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Reduce Risk, Succeed Together: A New Business Model - Austen Allred + Derek Andersen

Austen Allred
Co-Founder & CEO at Lambda School
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2020 Startup Grind Global Conference
February 12, 2020, Redwood City, CA, USA
2020 Startup Grind Global Conference
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Reduce Risk, Succeed Together: A New Business Model - Austen Allred + Derek Andersen
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About speakers

Austen Allred
Co-Founder & CEO at Lambda School
Derek Andersen
Co-Founder at Startup Grind

Austen is the co-founder and CEO of Lambda School, a new model of higher education where the school invests in the students rather than the other way around. Lambda School's mission is to find untapped or underutilized talent, and to train that talent for the most in-demand jobs in the world. Founded in 2017, the school provides world-class education and career services to over a 1,000 students.

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Derek co-founded Startup Grind, a community of over 600 Chapters in 150 countries designed to educate, inspire, and connect entrepreneurs. Since 2012 Startup Grind has hosted 7,000 events for more than 250,000 people.

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About the talk

A Fireside chat with Austen Allred, Founder + CEO of Lambda School about The New Business Model Centered Around Reducing Risk and Succeeding Together. Interviewed by Derek Andersen, Founder + CEO of Startup Grind/Bevy


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Well, thanks for coming. I think the last time you were at startup grind you were sitting in the audience. Is that right? The very first thing I ever did when I got to Silicon Valley was I went to a startup grind funnily enough. I've never told this story before but Jessica Livingston was the speaker. So she doesn't remember that. I've never told her that song. That's really cool. Yeah. It was like in Google it. Was it on Google campus or something with the time we had about two

or three people on the team and I spoke with him about this experience and he found an old email from you like a few months after he remembered meeting you and he found this old email from some company. You are launching or some product that you were getting out and he was in heat emailed it to you and you put them on the distribution list and if it's something good may not even remember what it was. Don't think it was around very long at like many of us sort of the things you launch and then they come and they go by your experience. I think a lot like a lot like a lot of people

probably in this room or the watches can relate to which is that you didn't find immediate success everything you've ever done hasn't you know, Gone to the roof immediately. I mean, how how is this process been for you now that you found Lambda and you you know how to store having great success with outfits or the journey to get to that point but something like it's been really interesting. I think people ask me all the time about, you know, did you expect that Lando would do what it's done thus far. I'm going to be clear. I don't think you know if we're barely getting started

but the short answer is no not in my wildest dreams the sky. Actually. I've worked harder at Lambda than any of the other projects we've done in the past turns out product-market fit just matters a whole whole lot Yeah, that's really interesting. I think it's hard for people that haven't been through that to fully grasp that but like a man feel the same way. I work just as hard on five things. No one's ever heard of is that worked and start crying like it's just me. What what is that? Is it? Is there a that something you can

even control is it just it has to just be a great idea. It has to be something that people are actually going to I mean, how do you how do you know if you don't like go forever working something that people are never going to like it's really hard to say with kind of a such a small sample size than any one person has but you know as you go around and you talk to a successful Founders in people who started great companies you realize that that's not a unique experience for Lambda School. Everyone's kind of you need to start scratching a little itch and then you like the other people might be

interested in this too. And then for some reason it just it just hits and I think you know, the Y combinator advice of paying really really close attention to you. Is matters, but it's difficult for me to say. There's one particular story that I maybe you probably don't want to relive at this moment. But you had a series a fall through on December 23rd. When could you just tell that story? May I talk to a therapist about this? All the time in is a company that I started before Lambda school is called grasswire.

We're trying to build kind of crowdsourced fact-checking for social media journalism. So theory was you know, there's all this stuff out on Twitter. How do you know? What's true? How do you know what's false? And what's the Delta between random Tweets in an actual article that people can trust and rely on so we had a bunch of users. We had kind of the crowd Source fact-checking in news reporting mechanism working kind of a Wikipedia for news and then there was a billionaire who is a household name that said, hey, I want to lead your series. We got all the docks done. We

were waiting for the wire and then he had his assistant call me on December 23rd and say I actually just not going to do it. So I had to call and we are out of cash at the time so called everybody and laid everybody off on December 23rd. How do you like? When you have these experiences and you have these failures like how do you personally how have you overcome them? Like what what have you done for yourself to say like, I'm actually just keep trying because I feel like I pray everyone in this room has some sort of story like that one super

