What Does the Closing of Dev Bootcamp Mean for the Coding Bootcamp Industry?

The recent announcement of the shutting down of Dev Bootcamp, one of the largest and most significant players in the coding bootcamp industry, caught everyone by surprise. While vocational coding schools existed in some form back in the ‘90s, the recent wave of coding schools - pioneered in part by Dev Bootcamp - has been an exciting and trending phenomenon since 2012, and continues to gain momentum. The fact that someone can jump into a career with a great salary and high demand in just a few months and minimal cost (compared with traditional university training) has gotten everyone’s attention. And suddenly, #DBCShutdown happens, with the explanation that they could not find a sustainable business model. The big question in everyone's mind is: What does this mean for the coding bootcamp industry? If one of the most well-known pioneers among coding bootcamps failed, does that mean that others are soon to follow?

The reality is that Dev Bootcamp did many things right. There are many moving parts at play, so let’s break everything down to see where exactly the failure happened.

The first thing to note is that Dev Bootcamp did not shut its doors because it was not successful at transforming its students’ lives. There is still not a clear consensus on job placement reporting among coding schools, but whether job placement rates among coding schools are at 90% or at 60%, and whether graduates landed jobs within 3 months or 9 months after graduation, it’s clear that the majority of graduates at the majority of bootcamps are ultimately successful - and at rates much higher than traditional colleges. Course Report - a leading observer of the coding bootcamps - has done its own independent survey which found that in 2016, 73% of coding bootcamp grads have reported landing a full-time job requiring the skills they learned in their bootcamp. So DBC did not shut down because its outcomes were poor - in fact, its outcomes were very good.

Instead, the closure of DBC happened because they could not find a profitable business model. Apparently, they’ve been losing money, both before and after their buyout by Kaplan. Why is this? And is there a way to run a coding bootcamp that actually turns a profit?

In theory, the successful business model of any vocational school essentially boils down to this equation:

Tuition - (Salaries + Rent + Customer Acquisition) = Profit

Obviously, there are additional factors at play, but those are the key elements.

Tuition at coding schools runs typically between $10,000 and $15,000, and as someone who runs a coding bootcamp, I can share that a bootcamp can be structured so that tuition can exceed salaries and rent combined. However, I believe that DBC failed because of its cost of customer acquisition (CAC). 

Actualize does very minimal paid marketing, and therefore has a low CAC. Such a model can be profitable and sustainable. The downside of this is that we have just a fraction of the number of graduates that DBC has.

Dev Bootcamp, on the other hand, built an infrastructure that was engineered for - and relied upon - the enrollment of up to one hundred students each month. DBC began new cohorts every three weeks, and would at times have its cohorts completely filled out a year in advance. Frankly, that’s quite impressive.

But at what cost did DBC achieve those high enrollment numbers? While I’m not privy to that information, it appears that they spent an exorbitant amount in advertising to achieve their high growth.

And that model is the one that DBC says is unsustainable. Running an operation that relies upon heavy enrollment means spending an unsustainable amount of money on marketing because the CAC for coding bootcamp students at those numbers is simply higher than the cost of tuition.

Why is the CAC of coding bootcamp students so high?

We once had a business consultant who insisted that virtually any person who becomes exposed to the concept of a coding bootcamp should easily be convinced to enroll. After all, it’s a great way to land what for many is a dream career with great financial rewards. Why wouldn’t someone spend $15,000 and a few months for what could turn into a six-figure salary in just a few years?

However, we’ve found that the acquisition funnel is much longer than that. Students cannot simply be shoved in the door, as there are many thought hurdles that prospective students need to overcome, including:

1. How do I know that I’ll be good at software development?
2. How do I know if I’ll enjoy software development as a career?
3. While most graduates are successful, will I be among the minority who are not?
4. Do I have the money to fund the bootcamp?

A fifth question exists for programs that are full-time, such as DBC:

5. Can I afford to quit my current job to take a full-time bootcamp?

It takes a while for people to become comfortable with the answers to these questions, and it is simply too expensive to "banner-ad" people to try to get them past these questions.

I believe that a sustainable coding bootcamp model requires the following components:

1. Play the long-term game. Take the time to educate people about what coding is and how much they can enjoy it. It may take an entire year between exposing someone to coding and the time in which they’re ready to enroll in a bootcamp. I believe that more people are enrolling in coding bootcamps than ever before, but we still need to nurture our future customers.
2. Grow slowly. At one point, we ourselves made the mistake by growing too quickly, and we had to shrink our operations when enrollments slowed.
3. Allow people to take a coding bootcamp on a part-time basis. Actualize has always been part-time. Just as people go for Masters degrees on weeknights, why do coding bootcamps have to be different? We’ve found a successful educational model that doesn’t require our students to be in the classroom 40+ hours a week.
4. Find the right tuition model. On the whole, coding bootcamp tuition has risen sharply over the past several years. But there’s a catch-22: The same people who want to take a coding bootcamp so they can earn more money do not currently have the money to pay for a such a bootcamp. Since federal aid is still largely out of the equation, is bootcamp tuition possibly too high? I’m not certain that coding bootcamps are overpriced, but I’m not certain that they’re not.

There’s one other elephant in the room that I’d like to address: Silicon Valley has influenced the way many of us think about business. Companies such as Twitter, Uber, Tesla, and many others are hyper-focused on growth and seemingly unconcerned about the fact that they’ve always lost more money than they’ve earned. VC's and startup founders want to be the next “unicorn” and will run businesses like someone driving a car three times over the speed limit - hoping that they can get their exit before everything crashes and burns. Profitable businesses that don’t have hyper-growth, on the other hand, are considered unexciting and not worth investing in. 

It’s possible that at this time, coding bootcamps are not sustainable in terms of achieving hyper-growth and becoming the next Silicon Valley darling. If that’s the case, from the perspective of investors, coding bootcamps aren’t worth investing in and are indeed unsustainable. But for those of us who run coding bootcamps because we love teaching people to code and helping them transform their lives, we can maintain a profitable business. It may not be wildly profitable and it might “just be a lifestyle business,” but we can enjoy what we do and still make money sustainably. 

I don't know that Kaplan closed DBC because of this mentality, but I do believe that other bootcamps will soon shut down because they only want to exist if they can become a billion-dollar business. And that's simply not the reality at this time.

The coding bootcamp industry is young, and we still have a lot to learn. However, there are business models that are sustainable, and I’m confident in the industry’s future.