Codecademy has already outlived many rivals — is that enough?

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Codecademy, the New York-based online interactive platform that offers coding classes in a wide variety of programming languages, is a little like background noise; it’s been operating reliably since founder Zach Sims created the company while still a Columbia University student in 2011. It’s a brand that people know and that millions have used, but because it has grown steadily, without headline-making funding rounds — or, conversely, newsworthy layoffs —  the 90-person company doesn’t routinely attract a lot of press attention.

That’s fine with Sims, who we spoke with last week following the most recent bout of bad publicity for Lambda School, a younger rival that has raised $48 million from investors, compared with the $42.5 million that Codecademy has raised over time. Sims says his capital-efficient company is continuing to chug along nicely.

The question, increasingly, is whether that’s ‘nice’ enough for VCs. Indeed, Codecademy — like a lot of startups right now — is in the awkward position of being a smart, solid, fast but not massively growing business. In the year 2020, that raises questions about next steps.

The last time we’d spoken with Sims, roughly two years ago, Codecademy — which struggled for years with how to produce meaningful revenue —  had recently launched two premium products. One of these, Codecademy Pro, helps users who are willing to spend $40 per month (or $240 per year) to learn the fundamentals of coding, as well as develop a deeper knowledge in up to 10 areas, including machine learning and data analysis. Sims says this has taken off, and that it now has 100,000 paying members.

A second offering, Codecademy Pro Intensive, that was designed to immerse learners from six to 10 weeks in either website development, programming or data science, has since been dropped.

Who are the company’s paid users? Sims says they tend to fall into one of two buckets: those who are learning a discrete skill set, perhaps to build a website in a pinch, and those who are gainfully employed but looking to climb the ladder or switch jobs and who see Codecademy as a way to spend a couple of hours a week to develop the skills to get there. Roughly 60 percent  are based in the U.S.; the rest are elsewhere, including in India and Brazil. (The need for coding skills “isn’t a U.S.-only phenomenon,” Sims notes.)

Sims suggests the payback on investment can be fairly quick, given Codecademy’s pricing. By way of comparison, some on-premise coding schools charge upwards of $20,000 a year — a big enough expense that in order to make themselves more accessible, they invite students to pay nothing upfront and instead collect a percentage of their salary once they find a job.

Naturally, because Codecademy largely lives online, so do occasional criticisms about its perceived shortcomings. One customer — a self-described computer science major — authored a thoughtful review in December, writing that “being a programmer is more than simply being able to memorize syntax.” While Codecademy has introduced “thousands to the fundamentals of computer science,” through “addictive bite-sized pieces that are easy to accomplish,” this person wrote that it falls short in helping cultivate a “coders’ mindset.”

Asked about this, Sims says the review was originally written in 2015 and “updated in 2019 for SEO purposes,” adding: “We definitely have a lot to fix, but I think we’ve solved a lot the things referenced” in the post.

Either way, enough people are finding value in Codecademy’s vast number of offerings that it recently reached an important milestone —  it’s now cash-flow positive — having doubled it revenue last year.

Sims is understandably proud of this accomplishment, noting that “there are few [coding platforms] that are growing sustainably and profitably and generating cash that can be invested back into the business.”

Codecademy is enjoying the same tailwinds it has from the start, too. Though skepticism has grown around coding schools more broadly, the ability to design, shape, correct, and secure software will only grow more valuable. Receiving a related education that comes affordably remains an appealing proposition.

It’s a case the company is continuing to make for consumers and, we gather, more enterprises that are starting to offer Codecademy type classes to employees. Though Codecademy already sells classes in volume packs, Sims suggests that a big push in 2020 will involve tie-ups with companies that want to provide what it teaches as a perk.

Whether it intends to paint a picture for investors, too, is less clear. Sims says Codecademy has thus far “made the conscious choice to turn down additional capital,” while acknowledging that could change.

Certainly, follow-on rounds are growing harder to land, as described in our piece last week about “portfolio bloat.” The reason: VCs have raised so much money in recent years that they’re funneling it into new startups faster than ever. (They need to find the Next Big Thing to return all that capital.)

That’s leaving a lot of more steadily growing companies to fend for themselves for now.

What the end result will be is an open question. Codecademy’s cash-flow positive status gives it more time to wait on an answer. “Because we don’t need to over-raise like many other companies in Silicon Valley, this mean we aren’t successful,” says Sims. His plan in the meantime: keep building.

Source: TechCrunch

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