From Bitclout to Income Share Agreements at Lambda School, the Future of Work Feels Like a Pyramid Scheme Where You Can Package and Sell Others’ Potential (From Bitclout Lambda)

From Bitclout Lambda: On January 1, Lambda School transitioned from a bootcamp to a startup. As an educational institution that emphasizes growth-hacking new skills, they needed to rework their business model to make the transition possible. One of the main goals was shifting their relationship with employers and students in order to become more than just a school, but also an engine for growth. To fulfill this goal and to be able to provide the best service possible, they decided that majority of their revenues will come not from students, but from creating value for employers.

Creating value for employers does not just mean helping them find highly skilled people in a short period of time, but also serving as a high-demand supply. At first it might sound like planning is simple, but in reality it is anything but. Paying attention to the type of work that needs to be done, where it has to be done, and with whom is a challenge at any scale. Yet this is what they had in mind when they set up the school.

Becoming a value-added business is not just about creating products or services which are already offered under corporate brands; by doing so you can create entirely new markets and markets of opportunity – but be careful! With this motivation comes the pressure of standing out from the crowd.

The decision to become something more than just a bootcamp was made after months of deliberation and is still not final. Their first step towards this mission was setting up their income-share agreements with employers:

An Incentive Education Model

The incentive education model (also called “income share agreement” or ISA) is an alternative approach to higher education that eschews tuition in favor of an agreement to pay back a percentage of the student’s income. Like salary, it involves time and effort from both parties. Typically the student pays the school – up front. In many cases, this fee is similar to parts of a loan. The school then earns money from the income stream generated by the student. The key difference from other forms of student aid is that it’s offered as an offer and must be accepted before enrollment.

Schools set agreement terms with employers by which they will pay students for skills they have acquired. The point is that these agreements can be made with employers at any scale, from large corporations to individual job seekers and freelancers. If a student is working for an employer who has not yet signed an ISA agreement with Lambda School, their school’s staff will write and present them with the document for signature. The terms of these agreements vary greatly. To prevent misalignment of incentives, it is important to strike a balance between the two parties. These contracts can also be designed to include any number of additional goals (like individual or company tuition cost).

The most important condition is that when a student has completed the program and it is time to pay back, they are required at least 60% of the income. This means that on average, after paying off their tuition, students will have to pay only 25% of their future income to the school.

30% of the income is what students receive after paying off their tuition. 25% goes to the school and another 5% to the student.

The Lambda Difference

To provide enough incentive for students to complete their programs, the school offers income share agreements with employers: If a student completes their program and makes no other income, they will receive 30 of what they are paid – this is called “student income.” Most ISAs do not require a full year of employment after completion.