dramatic and the timing of it was just you know, crazy bad but like many people like they'll have like they come into the valley figure for 6 months are there for 15 years, they come for 6 months and then they just disappear like you never see them again and like but you know you even in spite of such an unbelievably difficult experience in you know, just like I could see people totally leave in the industry. Actually. I got you didn't thankfully. How did you overcome now? I think at the end of the day a lot of what a company is is

learning how to manage your own psychology. In fact, I think that maybe one of the most the single most important aspect of it and that's not only true in the downtimes that's true in the good times and it kind of runs in Cycles like elem school today. It's been fascinating to watch know we kind of hit this cultural Zeitgeist in so many different ways to wear everybody started talking about us and usually in an insanely positive ways that sometimes we didn't deserve now, we're kind of on the other side of that cycle where people are talking

about us in ways that I still feel like, you know, we don't really deserve and what you learned from all of that. I think we're well you have to learn is to not Outsource your judgment making to other people. So the things you know, there's ground truth. There are our numbers there is what is Actually actually happening within the company and that remains true regardless of what investors think or or reporters think or the broader Silicon Valley Community thinks and what I've learned over time is that when stuff

like that is crazy and bad things are happening. You really should just turn inward and focus on your users focus on how are you creating value as a person or as a company and you'll find that there's a lot of valuable stuff that you can do when all that happened several years ago the most difficult part was that kind of had one investor who had never heard of me before it was a crazy idea and he basically had funded the entire thing and when that guy decided to pull out he kind of turned on me and then we went to lunch and he was like, I don't think you're ever going

to have a job again in Silicon Valley and like I don't think that you'll ever be successful. I like that was hard like that really sucked. So I think that was like the first lesson in. My main motivation has never been to prove that guy wrong, but it forces you to disassociate reality with what a specific person thinks. Yeah, really? Appreciate you sharing that experience and it's agreed inside like managing your own psychology unit. And I think I'm 10 years this month when we start start crying. I've been at

my job 2 and 1/2 years ago and and so much of it is you're just sort of there alone and you you know, it's like I've been successful in these other things. I like I don't think I'm like, you know play Loser by my company like it sucks terrible, you know, and it's like you have to try to like figure those things out in your head and then you have these these things. Where are these moments where people like there's a very famous Venture partner in a one of the biggest firms here who flat-out said we were when we were I was going to come if she said I will not start a company with you.

You're not the time. Person, I would ever start a company with a net. I like that messed me up for a long time and and to your point like I'm not totally motivated by that person what they said but like you have to then sort of overcome those things in your own mind at 2, then, you know, two then prove it actually, you know, you can do what you think you're going to do. I think one of the most important moments in being a Founder is when there's somebody that you just respect like crazy that tells you something that you know is wrong and you you

for the first time have to like act according to what you know to be true and your instincts as opposed to this person that you just respect like crazy. That's I think that's when you kind of come into your own and you also have to be right in doing so right you can totally be wrong and I've done that as well but Yes at the end of the day it comes down to trying to figure out what reality is I think. Marcus Aurelius talks about like focusing on the logos not the east of ethos not to pass those who like what is the reality of the situation and

getting to that and ignoring everything else for those who don't know what else? What is what is Lambeau? What problem do you saw? We are an engine that takes people from low-income and moves them to high-income and we take a cut when we do. So right now we train people to be software Engineers. It's complete. It's no upfront tuition. You only pay us back if you get a job as a software engineer making more than 50k a year. And if you do thing you pay a 17% of your income for 2 years cap at $30,000. So what it really is

we're taking somebody from ground zero to a high-paying skilled profession and we only make money when were successful in doing so programming isn't for everyone. When is it a good? Idea to change careers and become a programmer and maybe who is it? Not built for yeah, I think that's obviously it's a personal decision and trying to get better at helping people make because if you don't actually want to be a programmer, we don't want to spend tens of thousands of dollars training you and then have you decide to go another way. So we know the first thing that you have to

