Lambda School cuts staff and exec pay amid market uncertainty

Online coding bootcamp Lambda School is the latest startup to announce layoffs, writing in a blog post that it’s made the “difficult decision” to cut 19 staff from roles across the company.

The eight members of its executive team, including CEO and founder Austen Allred, are also taking a 15% pay cut, it said.

It’s not clear what proportion of the company has been hit by the layoffs — we’ve asked Lambda for more details and will update this report with any response.

Allred said the job cuts are partly linked to coronavirus-related uncertainty affecting the hiring and financial markets for the foreseeable future — given how Lambda’s model is linked to graduated students finding employment which pays well enough for income share agreement to kick in. (The school gives students the option to pay no tuition up front and instead pay 17% of their salary for two years, once they have a job that pays a minimum of $50,000 per annum.)

However Allred also writes that the headcount reduction is related to an executive decision to dial back growth goals for 2020 — in order to put increased focus on “quality and student experience”, as he puts it.

The Y Combinator-backed startup, which launched its first courses back in 2017, has fielded plenty of controversy over its model, including criticism from students over the quality of the teaching it provides.

It has also been the target of anonymous social media accounts which have characterized its model as exploitative and even a scam. And Allred himself has frequently taken to social media to defend against repeat accusations and attacks.

In one clear misstep, the school failed to properly register with California authorities — and was last year ordered to cease teaching until it had done so. It was later fined $75,000 by California’s Bureau for Private Postsecondary Education.

Lambda has also been selling some of its income-sharing agreements (ISAs) to investors. The Verge reported in February the startup had quietly partnered with Edly — a digital marketplace that helps schools sell ISA to accredited investors. Wired reported in 2019 on an earlier sale.

Critics contend such sales undermine Lambda’s claim that its incentives align with students’ goals because it doesn’t make money on ISAs until students have been hired and are paying it back.

Although Allred was talking about the potential to sell ISAs “at the point of graduation” back in 2017 — when we asked about how it would raise enough capital to sustain the program. “We have a lot of interest in purchasing the income share agreements at the point of graduation, from investment funds and that kind of thing,” he said then, suggesting the startup was looking at a variety of ways of funding the business.

In the blog post yesterday announcing the round of job cuts, Allred does not refer directly to any of the criticism about the quality of the teaching it provides — but does appear to give tacit acknowledgement that it has at times been lacking.

“Lambda has always had a culture of ‘yes.’ Yes, try that new idea. Yes, run that experiment. Late last year, we realized that trying to do too much was actually holding Lambda School back – that we weren’t good enough at saying ‘no.’ As much as students want shiny new things, they need excellence. And excellence requires focus,” he writes.

“We’ve been moving in that direction since Q4 of last year. We talked in All Hands and at the retreat about making 2020 a time to optimize – to focus on quality and student experience.”

He goes on to list a number of internal decisions related to this claimed shift of focus — to quality and away from quantity — including pausing new EU program enrollments; pausing new Android enrollments; and putting a hold on a cybersecurity program.

Other changes he said the startup has made “over the last several months” include reducing its admissions targets; ending new enrollments in the UX program; ending new enrollments for dedicated international cohorts; and restructuring the Hiring Solutions and Outcomes teams to “more effectively support students in their job search”.

The layoffs are part of an internal reorganization to “support these new, more focused priorities”, per Allred.

“Today is a sad day, and people will react in different ways. However you react, those emotions are real, and they matter. This was one of the hardest decisions I’ve ever made in my life,” he also writes.

“I want to publicly say thank you to everyone who has worked at Lambda for what you’ve contributed. I know you’ve given parts of who you are to Lambda, and to our students. You are part of our journey. You are the reason we are here. Thank you.”