Guild, trilogy and lambda

For a very long time, education was a terrible place to invest. Then founders started to figure things out. Coursera, udacity and Udemy took advantage of the web to create massive audiences. For many of us though, it wasn’t clear that ‘access’ to better education was the be all and end all.

Along came three companies — Guild, Trilogy and Lambda (where I am an investor and board member) — which have taken very different approaches to the post-secondary market, all founded on the premise that higher education would be unbundled and re-aggregated in different formats. They have all achieved results that would stand out in any generalist VCs portfolio.

A decade or more ago, Starbucks figured out that if it paid for college degrees for its entry level workers, it would move their retention from something like nine months to four years. Guild figured that if it worked for Starbucks, other companies would want to do the same. They create an education as a benefit program for other companies to pay for college for their employees. They sign up a network of colleges to allow students to take degree granting courses in their off hours, and then provide a dashboard back to the company showing how people are doing. And it works. Companies using Guild achieve significantly higher retention for their employees taking advantage of the benefit.

Trilogy built an in-person computer science program to train people for computer science jobs. They then partnered with universities, borrowing a classroom and their brand, and filling the classroom with eager students from outside of the university. Like Guild, this was a huge success, ultimately being acquired for $750m by 2u last year.

Lambda school took a third approach. They couple a completely online program with a novel financing mechanism called an Income Share Agreement which makes Lambda free to students until they got a job. After that, the student pays a percentage of revenue for their first two years. As with Guild and Trilogy, this led to incredible success.

What I like about all three models is that they are providing value to students without trying to mesh too closely to the existing system. For students of Ben Thompson’s Aggregation Theory, they are all aggregating as many students as they can and using that to commoditize previously high value aspects of the value chain in higher education.* For example, by aggregating a large number of students, Lambda becomes the most significant provider of fresh talent to employers, something that was diffused across many universities before. The traditional university value of knowledge but not jobs makes it difficult to compete with a company that does both.

Guild uses its large number of students to strike favorable partnerships with degree granting universities who must compete on quality and cost to continue serving Guilds members.

Trilogy understands how to market to upskillers better than colleges. So is able to offer a completely new revenue stream. Because of this aggregation of students, trilogy is in a powerful position when choosing which local university to partner with in any area.

I think we are just starting to see the slew of companies that will be attempting to commoditize the previous advantages which universities held, and moving value to a new area which they can dominate.

*Thompson draws a distinction between someone like Netflix that has zero marginal costs when serving a new user vs. Airbnb which does have costs related to supporting each new user. I don’t think this is the determinant of success in education, because solutions which cut out the humans may scale faster, but quality is often lacking.