do when you come to Lambda school is what we call our pre-course work. So it's about 40 hours of let's dip our toes in this and let's play for basically usually takes a month or two part-time and see if this is something that you'll actually enjoy of course. It's not perfectly predictive, but in our experience the best way to determine if you like it is just try it out and it isn't for everyone School in its current form does not solve. Income Mobility for everybody. It's only for a small subset of the population. You've hired a lot of recruiters and essentially have this like

internal talent agency. I've gotten they email me to call Matt spoken with them for about hiring developers. Like why is that so important for a school to have you look at it? I mean still have a career services arm and then I guess we work rate is really have to solve the entire problem for a student and part of the problem is financing part of it is education part of it is getting your foot in the door and getting interviews part of it is being prepared for those interviews. I'm even have we have Financial Training when your toward the end of the program. So when you get the job, you know how

to handle it like we have to we have to cover all the bases and take you from beginning to end. Are the most important pieces of that especially if you don't have a degree and you don't have a resume that looks like a traditional software engineering resume is just getting your foot in the door. So we got a 20-something person team in Utah that just lines up interviews for students. So just one team that their job is preparing the student to be technically you're ready and to be able to pass the interviews and then another team lines it up. What is is there a point where

developers are not as valuable as they are today? Like is there a point where the talent they eventually matches the demand. I mean in theory, of course, right? I think the reality is worm a long way away from that reality. But what I what I've always said is that if that happens then we'll teach something else will try and something else. So our purpose in life isn't necessarily to be a software engineering school. It's to train people for the jobs that are highest in demand. Whatever that maybe you would

actually hope that a school with the promise of kind of jobs on the other side would be able to shift and would be able to adapt to the market now right now though the shortage and the demand for software Engineers is growing so fast that we're not going to be able to scratch the surface in the next few years. But yeah the beat Call Lambda school is not necessarily software school. Yeah, what is it? It's an engine for economic Mobility that takes you 5 years from now. I want somebody to be able to show up raise their

hand will do some sort of assessment or analysis on where they ought to be and then we'll be able to get you all the way there. So do you know in the future if the factory goes out and it's kind of a fundamentally missing piece of the economy like right now if I factory goes under in Detroit, there are thousands of skilled bright people with nowhere to go and that's crazy. Like there should be a mechanism to figure out where you ought to be in the economy and help you get there and it's so disjointed right now that it's not really efficient. I want to create that. There's 1.5 trillion

trillion US dollars in student loan debt right now clean Cruces and family therapist said that universities were going to go out of business. What do you think changes over higher and higher at over the next decade? What's what do See happening, you're close to that anybody has shifts in. I mean when I went to the college no one ever mentioned the word student loans at all after I graduated like it just was not part of the equation. Yeah, and now you talk to an 18 year old and it's the number one thing on their mind. So

what we're seeing in higher education probably is a shift to Value over prestige a shift to outcomes over brand and there's some schools are going to be hurt as a result of that. Right and I think Clayton Christensen specifically called out a lot of the very expensive liberal arts private schools are going to be the first hit. I think he was a little compressed in the time frame. May he rest in peace, but I think the prediction was Broadway, correct?

Why everybody has an opinion about your company don't I know it but I would like to know why is it that so many people? Why is it that so many people have such deep feelings about what you're doing both negatively and positively like what like what is it about what you're doing that creates so much anxiety and some people what I would help me understand it and I've been trying to understand it myself. So I think my analysis of it is that there are a few things that people hold deeply deeply true to themselves and the kind of

things that occurred to them education is one of them answered lens School looks at this enormous problem that is student debt lack of income Mobility lack of equality and we have a solution to that right one solution is hey, we're going to help people become software engineers and we're not going to be paid unless it works and you don't need a degree. So all of those things start to cut for or against deeply-held. leaves believe such as do you actually need a degree should education be for profit is a university a good thing or a bad thing or is it is it for

everybody and I think like a lot of the folks that I've talked to you. They're hyper hyper critical of Lambda School in when I get them in a conversation. I realized that they don't actually dislike Lambda school. They don't actually but not worried about us and the company they're worried about something else being displaced because Lambda school is there so one example is going to had to spend a lot of time on Capitol Hill and I had a senator basically straight up tell me what you guys are doing is incredible. But any support I put behind you is support that I'm not

