Fact
Lambda School's ISA: don't pay until you earn $50K+
Austen Allred explains Lambda School's income-share model: students pay nothing until they're earning over $50,000 a year after the program, aligning the school's incentives with the student's success.
“we train people to be software engineers and data scientists in live online classes, but we don't charge anything until you're making more than $50,000 a year after the program. So the idea is, if we can de-risk education for people, then you can kind of go for the education that you ought to. I mean, incentives are aligned between the school and the student. So we don't get paid unless— and we don't make money unless you're successful.”
Steal thisTie your price to the customer's outcome so you only get paid when they win.
Number
Lambda School takes 17% of salary, capped at $30K or 2 years
The ISA terms: Lambda School takes 17% of a graduate's salary only if they earn more than $50K, capped at $30,000 total or 24 monthly payments, whichever comes first.
$17
Share of graduate salary collected under the ISA · percent
“we get 17% of salary if and only if you're making more than $50K a year. And then once you've hit $30,000 or 24 payments, monthly payments, whatever comes first, it's done. So it's either 2 years or $30,000, whatever comes first. And if you don't get hired making more than that amount, then we never make anything.”
Number
Lambda enrolls 300-400 students a month, bigger than the UC system for CS
Three years after starting with 20 students, Lambda School enrolls 300-400 students a month and places more software engineers than all the UC schools combined.
$400
New students enrolled per month · students/month
“we started, what was it, 3 years ago with our first 20 students, and now we enroll 300 or 400 students a month. So we're talking in the realm of, we're like, that's a lot of software engineers actually. It's not the biggest university by any stretch, but we're placing more software engineers and We're— think about like the UC system, right? All the UC schools, um, we're about— we're a little bit bigger than that as far as software engineering goes.”
Number
Lambda School raised just over $120M in 3 years
Founder Austen Allred, 30 at the time, says Lambda School has raised just over $120 million in its first three years of existence.
$120M
Total venture capital raised · USD
“Uh, just over $120 million.”
Fact
Financing the ISAs is the hidden core of the business
Austen explains that the most misunderstood part of Lambda is capital: equity investors want to build a tech company, not buy ISAs, so the school uses separate pools of capital to borrow against discounted expected student revenue.
“the financing mechanism is probably the most important and most misunderstood aspect of Lambda School because the cost it would— if we could raise half a billion dollars and then just sit there and wait for that $100 million to come in, we could do that., but that's not, that's not how it works, right? Like, so our, our equity investors do not want to put in a bunch of money to buy ISAs. They want to, they want to build a technology company. And so we have different pools of capital that are for basically borrowing against the ISAs.”
Story
Austen lived in a Honda Civic to break into Silicon Valley
Broke and skill-less, Austen saw a Hacker News post about a guy living in his car, realized he had the same 2-seater Honda Civic, put an air mattress in it, and drove to the Bay Area rather than pay $800/month rent.
“I saw on Hacker News, there was some guy who'd Re— like, reworked his Honda Civic to live in it. And I was like, oh my gosh, I have that same 2-seater Honda Civic. And crazy as it sounds, like, I started looking at like rent in the Bay Area and it was like $800 a month. And I was like, I can't— who can afford $800 a month? That's ridiculous, right? For one room. Yeah. So I just put an air mattress in my car and drove out there and said, I'll figure it out.”
Story
Going fintech at LendUp is why Lambda School worked
Austen's first startup (a crowdsourced fact-checked newsroom) went to zero; he then took a job at LendUp to get close to the money, learning about risk, capital markets, IRR, and securitizations that later made Lambda's ISA model possible.
“So that was basically me moving from, hey, I'm like 10 steps away from money changing hands. I want to get as close to the money as I can. And so I kind of went down the fintechy route, which is a lot of why Lamb School worked. Because I was always thinking about risk and capital markets and, you know, how you can move money from one place to another and what the IRR needs to be to make that happen and how securitizations happen and stuff like that.”
Steal thisGet as close to where the money changes hands as you can; the financial mechanics become your edge.
Story
12 hours a day knocking doors on a Mormon mission in Ukraine
Austen describes his Ukraine mission sales playbook: free English classes to surface open-minded leads, plus brute-force numbers where he'd spend 12 hours a day for months knocking on doors despite a wildly inefficient funnel.
“there were probably 6 months at a time where I would spend 12 hours a day knocking on doors or approaching people in the street. And your top of the funnel is huge and it doesn't— you know, your funnel is not very efficient. And if you have a sales funnel like that, in most companies you would get fired. But that's just what you did.”
Number
UCLA: 100,000 applicants paying ~$80 each in application fees
On the hidden business of college application fees, Austen notes a school like UCLA can have 100,000 people apply at roughly $80 a head, turning admissions paperwork into serious money.
$80
College application fee per applicant at UCLA · USD
“you actually look at it broken down by like school, and it's like, you know, UCLA will have 100,000 people apply and they'll all pay $80, right? Like, that starts to get crazy money.”
Framework
The hard-to-do, high-pay job is what makes a training business powerful
Reacting to a 'Lambda School for mortgage officers' pitch, Austen argues the magic of Lambda is that becoming a software engineer is genuinely hard but well-paid; jobs you can't easily fail at don't create the same value or moat.
“the interesting thing about that is, like, you can't, like, fail at becoming a mortgage officer very easily, right? Like, the reason Lambda School is so difficult and so powerful is because you can— it's really hard to become a software engineer, but when you are, you get paid really well. And so, that's just a different end of the market.”
Steal thisTrain for skills that are hard to acquire but command high pay; difficulty is the moat.
Prediction
Pending
Austen puts Lambda School's odds of failure at 50%
Asked point-blank about the probability Lambda School goes to zero, Austen pegs the chance of failure at 50%, framing it as a high-variance bet that is either huge or nothing.
“50%.”
Tactic
Build your business on Twitter by amplifying small wins
Shaan credits Hoover as one of the first to build a company on Twitter that had nothing to do with Twitter—taking nuggets like 'Ashton Kutcher just signed up' and amplifying them into a daily drumbeat of good news that pulled people in. He notes Lambda School's Austin Allred doing the same by spotlighting other people's wins.
“I've joked around with, with friends that I feel like you were the first guy to build your business on Twitter that had nothing to do with Twitter. And today,— in this other company we invested in, Lambda School, the founder, Austin Allred, he's doing the same thing. He shares every victory on Twitter and people love it.”
Steal thisBuild a public drumbeat of wins on Twitter—especially other people's wins—to grow a product unrelated to Twitter.