Codecademy Co-Founder & CEO Zach Sims On The Future of Learning

Zach, it's so nice to have you here. Zach is the CEO of Codecademy, as many will know, a 4-year-old New York-based company.

Thank you for having me, Connie.

Are you having a good time in Zavos?

Zavos has been great so far.

And this is not your first time. We were just talking outside and you're sort of becoming a veteran of these things.

Yes, third year.

So what do you think of them? I mean, are they useful from a networking standpoint?

It's absolutely interesting from a networking standpoint. For us, we work with universities, with governments, with some of the Fortune 500s, so it's a really good opportunity to meet a lot of people in a short period of time and get more done meeting-wise than you would otherwise.

That's great. I mean, I've noticed personally it's just great, even just the sort of interactions with people on the shuttles and at the parties. It's been very fun. So for people, I think most of our audience is going to know exactly what you do, but maybe go over your business Sure.

So Codecademy teaches about 25 million people around the world the technology skills they need to find jobs. So 4 years ago, my co-founder and I, Ryan, realized this problem that colleges and educational institutions around the world don't change fast enough based on the labor needs that we're seeing in the market. And so people aren't able to get skills, and they aren't able to do highly skilled technical jobs like programming. So we wanted to create a place for those people to go where they could learn free of charge and find the education that would help them get a step up in the world.

Okay. And those 25 million people, are they mostly in the US or where's your presence? How's your presence sort of outside of the US?

So they're all over the world. More than 65% of them are outside of the US. So our business is super international. The largest country concentration is the US, but we happy to be big in a lot of European countries, some South Africa, South America. Some African countries as well, and pretty much all over the world. There's a concentration of users.

That's great. And so explain to me how this whole thing works. We have some of— there's so many online education platforms. How much of the content do you produce versus sort of outsource?

So we've always focused on taking a platform-based approach. So I think if you look at the majority of technology companies, obviously looking at, you know, when Tumblr sold for $1.1 billion, I think the New York Times' valuation in the public markets was relatively similar. Mm-hmm. And so building these technology platforms, you can do more with less. And so that's what we've tried to do with Codecademy, where we have a platform that both we use internally to create content. We work with K-12 teachers in the countries that we work with, universities. We work with companies that create courses. So we're with a whole multitude of people that are creating content on the platform, and then we edit and curate the best materials and put that online for most of the people to take.

OK. And are they sort of long courses or sort of like chunks of content that people can piece together?

So everything's bite-sized. I think when we first started thinking about Codecademy, I was enrolled in a computer science— an intro to computer science course at Columbia, where I went to college. And I was frustrated by the fact that it was 3 to 6 months long to get through courses. You needed to spend 20 or 30 hours a week. There was a lot of homework. And really, it felt like the experience should have been more focused on learning by doing. And so we designed this bite-sized learning by doing experience that really fits into your life and isn't disruptive.

And because it's that— because of the way you structured things, do you track— I mean, is it possible to ask you what your attrition rate is? Or is it sort of—

So we track on course-by-course basis. And the thing is that because people are stitching together a lot of courses to reach an outcome, it's hard to say exactly what number of people finish which courses, which I think is very different from something a lot of people talk about, which is MOOC attrition rates in general, where you see these 3-month courses, again, with homework and projects and tests and all these things that people have to take, where for us, you're taking these bite-sized units, and the completion rates on these bite-sized units are really, really high.

And so if it's not— if the completion rate on these bite-sized units is not very high, will you drop the course, or is it— it doesn't cost you anything to host it, so who cares?

So it doesn't cost us anything to host it. We just change how it shows up on the site. So we only want people taking really, really high-quality educational material and learning from the best. And so if you want a particular topic and a course isn't very good, usually it'll be hard to find on the site. And so we try to surface and curate the best material for students so that they have the best experience.

OK, great. So I shouldn't have said it doesn't cost you anything to host it. You do have hosting costs.

We do have hosting costs, yes.

And you do not make any revenue, which is kind of interesting in this market where suddenly there's this focus very much on, uh, let's stop trying to grow the audience and switch to profitability. Are you feeling pressure to do that?

