The Billion Dollar Bootcamp

What would it take to build a billion-dollar-a-year school?

Today, we’re doing creative arithmetic. Math is fun!

Let’s play a game with bootcamp business models.

Here are the rules:

1. The bootcamp has only one teacher.

2. The cost to acquire a student is $1,000.

3. The sum of the other costs for a student is $1,000.

4. There are no other costs. There is no other revenue.

5. We can only adjust three variables: program length, tuition, and student-to-teacher ratio.

We’re going to ignore everything else about the schools for now, and just focus on annual revenue.

Before we start, some notes and definitions.

CAC is the cost to acquire a customer. Basically, it’s money you spend on advertising, reviewing applications, conducting admissions interviews, giving campus tours - whatever it takes to get students to actually show up on day one.

For all of these hypothetical schools, CAC amounts to $1,000 for each student.

COGS is the cost of goods sold. For bootcamps, it usually includes line-items like teacher salaries, leases on classroom space, t-shirts and swag for students, software licenses, student community events, and (if they’re part of the program) career services. Everything you pay for in order to teach the program and support students.

For the game, we aren’t including teacher salaries, and rounding everything else off to $1,000.

In my post about bootcamp business models, I slice and dice the contributing factors in greater depth. Go look there if you want all the gory details.

Fixing CAC and COGS at $1,000 each makes my game much easier. If you’re running an actual school, you can’t just decide how much things will cost. But... this is our house, we make the rules. 

This is a dumb game. It’s meant to illustrate how these variables interact, and to give a rough sense of the space of possibilities for schools, in pure financial terms. It ignores almost everything that matters about a school.

The three variables — program length, tuition, and student-to-teacher ratio — trade off against each other. In theory, a school could double the number of teachers and halve the program length without changing the annual revenue. Or, a school could double the tuition, and double the length of the program, and have the same result.

Those kinds of tweaks — turning one variable up and another down — don’t affect the outcome, I’m only going to turn the knobs in one direction: up.

Let’s look at the first bootcamp, and then dig into the formula I’m using.

This first, tiny school brings in just $30,000 in annual revenue per teacher. By the end of the post, we’ll see what kind of numbers are needed to build a billion dollar bootcamp.

A tiny, but maybe feasible bootcamp

A long program, a low tuition (about half of what most bootcamps charge), and a low student-to-teacher ratio. This sounds like it’d be an awesome deal for students - if it existed.

Teachers generally have better employment opportunities, so unless they’re really not in it for the money, this school doesn’t make sense to run.

Still, we have to start somewhere. If this solo teacher were really committed, this is around what a minimum feasible school could be.

What would this program actually look like?

In six months, one teacher could cover a lot of material with only five students. That’s way more support and individualized attention than most bootcamps (or really any kind of school) deliver. It’s shorter than some of the longest bootcamps, but it’s also much cheaper than any US based bootcamp of that length.

With a 5:1 ratio, a teacher would have over an hour to spend with each student each day one on one. All five students could work in pairs, trios, or even one big group, mob-debugging problems elbow-to-elbow on the same screen. The teacher could micromanage all student learning.

That sounds like it would be an intense experience. That level of attention might deliver something like Bloom’s Two Sigmas, a storied two-standard-deviation improvement in student learning with the guidance of a tutor.

At $5,000, most of the real cost to a student is the opportunity cost of their time, not the actual tuition — more on this later. Whether through a loan, an Income Share Agreement, or paid up front, the tuition isn’t the biggest barrier to this school.

How does the math work?

So glad you asked.

Here’s the formula I’m using for all of these hypothetical schools:

programs per year * students per teacher * (tuition - costs)

Applied to our first bootcamp: the six month program could run twice per year, with five students each paying $5,000 in tuition. In our model, every student costs one thousand dollars to sign up, and one thousand dollars to teach.

2 * 5 students * (5,000 tuition - 1,000 CAC - 1,000 COGS)

So, ten students per year, times three thousand in tuition per student:

10 * $3,000 = $30,000

Thirty grand total, from fifty grand in tuition collected.

You may have noticed I’m using the word “revenue” the wrong way. If you are screaming in your head “that’s not what revenue means! 🤬🤬🤬”, then yes, you’re right.

The game is about answering this question:

“How much could a teacher make each year, if they ran a bootcamp solo?”

That’s probably closer to the definition of profit than revenue. But! Most big bootcamps treat teachers’ salaries as a cost in their model, so from that perspective, it doesn’t really make sense to call it profit either.

The right term for it might be something like “annual revenue contribution per teacher”, but that’s a mouthful. My game, my abuse of terminology.

If someone were running this tiny-but-maybe-feasible bootcamp for real, they would try to reduce the costs. They’d probably find ways to do it! But again — I’m skipping those kinds of cost optimizations for now.

Let’s ratchet everything up a notch.

The Cheap Boutique

Let’s run through the math, briefly.

