If you visit the website of Lambda School, a “boot camp” for people who want to quickly learn how to code, you’re greeted by a photograph of a grinning student with an open laptop and the encouraging words: “Your new tech career starts here.” It’s the first of many promises made by Lambda, which currently boasts 2,500 students, all of whom receive their education online from their own homes — and none of whom pay out of pocket for their educations, instead signing “Income Sharing Agreements,” or ISAs, through which Lambda gets a percentage of their first tech job after graduating.
If you recognize the name, it might be because of the $48 million in venture funding it’s raised in its nearly three years of existence, or its $150 million valuation. VCs have been attracted to Lambda’s ability to rapidly grow its enrollment via online-only instruction and the no up-front cost tuition enabled by the ISA model. But most likely it’s because you’ve seen the company’s ubiquitous Facebook ads, or read some of the seemingly endless tweets about the company written by its executives, in particular its founder, Austen Allred. I personally became interested in the school after seeing a (now deleted) tweet by one of Lambda’s executives, Trevor McKendrick, in which he claimed that “if you don’t think Lambda is at least a $100B company you don’t understand the American economy.”
I don’t think Lambda is a $100B company, regardless of whether I understand the American economy. Internal company documents obtained and reviewed by Intelligencer, plus interviews with former staff and students show a company selling unprepared students an incomplete education, fueled by overpromising marketing and misleading, if not downright fraudulent, figures.
Allred, a serial entrepreneur from Utah with a background in marketing, founded Lambda in 2017. His previous work was mostly concerned with “growth hacking,” which is Silicon Valley jargon for finding underappreciated (or, less charitably, underhanded) ways of marketing something. He’s also published several articles about entrepreneurship — including one with the inauspicious title “Successful Entrepreneurs Are Usually Liars.”
2017 was a bit of an odd time to get into the coding-boot-camp business. The industry got going in 2011, when start-ups were in vogue, and the dominant economic narrative of the day was that high unemployment was explained in part by a “skills gap” that retraining could solve. This was the era when people wrote articles with titles like “Why Everyone Should Learn to Code,” and boot camps rushed to fill this apparent need. There was hope that technology could solve its own economic divide between the haves and have-nots — or rather, the code literate and illiterate.
Nearly a decade later, the boot-camp boom is over. Unemployment has dropped, and the “skills gap” has come under fire as an explanation for labor-market slack, especially now that the labor market has tightened. Most large boot camps have been sold or shut down, as enthusiasm gave way to the sober economics of running a for-profit school. Most, except for Lambda School.
Lambda School has raised funding from prestigious Silicon Valley institutions like Y Combinator, GV (formerly Google Ventures), and Ashton Kutcher’s Sound Ventures. It is currently valued at $150M, an impressive sum for a company that only began fundraising in August of 2017. Unfortunately, there’s very little evidence that Lambda is able to improve where other boot camps have failed.
The point of a coding boot camp, obviously, is to help you get a better job. Lambda’s claim, reproduced on its website, that “86% of Lambda School graduates are hired within 6 months and make over $50k a year” is an understandably attractive proposition for students — and a key pillar of Lambda’s marketing. Students I talked to confirmed that the feeling that it was likely that they would be able to land high-paying jobs was a key part of deciding to attend.
However, a May 2019 Lambda School investment memo — entitled “Human Capital: The Last Unoptimized Asset Class” — written for Y Combinator and obtained by Intelligencer, tells a very different story. In a section warning that student-debt collections may prove too low, it matter-of-factly states that, “We’re at roughly 50% placement for cohorts that are 6 months graduated.” A recent interviewee for work at Lambda School also confirmed to me that the company’s own internal numbers, which the interviewee was provided as part of their interview process, seem to indicate a roughly 50 percent or lower placement rate.
So where does that 86 percent figure come from? Lambda has reported graduate-outcome statistics at the Council on Integrity in Results Reporting (CIRR), a voluntary trade organization of coding boot camps whose purpose is to ensure that participating schools publish truthful information about student outcomes. Allred has often used this report to defend his company online. But where other boot camps have multiple reports spanning many student cohorts, Lambda has only reported statistics for its first 71 graduates — 86 percent of who, the school claims, found jobs. Sheree Speakman, the CEO of CIRR, told me that Lambda has not undergone the standard independent auditing for the sole report it has submitted, and that her communications to Lambda School regarding further reporting and auditing have gone unanswered.
Lambda’s former director of career readiness, Sabrina Baez, told me that placing Lambda’s first batch of students was extremely difficult, largely owing to how underdeveloped the curriculum was at the time. When asked about Lambda’s claim that 86 percent of its first graduates were placed within six months, she told me, “I would say out of that 71 students, within six months of them graduating it was probably a 50-60 percent placement rate,” and added that Allred sometimes exaggerated student-placement progress on Twitter — recalling, as an example, an instance in which she told Allred that a student might receive an offer soon, only to find out later that he had tweeted that the student had already received an offer.
Lambda is also unusual in that it does not charge an upfront tuition to attend. Its home page proclaims, “We don’t get paid until you do, so we’re in this together, from your first day of classes to your first day on the job.” Lambda School is free, but with an asterisk: To attend, you sign a contract that says that if you get a tech job paying $50K or more, you have to pay 17 percent of your pre-tax income to Lambda School for two years, or until you pay back $30K, whichever comes first. These are called Income Share Agreements, or ISAs.
Students I spoke to confirmed that knowing that the school only profited if they were successful in breaking into a tech career was a key factor in learning to trust Lambda. The allure is that you don’t need to trust any particular authority on whether the school is good — Lambda is putting its money where its mouth is.