So I would say we're early on in testing a number of revenue streams. So I was wrong when I said we make no revenue. We make some. But at this point, we're looking into figuring out the most scalable model for us. And I think this is one of the benefits of running a platform that is used by so many people, is it looks like there are many avenues to go down. And for us, it's just an issue of serialization. So which do we work on first? And initial tests have shown us internally that there's a clear path to profitability and building a sustainable business that obviously, you know, we've had the help of venture capital so far, but there's the option to go down the route of not needing venture capital in the future, which I think is obviously the position of power that you want to be in.

That's great. Well, can you be a little bit more specific though about what some of these possibilities are?

Sure. So we get a lot of requests from both consumers and enterprises and governments to provide additional services on top of the content that we provide for them right now.

Like a prosumer sort of—

Exactly. So there's a potential for sort of prosumer services to offer to all of these groups, whether it's additional content, whether it's things like mentors to help students in any of these different environments, or whether it's really helping people go from zero to a full job and, you know, charging a placement fee or something like that. So we've seen that really what we're helping people do is go from, you know, a lower level of employment or unemployment potentially all the way through to a new job. And the value creation there that we are participating in is immense. And so I think the ability to capture some of that value we're not as concerned with because it really is such— the magnitude of the change in someone's life and in their earnings power is tremendous.

Do you track, I mean, can you say that we've placed, you know, so many people into jobs after they use our product?

So we don't track outcomes directly after students graduate, but we do get anecdotes over email all the time, and I can say at this point, you know, tens of thousands of people have emailed in, and these obviously are the proactive ones who email in and tell us, I got a new job because of you. I got an email, a physical letter the other day, actually, from someone who is studying computer science and has a summer internship at Palantir. And so we're really seeing the anecdotal data. And we'll soon start to be able to quantify the actual results that people get at the end as we start to keep in better touch with students that are learning on the platform.

OK. I was curious, in part, because another high-profile online learning center is Galvanize. And I think they have, it's like an 11 or 12-week program. It's fairly expensive. I mean, they— I think it's something like $21,000, but they boast something like a 98% placement rate. So I'm wondering, first, if you think that's justifiable based on the success your students are seeing without paying anything, and second, if you're interested in getting into that market as well, which is obviously very lucrative.

So I think there's different tiers of experiences for different types of learners. I think our experience right now favors the self-motivated, driven, independent learner. I think the offline kind of boot camps that are located in cities like San Francisco and New York favor people with the capital that can afford to pay for access.

Okay.

And favor people that need that extra push and that structure around their curriculum, where you're finding what most of the people that do, who go to these boot camps, take that— I think in Galvanize's case it's 9 months off, or in other, other cases it's 3 3 months off, and they're doing an intensive program. And so it depends on the style of change you wanna see, whether you wanna get a promotion, whether you wanna get an entirely new job, and what you're willing to dedicate in order to do that. And so I think there's room in the market for all of them. I think our focus has always been on driving the cost of access down. So I don't think we'll offer, you know, a $12,000, $20,000 product anytime in the near future, because we wanna offer an experience that is comparable to that for a much lower price.

OK, that's great. So that will bring me back to my last question, which is, I was astonished to see that you've raised just $12.5 million, which in this market seems like a pittance.

Indeed.

Crazy as that is to say. And it was a couple of years ago. So is there a round in the works that you'd like to talk to us about? Or you said you'd like to maybe pursue avenues where you're not going to be taking more equity.

So the company's focus has always been on building a long-term sustainable sustainable business, and I think it's still that way. We've been, uh, perhaps overly frugal with our capital. I think, you know, again, as I mentioned with platforms, what we've really focused on doing is leveraging technology to build a company that scales. Um, and that obviously—

How many employees do you have?

So we're 25 employees.

Okay.

Um, and I think keeping that focus on using technology to build platforms that help us do more with less, again, is super important to build a sustainable and strong company over the long term. I think As you mentioned, in the market that we either are in now or are just leaving, with access to capital being so easy, you see lots and lots of companies that are building these large businesses with capital expenditures that are insane. And then when it comes time to justify a real business, or comes time to justify spend, it's hard. And I think I'd much rather be in our position of scaling up in accordance with how the business is growing than I would to be in the position of most of these companies that are going to have to do layoffs to right-size their companies. To how the business is performing.

Zach, I like the way you think. Thank you so much for coming by.

Thank you for having me. Nice to see you too. Thank you for having me. Nice to see you too.