Can Lambda School Become a $100M Business? A Growth Case Study

This is Part 1 in a series deconstructing Lambda School’s growth. I have no affiliation with Lambda — I just think it’s an interesting business.

When I graduated in 2014 with a 4-year marketing degree, I realized how little I learned that was directly applicable to the needs of employers. It wasn’t until spending an entire summer taking online courses that I landed my first job in the tech industry. Since then, I’ve been deeply interested in any novel approaches to education. From MOOCs to coding bootcamps, I knew there must be a better way. That’s why when I recently heard about Lambda School, I was intrigued.

If you haven’t heard of them, Lambda School is essentially a coding bootcamp with a twist: you don’t pay them anything until you land a job bringing in more than $50,000 a year, after which you pay them a portion (17%) of your income for 2 years. This makes a coding education accessible to people with less savings to spare and, more interestingly, makes Lambda fully invested in their students’ success.

It’s an interesting model with a huge potential for impact, sure. But can Lambda really become the next big alternative to higher ed? In this series, I will try to answer that question by deconstructing their potential for growth. Along the way, we’ll determine if Lambda is cut out to be a $100M+ business, see what growth loops could drive the business forward, and dig deep into their funnel.

Part 1: Can Lambda School Become a $100M Business?

To answer this question, I’ll be using Brian Balfour’s “Four Fits” framework, which elegantly breaks down a $100M+ business into four interconnected parts:

  • Product-Market Fit: Does Lambda have a product that a particular market wants?
  • Product-Channel Fit: Does their product fit well with a scalable acquisition channel?
  • Channel-Model Fit: Does their business model enable this acquisition channel?
  • Model-Market Fit: Will their business model combined with their market enable a big business?

Product-Market Fit (PMF)

Let’s start with Lambda’s target customer: people who desire a more lucrative career but lack the financial resources, support, and know-how to get there. Their founder, Austen Allred, claims it is a mixture of people who “got the wrong degree”, abandoned their degree, and never went to college at all. All of these groups share common problems: they’re in low paying jobs and may have debt to pay off. Hence, Lambda’s key value prop of not making you pay a dime until you get a high paying job is very compelling. But only if their curriculum (product) works.

Market Problems Solution
  • Got the wrong degree, abandoned degree, no college
  • Desire a more lucrative career
  • Low paying jobs
  • Debt
  • Coding bootcamp you can take from home
  • Don’t pay until you get a high paying job

Does their product deliver on its promise?

To start, we can look at customer feedback. Bootcamp ranking site Switchup has Lambda School at a 4.92/5 rating and it is among the top 20 coding bootcamps on the site. Not bad. There are also countless reviews like this one:

That’s not to say Lambda isn’t without its detractors (see Reddit), but on the whole, customer sentiment seems very positive. As alluded to by the student above, Lambda seems to be iterating on their product to strengthen PMF. They’ve also taken efforts to improve their filtering of potential students (i.e. refining their target market) which I’ll discuss further in a future post.

Next, we can look at student retention. If they’ve truly built a product that serves this market, a high percentage of students will make it to the end. Austen claims that while in the early days as little as 50% retained (not so good), they’ve increased that to 80-90% (May 2018). That’s much more sustainable. And with curriculum iteration a core part of their playbook, it seems likely they can push it further. Of their graduates, Lambda claims 83% get hired within six months.

So, it seems like Lambda delivers. But there’s also evidence that they overdeliver. I’m amazed at how much their students advocate for them (Twitter, blogging, etc.) — and this word of mouth is a key growth amplifier for them (more on this later).

Product-Channel Fit

Even if students think Lambda has a great product, they’ll never make it to the big leagues if their product doesn’t fit well with a scalable acquisition channel. They don’t make the rules of the channels, so their product must be designed with one in mind.

