telling the future, but if you are interested in the reform of higher education, I highly recommend you keep a close eye on Lambda School.