VC incentives are the real problem here. I was a mentor at another bootcamp and also the founder of a high-skill developer marketplace in 2017.
A valuation of $1B for this business is crazy. Investors were simply underwriting students paying for trade school, there's no tangible tech innovation. Like Theranos, WeWork, and FTX - it's the story of a darling founder who has to justify an unrealistic valuation in a frothy market. They're living in an echo chamber where fraudulent behavior goes unquestioned because everyone wants the upside.
Salaries are based on scarcity. High-skill software engineers were rare at one point, because there weren’t many of them with experience or training. Programs like Lambda School increased the number of people who know how to code while decreasing quality, resulting in fewer unfilled jobs and lower compensation. And again, where is the innovation? In the sketchy ISA?
There's a fine line between the “fake it till you make it” ethos in Silicon Valley and fraudulent behavior that materially hurts investors and consumers. He clearly crossed the line by publicly and repeatedly lying, but he was also incentivized and encouraged to build a hyper-scale business on the backs of people lacking expertise in the job marketplace.
I believe teaching people how to code is a good thing. But it's not a venture-scale business, and never should have been valued as such. A sketchy financial instrument doesn't equal innovation.
Like Theranos, WeWork, and FTX - it's the story of a darling founder who has to justify an unrealistic valuation in a frothy market.
The other issue for all of the examples you cited (and Lambda) is an-almost complete failure for the VCs and accelerators and other gatekeepers to effectively carry out due diligence.
I say "almost" because in the case of Theranos, some investors did pass, according to the documentary and WSJ reporting. And there may be others that passed on Lambda and WeWork that will never come to light.
But FTX - the transcript of the Sequoia internal chat
supposedly vetting SBF is laughably amateur and shows the mindset that allows VCs to be duped by pattern matching and specific personality types (Ivy dropout, MIT mad scientist, charismatic new age genius, etc.):
> That’s when SBF told Sequoia about the so-called super-app: “I want FTX to be a place where you can do anything you want with your next dollar. You can buy bitcoin. You can send money in whatever currency to any friend anywhere in the world. You can buy a banana. You can do anything you want with your money from inside FTX.”
> Suddenly, the chat window on Sequoia’s side of the Zoom lights up with partners freaking out.
The ease by which the Investor Class can be duped by smooth-talking, charismatic phonies is Silicon Valley's Achilles Heel. They see someone who "fits the image of what they want to invest in" and that's it. From there on, it's "I Want To Believe" and they're willing to set aside technical warning signs and all detractors.
It's sad. For every Theranos out there, there are probably 100 feasible, solid business ideas that are technically sound that get passed up because the founders don't wear black turtlenecks and didn't drop out of Stanford or whatever.
If I could go back in time and reset my Character, I'd put all my skill points into "Charisma" and cruise through life as a billionaire, fooling everyone.
I'm not sure we can solely blame VC incentives here. There are many edtech companies that are doing well with VC funding / incentives (Coursera, Duolingo, Goalsetter to name a few). As far as I know, the majority of these companies have not resorted to predatory practices or actively misleading potential students.
I agree that VCs have an incentive to inject high-octane fuel into the growth engine of a company, but the decision to use that fuel for an ICBM or a Spaceship is ultimately that of the founders.
A valuation of $1B for this business is crazy. Investors were simply underwriting students paying for trade school, there's no tangible tech innovation. Like Theranos, WeWork, and FTX - it's the story of a darling founder who has to justify an unrealistic valuation in a frothy market. They're living in an echo chamber where fraudulent behavior goes unquestioned because everyone wants the upside.
Salaries are based on scarcity. High-skill software engineers were rare at one point, because there weren’t many of them with experience or training. Programs like Lambda School increased the number of people who know how to code while decreasing quality, resulting in fewer unfilled jobs and lower compensation. And again, where is the innovation? In the sketchy ISA?
There's a fine line between the “fake it till you make it” ethos in Silicon Valley and fraudulent behavior that materially hurts investors and consumers. He clearly crossed the line by publicly and repeatedly lying, but he was also incentivized and encouraged to build a hyper-scale business on the backs of people lacking expertise in the job marketplace.
I believe teaching people how to code is a good thing. But it's not a venture-scale business, and never should have been valued as such. A sketchy financial instrument doesn't equal innovation.