Before we assess some potential channels, let’s consider a Lambda customer’s journey to becoming a student:

  1. Interested visitors come to their website
  2. They fill out an application form
  3. Lambda assesses the potential student’s fit
  4. An offer is made and an agreement is signed

Looking at it this way, Lambda has an admissions process similar to a B2B sales funnel. So their goal with an acquisition channel will be to generate student leads.

Given that, let’s consider some commonly used B2B channels.

Outbound sales

In theory, this would work with their product because they could offer a pretty compelling 1:1 sales pitch to students this way. But this would be way too costly and wouldn’t scale.

Content marketing

This definitely has potential. Lambda could create high-quality content (blog posts, etc.) and try to rank for keywords that their audience is searching. There’s a strong fit with their product because the content would demonstrate Lambda’s expertise in web development and build trust with potential students. However, the problem with this channel is that it relies on people having search intent. Many potential students probably don’t even know a career in web development is a possibility for them, and the chances of them searching for a variety of web development terms is probably slim.


Lambda’s best chance at large, affordable audience is paid acquisition. Facebook ads, for example, are a perfect fit for their product for a few reasons:

  1. Facebook’s interest and demographic targeting allows them to reach their latent target audience of lower-income people who desire a career upgrade
  2. Lambda’s “don’t pay until you get a job” pitch makes for a compelling ad, and
  3. Photos and video allow them to deliver this pitch in a captivating way

Where ads could break down in terms of fit is trust. Clicking on an ad and immediately filling out an application for a school you’ve never heard of is a bit weird (when exactly is this company going to steal my identity?).  To prove that they’re the real deal, Lambda needs a way to provide value right away.

How they’ve chosen to solve this problem is a perfect example of adapting your product to fit the channel. Instead of directing ads traffic to an application form, Lambda offers free intro courses so students can test them out. As a bonus, these courses act as an important quality filter to see if incoming leads have the potential to succeed as full-time students.

Channel-Model Fit

Okay, so paid channels sound like a good fit for Lambda. But is spending all that money for leads sustainable? Can their business model support it? Let’s take a look.

This will depend on two things: their average annual revenue per customer (AARPC) and their customer acquisition cost (CAC). Time for some quick math…


  • AARPC = $70,000 (Lambda grad median starting salary) * 17% income share agreement = $11,900
  • This is a sizeable amount of revenue per customer and leaves the door open for more costly acquisition. And it will be costly because getting a student to commit to a 9-month course is not an easy task. As leads come in from ads, they’ll need the hands-on attention of the admissions team not only to help move prospects down the funnel but to ensure these students have a high chance of success.


  • As I alluded to, their CAC is on the high end of the spectrum because of the friction involved:
    1. Bring traffic in with a compelling offer —> Ads ($ for clicks)
    2. Deliver value and assess fit —> Nurture and score mini-bootcamp leads with a CRM ($ for labor)
    3. Close with high potential students —> Schedule phone interviews with admissions staff (more $ for labor)
  • Okay, that’s starting to sound pretty expensive. But here’s where it gets interesting. As mentioned before, Lambda seems to be benefitting from a ton of word of mouth. This means for every customer they pay to acquire, they can expect them to bring in more for free. Every dollar is amplified and their CAC decreases as a result. If they can keep their product quality high, they’ll continue to reap the benefits here.

Given the above, Lambda looks like it has a channel-model fit that can sustainably support their acquisition strategy. However, as they scale they’ll need to be mindful of their cash flow, given their lengthy payback period. From lead to employed software developer is a 12+ month road.

Model-Market Fit

Everything is fitting together well so far, but none of it will matter if there isn’t a sizeable market willing to take the Lambda plunge. So, the question we’ve been waiting for: can they reach $100M? Time for more math…

First, let’s determine how many customers they’d need to reach $100M:

  • $100,000,000/AARPC
  • = $100,000,000/$11,900
  • = 8,403 paying grads needed per year

Now, let’s see how feasible that is:

If students can’t get jobs, Lambda doesn’t get paid, so there needs to be a demand for developers in the future. This one definitely doesn’t seem to be a constraint. We’re good here.