A four month program means three programs per year (every month has four weeks! I’m rounding!). Ten students in each cohort each pay ten grand in tuition, cost one thousand dollars to market to and enroll, and one thousand dollars to teach. That leaves eight thousand per student, times thirty students. We arrive at $240,000 annual “revenue”.

What does this program look like?

Sixteen weeks is fast. Students have to put in long hours, even with the pretty high level of support that they get from instructors. With ten students, a teacher might add more direct instruction to the mix compared to the individual attention they could give to five students.

Mob debugging with all 10 students probably wouldn’t be the norm. Still, 10:1 is an enviable ratio! The teacher would spend a lot of time getting to know each student personally, and figuring out how best to support them.

Ten students is enough that there starts to be a real community dynamic. Students won’t always be at the exact same place in the curriculum, but everyone will get a chance to work with everyone else. There’ll be enough personalities in the room for closer friendships to emerge, though probably not cliques.

The tuition doubled from the tiny-and-maybe-feasible school, and it is now a significant investment for the student. The opportunity cost is still relatively large, but by my reckoning, this is roughly the price and program length where the tuition and opportunity cost are roughly balanced as factors in the overall cost.

My logic for this: US median household income is ~$60,000, so four months of foregone wages is about $20,000. Four months at US minimum wage ($7.50 / hr) is $5,000. I think it’s fair to assume that students’ opportunity costs are, on average, somewhere between minimum wage and median household income. $10,000 is a nice round number in that range. Like all napkin math, this is probably wrong in some way. It’s also worth remembering that individual students vary tremendously!

With loans and ISAs, borrowing and repaying $10,000 in tuition is doable, so long as grads get jobs, and non-job-getting grads don’t have to pay.

This bootcamp is pretty plausible to run sustainably as solo teacher, or as a small team. If a single teacher were running it alone, $240,000 is competitive with tech jobs in overall benefits. Split with a co-owner or employee, these numbers can still work in lots of markets.

Ten students at a time is a sustainable teaching load, especially with a little break between programs (from rounding every month to February — see, rounding is good!). A teacher would have enough time to prepare for each day, give students individual attention, and avoid burnout.

As another positive check on the numbers, we’re in the range of real bootcamps! Take a glance at the market reports from Switchup, Career Karma, and Course Report to make your own guesses at which particular bootcamps are in this range. My guess is that the bootcamps that fit this revenue number are mostly online, plus a few that (in normal times) run in-person, outside of big tech cities.

Note: Tuition and program length are published and pretty easy to find for most schools. It’s super hard to tell student-to-teacher ratio from the outside — that’s where most of my uncertainty is in modeling any particular school.

Turn the dials up another notch, and we’ll find a whole lot more bootcamps.

The Universal Standard Bootcamp

The math, briefly: four cohorts of fifteen, times thirteen thousand dollars net per student, makes 60 * $13,000 = $780,000.

A lot of bootcamps are in this range.

The program I taught, Flatiron’s Software Engineering program, doesn’t perfectly fit, but it’s close.

Actualize, App Academy, Galvanize, General Assembly... a lot of the big players in the in-person bootcamp space look a lot like this.

The trend since the emergence of coding bootcamps around the turn of the decade has been toward a longer program at a higher price point, maybe with more students per teacher. But almost every program you could name still comes in near this mark.

Let’s tweak and tune the dials, keeping the same $780,000 “revenue” per teacher per year as a constant. Here’s some of the possible schools we can generate:

A: 16 weeks (3 cohorts per year), $15,000 tuition, 20 students per teacher

B: 24 weeks (2 cohorts per year), $8,000 tuition, 65 students per teacher

C: 9 months (1.33 cohorts per year), $30,000 tuition, 21 students per teacher

D: 2 years (half of a cohort per year), $70,000 tuition, 23 students per teacher

E: 4 years (one quarter of a cohort per year), $70,000 tuition, 46:1 student-to-teacher ratio

A is the neighborhood of Flatiron and other immersive in-person programs.

B is pretty similar to the swath of self-paced online programs, like Springboard.

C looks roughly like Lambda School or Kenzie Academy, though I don’t know their actual student-to-teacher ratios.

D is Make School (or their evil twin, Holberton School, if it actually had teachers and a two-year program).

E could stand in for a BS in Computer Science at most undergraduate programs. 😳

We found it! The Pareto frontier for coding schools! Or, at least my guess at it.

For those who aren’t familiar with 19th century Italian engineer, sociologist, economist,  and philosopher Vilfredo Pareto, his name is on  a ton of the tools in the economics toolbox (viz. the Pareto Principle, the Pareto Distribution, the Pareto Index the Pareto Chart, and Pareto efficiency).

This one is simple enough once you see it.

(Original Image Source: Wikipedia

Cheap, low quality products at the top left. Expensive, high quality products at the bottom right. Lots of products end up along the cost-for-quality tradeoff frontier.

Turning our quality knobs (student-to-teacher ratio, program length) and our cost dial (tuition) we can fit a lot of schools on this curve.