Only, it’s not always clear to students who actually owns these ISAs. Last year, Lambda partnered with Edly, an ISA marketplace co-founded by former Merrill Lynch banker Chris Ricciardi, the “grandfather of collateralized debt obligations,” to sell Lambda ISAs to investors. Wired reported in August 2019 that, “For about half of the ISAs, the company sells the rights to a portion of its returns to investors; in return, it gets cash up front.” On Twitter, Allred has vociferously denied this claim, suggesting that the author of the piece was mistaken. In October, he tweeted, “We never, ever get paid up front for ISAs.”
Private communications to his investors, however, confirm that Allred’s claim is entirely untrue. These documents show that, as recently as August 2018, a hedge fund paid $10K per ISA to purchase half of Lambda School’s ISAs. In fact, Allred lamented not being able to accept a better deal from a second fund because the deal with the first fund came with a two-year exclusivity agreement. Students I spoke to were entirely unaware of this practice, and were surprised to learn that Lambda was selling their ISAs. This week, the Verge reported, Edly began removing references to Lambda on its website. The school’s secret financing arrangements are a violation of Lambda’s central promise to its students — that Lambda only makes money when the students make money.
What about the quality of education? Lambda’s educational model hinges on student-contractors called Team Leads (TLs) — students who, two months into their education, defer another two months in order to become teaching assistants tasked with taking attendance, checking in with other students, and answering questions. These student-contractors are paid roughly $13 an hour and have only just learned the material they are then tasked with explaining to the next batch of students. One student told me he was given no training on how to be a TL and spent many hours on devising curriculum and exercises to help other students. Another student, Erica Thompson, told me that TLs “are hired on a Friday and start on Monday.”
The issues don’t end there. As Zoe Schiffer and Megan Farokhmanesh reported this week at the Verge, the Lambda enrollment process is haphazard and unreliable, and the curriculum is unlikely to help students pass even a first-round programming interview. For some students, the experience has been so disappointing that they’ve begun to organize. In a group letter to the school’s administration, Bethany Surber, a student spokesperson for a group enrolled in Lambda’s UX program, objected to the “substandard, disorganized, or completely lacking curriculum delivered to us by Lambda School.” Surber and her group are seeking to negotiate the cancellation of their ISAs.
I had the opportunity to question Allred about all of this at his office this January, after an extremely polite PR person ushered me into a small conference room in Lambda School’s San Francisco office. When Allred arrived, wearing a baseball cap branded with his company’s logo, I asked him about the discrepancy in the advertised student-placement rate and what he reported to his investors. At first, he told me that the 50 percent number in the memo referred to “student[s] making more than $50K.” When I reminded him that his marketing materials claimed that 86 percent of all graduates make at least that much, he admitted that some student cohorts had placement rates as low as 50 percent, and suggested that because the section of the memo concerned risks, “We’re going to pick our lowest number.”
I asked about the documents that showed Lambda outright selling ISAs, and he told me — contra earlier claims on Twitter — “that was true in the early days of Lambda School, but that’s not true today.” These days, Allred insists, the school doesn’t sell but instead “finances” ISAs: “We get an advance from an investor that is backed by the ISA.” Effectively, Lambda takes out a loan that is secured by students’ ISAs, and has to repay that loan with more interest as more students graduate and are placed. Whether or not this counts as “selling” strikes me as a meaningless semantic distinction: Either way, the school receives some money up front and an investor shoulders some of the risk of the ISA not paying out. And either way, Lambda School students don’t know that the school isn’t as incentive-aligned with them as the school’s marketing indicates.
As for the UX students who organized to try to arrange a cancellation of their ISAs, Allred suggested that the group’s letter was the result of bullying by particularly vocal complainers. Rather than negotiate with the group as a whole, he told me that he offered to speak with each student individually — weakening the group’s bargaining power — and decide whether their case merited a cancellation of their ISA. From an original 20 signatories on the letter to Lambda, 12 students remain who were willing to commit to group bargaining.
Before I left, I asked Allred about the thing that had first attracted my attention about Lambda: Why did he post on Twitter so much? Taking off his hat, he told me that he “doesn’t really have friends,” and used Twitter as a way of having some social interaction. A moment later, he clarified that he felt “an obligation to do everything I can for the students, in a way that I just don’t feel towards friends.”
It’s hard to believe that line. Lambda’s lies regarding graduate outcomes, financial structure, and curriculum quality are not merely hyperbole to drive sales of a product. The real human cost of underprivileged students who have been sold the dream of a new career is significant. One student I spoke with stretched thin the last of the goodwill from his friends and family to be able to attend Lambda and forego working. Erica is broke and drives for Uber to make ends meet. Students with no safety nets experience real financial pain from the nine-month hiatus from work, in addition to the looming dread of possibly having to pay Lambda $30K one day.
There is some virtue, still, to Lambda’s mission. Technology and economic change has opened up new job opportunities, and many Americans are desperate to join an industry that promises a future. Coding boot camps offer a kind of solution for one moral conundrum of technology — can we build a future that doesn’t diminish the people who helped us get here? Not, it would seem, through Lambda School.
But that isn’t stopping it. Lambda continues to pursue a familiar grow-at-any-cost strategy. Investors now own 40 percent of the company, and Allred now needs to deliver them a return. Lambda’s internal documents show that the school can be profitable so long as at least one in four students manages to find a tech job, and that it intends to enroll more than 10,000 students in 2020.
This post has been updated to clarify a hedge fund deal to purchase Lambda School’s income share agreements.