putting behind free education for all so I need you guys to die so that that cause which is a greater cause can contrive Like I said wait to meet you. Thanks so much of cultural deeply held beliefs and their people and envy Fair. We're not perfect either right like we make mistakes, but and that's why I think it's super important for me to not Outsource my judgment right now. But yeah, I can talk to a lot of the people that are super frustrated with Lambda School. You learn that it's not

actually about land School. That's not everybody but it's been fascinating to watch. Well, can I share my opinion? So I think about it? So I had an investor. We just really mad when they met once before we chat on Twitter or something like I've read everything there is to read on it. I read all the tweets. I read all the Articles like every Atlanta. I think I've read it. I I don't understand 4-minute the criticism of you all like I don't I don't understand book is one part of me is like

Optimus him. He's like, wow, like somebody like these people care enough to write things positive or negative. Like that's like is a Founder like I'm always grateful when people have an opinion on what I'm doing, but like anybody that you know that has student that like, this is like this is like one of those like CrossFit weight packs on their shoulders at all times of the day and night any time. They're in their waking minutes. They're thinking about this that they have and for most people it is impossible to ever lose that day like it is physically impossible they would they can

work. 38 David Howarth next 10-15 years, they'll never get a house because they had this student debt is never going away and what you are trying to do with Lambda and you know, yeah, of course, it's not perfect. Guess what lake go to university and see the thousands of students to get burned every single quarter and semester by the schools. Like yeah, you're you're 98% or 95% of your students get job. Sorry, like we're working on the final 5% Like I just think like the value proposition is so simple. You don't pay Jack until you until you you get

a job and then you pay a very small fee and comparison to the education should getting or any other education that you could get. And so like I like I I mean I read something so I got it it said this person. I would like two people didn't have a good experience. I'm like my gosh like there are millions of people on Twitter having a horrific experience like Zoe. Two people landed in workout for two people. You can have your money back the way you didn't pay anything. So like I just like I am precise with you and I can be I can like like I see I see you like

how much how honest and upfront you are and how about like trying to to like to solve the issue for a hundred percent of people and I think my my perspective is like that's just never going to happen. And in the meantime, hopefully, it's just Free Press is that the reason why people people see through, you know, some of the very small amount of criticism at my opinion like is totally ridiculous the vast majority of the time like I think reasonable people will see through that and the success stories of women who who are single moms who had a you know, a minimum wage

job and now they've gone to Lambda and now they can take care of their kids and the stories of people that are in factories or working in farms who now become engineers, I mean, These are like these are life changing experiences for people and you know, I think what you're doing is incredible so screw the haters and you know, I hope I hope I hope all the schools shut down and they all go to Lambda and if people have ulterior motives screw them, you know, you're doing a great job. So that's all I have to say that. Yes, and I'm and I'm and I'm looking for a job. So if you have your you

need you no hype man or whatever like dogs getting like right now the right is basically for every couple dissatisfied students. There's an article written right right on point, like either the number of articles about the negative experiences of Lima school just become so great that like it's extreme ORD it ceases to be a story if a student has a bad experience at Lambda school. That's like Those bad experiences while keep me up at night. Right? Like I want nobody to have a bad experience. It's by the

fact that I know that's an impossible standard to keep and to your point. If you said hey, I'm going to go to pick any University and see if there are a handful of disgruntled students. Like of course, right just and we've got 2,500 students. If you want to find a dozen that are frustrated you're going to find them like they're definitely they're the good news for us. I think is it when those articles come out our applications Spike like in the students who haven't had that

experience start sharing with themselves, like, you know, they have that that experience I think is super critical of is that my experience or is that we're reporters saying and does that match the reality that I'm experiencing or not and and they can determine that so I think you know, you're never like beyond the point where press matters but we kind of are like and for us, you know, I've been I haven't tweeted in a few weeks because for me it's like I'm going to take all of the effort and energy that I would have spent trying to combat

negative articles and tried to Define for people. What's true and what not and said, I'm just going to focus on the students and I'm going to focus on making sure as many of them are successful and happy as we can make them and at the end of the day people going to say nasty things about us on Twitter, but I sleep really well at night. So that's that's what matters at the end of the day Boston already claimed to school. Thank you very much.

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Austen Allred
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