BloomTech’s Downfall: A Long Time Coming
BloomTech’s unraveling reveals years of systemic issues and the inevitable regulatory response.
Four months ago, BloomTech laid off 50% of the company, as first reported by Class Central. This is the second halving of the company, exactly a year after the first one. It marks the fourth round of layoffs at BloomTech that we know of.
Now, the Consumer Financial Protection Bureau (CFPB) has come down hard on BloomTech, formerly known as Lambda School, and its CEO Austen Allred for deceiving students about the cost of loans and making false claims about job placement rates.
This action feels like a long time coming. BloomTech has been under media scrutiny for years, facing accusations of fraudulent practices, inflated job placement claims, and questionable use of income share agreements (ISAs). It seems the CFPB has finally caught up.
These practices have been part of BloomTech/Lambda School right from the start. Three years ago, Class Central compiled these practices into a single exhaustive article, relying on reporting by various publications like Business Insider, The Verge, and New York Magazine.
The oldest of these reports was published in October 2019, but instead of fixing the problems, the company doubled down. It had good reason to—it had the backing of Silicon Valley’s most powerful men, most notably, co-founder of Y Combinator Paul Graham.
In response to the reporting, he posted an “essay” titled Haters. Some of the people he credited for reading the draft include Elon Musk, Peter Thiel, Patrick Collison (Stripe co-founder), and BloomTech’s CEO Austen Allred.
Just a few months after this post, Stripe participated in Lambda School’s $74 million fundraise. Overall, the company has raised $122 million from name-brand investors like Google Ventures, Y Combinator, Ashton Kutcher’s Sound Ventures, GGV, and many others.
Beyond the financial backing, the coding bootcamp also enjoyed broad support from a number of tech/VC Twitter personalities, irrespective of the ground truth. They were always quick to jump to defend the coding bootcamp. The CEO himself is an avid tweeter.
This gave the company an aura of competence. But Lambda School was just making things up as they went along, constantly chopping and changing programs. At one point, it even announced plans to purchase a nursing school.
I wanted to write a well-researched news article about the CFPB action against BloomTech, but I do not have any more energy to give to this company. I even tried three different LLMs trying to generate an article, but none captured the message that I wanted to convey. For actual details, read it directly on the CFPB’s website.
If you’re wondering how Tech Twitter is responding, Austen is tweeting through it, while Paul Graham is out there subtweeting government regulators. Classic PG 🤦
This is exhausting.
Tags
Edward
That’s a common thing in internet lore. It’s probably the same in afk life too.
When something seems too good to be true, it probably is.
vinod subhash deshmukh
That’s a common thing in internet lore. It’s probably the same in afk life too.
When something seems too good to be true, it probably is.
Apsora Binte Hasan
Good
Dale
Although I am not familiar with the Bloom Tech story, beyond this article, I find it interesting that they took so much money as a startup in this area. The nature of the Internet has been that basically information is free – as in free beer, as the saying goes.
I’m sure it is difficult to find the money and I want to see anyone who works get paid for their work. The EDX model seems to be a successful model, with free auditing and pay for value when they do the work of adding graded assignments and certificates. To try to charge for information alone would require that one owns the information or that it is very limited in availability. That just is not the case in any educational information in the world today. Prices have to be very reasonable or free, charging just for that truly added value, because students can simply go elsewhere.