Just a rough estimate

They also need motivated people who can spend time learning to code. That could certainly constrain the market. Time for some more math…

  • There were 20,000 code bootcamp grads in 2018 (US and Canada), coincidentally who paid $11,900 on average. Not a huge market.
  • But — given that the median American household savings account balance is $4,830, traditional code bootcamps have a comparatively teensy market compared to Lambda. The percentage of the population with $12k to spend up front and potentially move to a city for a bootcamp just isn’t that big.
  • So, if 20,000 grads are coming from (I’m being generous) ~10% of the total potential market (200,000), then Lambda is left with the other 90% (180,000). So Lambda only needs to capture ~5% of the market (=9,000 annual paying grads) to have a $100M+ business. Not a cakewalk, but seems doable!

It’s also worth noting that the above analysis only considers their software development bootcamps for the US market. There’s potential to expand into adjacent markets (they’ve already started to do this with design and data science), but this would require assessing all of the four fits again. For example, a data science bootcamp is a new product for a new market (would-be data scientists) and it may require tweaks to their channels (maybe would-be data scientists don’t hang out on Facebook) and business model (the job market could be quite different for data science).

The Answer

Can Lambda School Become a $100M Business? I think so. And I really hope so. Because everything that makes good business sense above also helps students. If they do hit $100M, that’s 9,000 grads who have unlocked a new future and are creating more innovation. That’s pretty cool.

But if Lambda really wants to become the future of education, they’ll need a strong growth engine. Next in the series, I’ll see what growth loops could drive the business forward and dig deeper into their funnel.

What’s your take on Lambda’s growth potential? Would you like to see more growth case studies like this? Let me know @LloydaAlexander or in the comments below.


  1. UC February 5, 2019 at 3:47 pm

    Recently asked the founder what made Lambda different or his exclusionary education (pre-selecting students for potential) a compelling case against inclusionary education (available to all). Never got a valid response.

    I saw you work at Growth @ Udemy Alexander. Again, the question for you. Lambda is not an in-person bootcamp. Same education and forum support can be had from Udemy (Colt Steele, Andrew Mead, Maximilian, Brad Traversy and all the great guys out there).

    But Udemy, I’d need to spend ~$1k for learning it all. Lambda ~$20k. So, is $19k purely for community, brand, and job guarantee?

    I come from a developing country, and really weigh my cents and pennies. Is Silicon Valley again living in its own bubble, wrapping it up nicely in an “education disruption” and it’s just another hyped Juicero in the making when the alternatives are cheaper.

    1. Lloyd Alexander February 5, 2019 at 4:09 pm

      Lambda certainly isn’t for everyone. Udemy is perfect for people who are motivated, and I think that’s one thing that’s amazing about it (that’s how I got my start in tech). But not everyone can break into a new career with Udemy alone. Both companies have a unique model, and the world needs both.

    2. Paul February 22, 2019 at 9:26 am

      Teaching yourself how to code requires a specific form of motivation not everyone has. On Udemy, it’s $1,000 spent *upfront*. As hinted by Lloyd, the median American household savings account balance is $4,830. Lambda wins because of incentives here.

      On top of that, loneliness is a huge deal nowadays, especially in the US where >half of Americans feel lonely. Jumping onto the Lambda train makes you part of a social circle. Bonus points if there is happenstance and fellow students live in the same town as you do.

  2. Scott February 7, 2019 at 1:32 am

    The University of Phoenix made billions in revenue so I think the answer is definitely yes. I’ll be more curious to see if educational quality stays high as they’ll need to scale quickly and have an exit of some kind within the next decade. For profit education has never really worked at scale and I wonder if some of that is because of the importance of faculty and staff to student ratio and the different incentives of being a non profit vs a for profit. We’ll see what happens in the long run. I don’t doubt that the company will make a lot of money, though. It fills a niche not served in the current market.