There’s more to school quality than student-to-teacher ratio, but if a school is much above or below this curve, it’s a hint that they could be undercharging or overcharging.

So, what does all this mean? Well, for one, we’ve shown that multiplication works (and is ever so fun). The frontier also points to what innovation would mean — a higher quality bootcamp at a cheaper price has to beat this curve.

Let’s push beyond the frontier. For science! 🚀

A little faster, a little more expensive

One hundred students per year, in five cohorts of twenty, each netting $18,000, after costs.

This is pushing the envelope, but not pushing it to absurdity. (Just you wait!)

Twenty students is a lot for a single teacher, ten weeks is a very fast program, and $20,000 is a lot to pay in tuition. Still, I bet there are real programs with revenue per teacher numbers in this range.

Some programs that might look like this? Employers paying to upskill employees, short-but-expensive workshops, and programs that use a combination of curriculum, community, and technology to increase the number of students each teacher serves.

I won’t run through all the variants at this tier. Feel free to take a minute to sketch out what schools you think might fit, and let me know what you come up with!

Now we’re getting out of hand

Truly stretching our creative muscles.

What $40,000 program could you teach 50 students in five weeks?

Framed that way, it seems far-fetched. Let’s run through some programs that come close.

AltMBA is only four weeks, but it’s also only $4,450. (It also advertises a 10:1 student-to-coach ratio, which throws a wrench in our imaginary-bootcamp-hypothesizing machine. Curses!)

What about massive open online courses (“MOOCS”), like Coursera and Udemy? They turn the student-to-teacher ratio dial wayyyy up, but the price wayyyy down. Program length... isn’t really a consideration for recorded lectures.

The top Udemy course I could find after a few minutes googling had 1,046,582 students enrolled. We can pretend that each enrollment paid the same $14.99 I saw listed, though Udemy changes the price frequently. That gets us close but not quite there - $15.7 million in per-teacher revenue.

Coursera offers most of its courses for free, but charges for “certificates”. Its most popular course, Andrew Ng’s Machine Learning, has enrolled 3.3 million students (🤯). It doesn’t list a price, since it only has a free enrollment option. To hit the $19 million target, it’d have to charge $5.75 per student, or more likely, get ten percent of those students to pay $57.50.

So, maybe big online courses could hit this bar, but only the top ones, and only if we make generous assumptions about how many students enroll and how much they pay.

The Billion Dollar Bootcamp

The moment you’ve been waiting for. It’s here.

Multiplication is a helluva drug.

Let’s try to imagine it.

* * *

200 students show up, each having written the big h*ckin check. They project calm confidence, but underneath their glances around the room is a quavering, aching fear. Will this really be worth it? Are they themselves ready for the program?

The teacher enters.

Hello, and welcome to the course. I’m sure you’re all wondering if what I have to say will justify taking out that second mortgage.

A pause, as the teachers eyes roam to meet the gaze of several students in turn. The room shudders invisibly under the weight.

It will.

The tension, impossibly, heightens further.

Let’s not waste any time. Today’s first topic?

Multiplication.

* * *

Revealing the rest of this riveting content would violate my NDA ( 😂), but rest assured that it’d have to be good stuff.

Um, so, seems pretty impossible, right? No one would pay $100,000 for a one-week course, certainly not if they’ll be just one of 200 students.

Well, what about Y Combinator? (I did warn you that this game was dumb.)

The startup incubator actually pays founders to come to their “school,” but takes a piece of the company in exchange. If and when the company makes a big exit (like Cruise or Twitch), YC effectively charges a multi-million-dollar tuition.

To infinity...

Multiplication just keeps on going.

We can make it an infinite-dollar bootcamp three ways:

• Zero program length

• Infinite tuition

• Zero teachers

And beyond!

…well, maybe that’s enough multiplication for one sitting.

This game doesn’t have a prescriptive or normative moral. Mostly, I wanted an excuse to do arithmetic and explore a ton of simple bootcamp models. In that respect, we’re all winners.

If there’s a point to the game, it’s to push on our assumptions. If you can deliver a program where it makes sense for students to pay millions of dollars, or for millions of students to pay a few dollars each, you can make weird, model-breaking, curve-beating schools.

If you read this far, maybe you want to start your own bootcamp, or you think your bootcamp charges too much — or too little. If you want to sink your teeth into a meatier model, check out the bootcamp business model post. If you’re running a bootcamp, obviously do what makes sense for your circumstances — and let me know where this analysis misses the mark!

Whether or not you’re a bootcamp operator, reach out to me if you want to b.s. about this kind of thing. I’m always down for a conversation. Replying to the newsletter will reach me, or you can email hi [at] rob.co.bb, or find me on Twitter.

—

Thanks to early readers Keely Murphy, Sarah duRivage-Jacobs, Tom White, Nick deWilde, Matt Tower, Joshua Mitchell, Stew Fortier and Compound Writing, and my dad. Errors all mine!