Sep 18, 2020 · 32m · 20vc
20VC: Lambda School Founder, Austen Allred on How To Assess Your Relationship To Risk and Money, Why San Francisco Is A Case Study For The Greatest Squandering of Wealth in History & Why Complexity Increases Exponentially with Scale
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Lambda School founder and CEO Austen Allred joins Harry Stebbings to discuss how personal economic hardship shaped his approach to risk, the mechanics of venture fundraising and board governance, operational scaling lessons, and why high living costs and municipal governance issues led him to relocate from San Francisco to Utah.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 33.2% of the talking time here. How this is scored →
Harry as informed peer 2.4 Guest teaching 3.9 Guest disagreement 1.3 Harry pushing back 1.0
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 26:43 Critique of San Francisco's governance and missed potential
Austen offers his strongest critique, citing Patrick Collison to describe San Francisco's local governance as one of the greatest squanderings of potential wealth in modern history.
Hardest push from Harry ▶ 9:11 Harry breaks schedule to press on founder secondariesHarry explicitly tosses aside his interview schedule to press Austen on founder secondaries, challenging traditional investor skepticism towards secondary share sales.
Biggest teaching moment ▶ 16:16 Explaining linear versus exponential complexity in scalingAusten educates Harry on operational architecture, explaining how international expansion increases organizational complexity exponentially and contrasting Uber's decentralized approach with Amazon's API-driven model.
Harry holds his own ▶ 9:11 Harry defends founder secondary salesHarry uses his own domain perspective as an investor to argue that founder secondaries are beneficial because they remove downside fear and align founders with long-term upside.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Austen Allred's Journey to Tech and Early Failures | 2 | 3 | 1 | 1 | Harry asks background questions about Austen's early tech journey, living in his car, and managing personal wants versus startup growth. Austen explains his humble beginnings and his philosophy on separating personal finances from paper company valuations. | |
| Downside Risk Philosophy and the Tow Truck Story | 3 | 4 | 1 | 1 | Austen shares a story about a tow truck driver helping him out on the freeway when he was broke, illustrating why Lambda School focuses on removing downside risk for students. Harry offers his own take on founder secondaries, prompting Austen to explain how downside protection alters founder psychology. | |
| Fundraising Lessons, Board Alignment, and Targeted Board Requests | 2 | 4 | 1 | 1 | Harry asks how to be a better board member based on Austen's fundraising experiences. Austen shares insights from Gigafund and John Danner on board alignment and the importance of coming to board members with specific, targeted asks. | |
| Cap Table Management and Syndicate Round Construction | 2 | 5 | 2 | 1 | Austen details early cap table setup via AngelList syndicates and discusses lessons learned from expanding Lambda School too rapidly across four continents. He explains how operational complexity grows exponentially and contrasts the Uber model with the Amazon model. | |
| Recruiting COO Molly Graham and Complementing Founder Weaknesses | 3 | 3 | 1 | 1 | Harry shares his own operational shortcomings before asking Austen about hiring COO Molly Graham. Austen outlines his weaknesses in finishing and documentation and how Molly's complementary strengths create a symbiotic leadership dynamic. | |
| Twitter Branding, San Francisco Exodus, and Utah Relocation | 3 | 5 | 2 | 1 | Austen discusses his organic Twitter presence and explains his decision to move his family from San Francisco to Utah due to safety concerns. He reflects critically on San Francisco's governance and cites Patrick Collison's view on the city's squandered potential. | |
| Quickfire Round and Lambda School's Ten-Year Vision | 2 | 3 | 1 | 1 | In a rapid Q&A, Austen names Les Miserables as his favorite book and John Danner as his most helpful angel. He concludes with Lambda School's ten-year goal of increasing student incomes by ten billion dollars annually. |
Statements from this episode (24)
Allred Slept in His Car in Palo Alto for Three Months
“I bought a two-door Honda Civic, and I drove out to Silicon Valley, and I slept on the streets of Palo Alto for about three months.”
Allred's Prior Startup Failed After Billionaire Investor Pulled Series A
“We had a series A close, all the docs were done, had this big billionaire investor who was leading the round, and he just called me, like, on December 23rd and said, hey, I'm not going to send a wire, and that was the end of that company.”
Allred Lived on an $18,000 Teaching Salary After Getting Married
“She was a teacher, and we were living on a first-year teacher's salary, which was like, 18 K, or something like that”
Allred: Private Market Startup Valuations Are Paper Money and Don't Matter
“And the nice thing about private markets the way they are right now is it's all paper money. Like, whatever your last valuation was actually doesn't matter.”