  3. Brad February 10, 2019 at 6:30 pm

    What is interesting is that Lambda School is not the first programming bootcamp to use this payment model. I believe that App Academy was the first to do this. The reason no one has heard of App Academy is that they only take in students who already have strong programming ability. In fact I think most the students are professional programmers who are re-training for web development. So the result is that App Academy has a very high hire rate, like 98%. What makes Lambda School different is that they are willing to take a chance on people with no programming background who are disenfranchised and really need a pay-after-graduate payment system. So Lambda School is really helping people whereas App Academy is only helping themselves by helping people who really dont need help.

  4. Boris February 10, 2019 at 7:15 pm

    This is a really awesome analysis! I’ve only heard of PMF before, thanks for turning me on to PCF, etc.

    A couple of thoughts:

    – For market sizing, Where does the 200k potential market size come from? Is that software engineers employed in the US+Canada, number of software engineers that graduate from a traditional 4-year school every year?
    – Outbound sales are expensive, but I’m curious why you think it might not scale. There are a lot of options there, from an in-house sales team, to outsourcing to existing recruiting firms and paying for qualified leads, etc.
    – Which parts of this analysis would be interesting to compare traditional 4-year colleges?

    1. Lloyd Alexander February 10, 2019 at 7:59 pm

      Thanks, Boris! Good questions 🙂

      1) The 200k number is a quick-and-dirty estimate based on the 20k coding bootcamp grads in 2018 (US & Canada), as reported by Course Report here: Using median income data in the US, I make the case that Lambda’s potential market is 10x because they remove the upfront cost.

      2) Given the large CAC, it could work. But think of it this way: enterprise SaaS companies can use outbound sales to hunt high-value prospects that they think would want their product. I think it would be much harder for Lambda to hunt for high-value students (who would excel in the program, get an above average grad salary, etc.) that would justify the higher CAC. If these students exist and are identifiable, reaching out to them directly could make sense. But I doubt there are many, and hence I don’t think it would scale. It’s more about getting high volumes in the funnel, filtering through them, and finding those “diamonds in the rough”.

      3) I think the most interesting part is with PMF. Do students of 4-year degrees believe they’re getting a high-quality education that justifies the cost and will get them the career they desire? I think increasingly the answer is “no” and people are beginning to seek out alternatives like Lambda.

  5. Mir June 9, 2019 at 8:52 pm

    So interesting stuff to add.

    This is Austin’s book on Growth Hacking.

    I think one of the reason you hear about Lambda a lot of is because he literally wrote a book on it. Look at any Reddit, or Hacker News thread about Lambda and he will always be there. I believe he has like 5000 Google alerts set up for this.

    I am actually a Lambda student. Things change rapidly there. Both curriculum wise and what programs they’re trying to do. When I started there was barely anything but their full stack web. Now there’s many more programs. This could be factored in as well since I presume Data Scientists make more than UI people.

    I think the problem with Lambda is there’s only so many people you can really put in a single Cohort before the question becomes… why am I watching a live lecture. Your questions wouldn’t get answered and you’d barely interact with your the people in the class. The answer is more smaller cohorts but that comes at the expense of finding additional staff. Currently they have one “PM” (sort of a teaching assistent) per 8-10 students. They need many more if they want to keep expanding as well as instructors.

    The other part is I don’t think that they are as selective as they used to be. While you could argue that anyone should be given an opportunity, I don’t think that 90% rate is true anymore. It’d be interested to see if that only counted people who made it through the first two weeks (the period which you can drop without paying). I can tell you the amount that complete on time is very low, mainly because a lot go back to be PMs which is overall a good thing. I’d wonder if accepting anyone will work out if the person is discriminated against by age, or location. There’s a lot less tech jobs in Butte, South Dakota then in Chicago.

    I’ve wanted to write an article for awhile called “Lambda’s Gamble” which would attempt to figure out what the actual cost pers student of Lambda.


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