Low-Income Individuals Must Constantly Hyper-Focus on Downside Risk
“But when you are poor, or when your salary or your income is low, I mean, most people don't even have salaries, they have incomes or wages coming into Lambda, you have to think really, really hard about downside risk, because any little thing that goes wrong t…”
Stebbings: Founder Secondaries Are Brilliant to Remove Downside Risk Mindset
“I think it's brilliant to remove that downside risk mentality from a founder's perception.”
Allred Has Taken Almost Zero Secondary Liquidity in Lambda School
“Transparently, I have done basically zero secondary relative to where Lambda is at”
Founders With Zero Net Worth Optimize for One Year, Not Ten
“A founder who has zero net worth, and this is something that I've battled with in myself, you can find yourself optimizing for a year from now and not thinking about 10 years from now because you're optimizing for today.”
Allred: Lambda School Has Passed on Opportunities to Sell the Company
“We've had chances to sell Lambda School.”
Boards Give Random Advice Unless Founders Make Specific Asks
“Figure out exactly what your ask is, and then come to us with exactly that ask, and we will go crush it for you. But until then, you're just going to be getting random advice, and it's probably stuff that you've thought about 10 times as much as the board, and…”
Lambda School Used an AngelList Syndicate for Post-YC Seed Round
“So we did a syndicate through AngelList, which is nice from cap table construction perspective, because it's just one name on the cap table.”
Structure Round Docs to Avoid Chasing Every Angel Signature
“And we also set up our docs in such a way that if X percent of the seed round has signed docs, then we're good. I think that's really important. So you don't have to chase down literally every single person.”
Lambda School Expanded Too Quickly Across Four Continents
“And so we had five different tracks running. We were on three different continents. We were spinning up in India as well. So we're starting on our Fourth continent. So we're in the U S Europe, Africa, and we're starting in Asia as well. And we just kind of did…”
Allred: Lambda School Erred by Adopting Uber's Decentralized Operational Model
“But I think we picked the wrong one. We went with the Uber model. And the educational model is so sensitive to changes and so sensitive to experience that you can't Really get away with that.”
Consistency Matters More Than Minor Updates in Education Products
“And what's more important when you're in a learning state is expectations being met exactly more so than it getting marginally better and whiplashing you.”
The COO Role Must Be Customized Around the Founder's Weaknesses
“COO is one of those roles where there's not like a single COO. It's very much a custom mold to what the CEO is and what the founder is and finding someone whose strengths are the founder's weaknesses and vice versa, more so than it is just Hire a COO off the s…”
Allred: I Operate at Lightning Pace but Struggle With Documentation
“I tend to move really fast and do things 80% of the way and jump from thing to thing at kind of lightning pace. I'm not very good at finishing things or making sure things are well documented. I'm not I'm not as good at thinking about the edge cases of what I …”
Lambda's Twitter 'Building in Public' Brand Was Completely Unscripted
“When we got into YC, I was like, okay, I need to like cut back On Twitter and just be heads down, but it was kind of fun to share what was happening. So it was just like an honest outgrowth of my personality that I thought it was fun to share stuff as things w…”
Allred Predicts San Francisco Faces Potential Bankruptcy and Budget Disarray
“From a governmental status, I'm sure the budget is going to be a wreck for a while. There is a possibility San Francisco goes bankrupt.”
Allred: San Francisco and Palo Alto Permanently Lost Default Hub Status
“I think because of coronavirus, there is now enough of an impetus that it won't be obvious that you should go to San Francisco or Palo Alto anymore, and because of that, I think it will change permanently, and I think more will move to the cloud.”
Lambda School Couldn't Have Succeeded as a Fully Remote Company Initially
“I know that Lambda would not be what it is today if we were doing it all remotely, just random lunches and dinners and meeting up with other founders and investors and people that I really admire was really, really unique.”
Allred: The Bay Area Is History's Greatest Squandering of Potential Wealth
“I think Patrick Collison has said something about the idea that in 50 years we'll probably look back at the Bay Area as one of the greatest squanderings of potential wealth that the world has ever known, and I tend to agree.”
Danner and Hastings Are the Sole Founders Scaling Public EdTech
“There are a lot of people who know a lot about education. There are a lot of people who have Built billion dollar companies and taken technology companies public. I think John Danner and Reed Hastings are basically the only people who are both at the same time…”