Andrew: Hey everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, where I’ve done over a thousand interviews with entrepreneurs about how they’ve built their businesses, everyone from the founders of Airbnb to the founder of Pixar and frankly even a few entrepreneurs who came on here just to talk about how their businesses failed.
Well, in the years that I’ve been doing these interviews, I’ve done a few interviews with entrepreneurs who have done coding schools. At first, the whole idea just took me by surprise. How can a school in person, not online, not in an app, in person, how could that do well? And then not only how could that do well, but how could it do so freaking well considering how few students you even need to make it work or how little the founder had when he got started?
That’s kind of the interview we have here today. The twist here is that today’s guest says that he’s really risk-averse. I read his story in preparation for this interview. He is a really risk-averse person and still, he took the risk, he took the plunge, he started the business and the business did phenomenally well. I’ve looked online. His students are happy with him. The business took off. I invited him here to find out how he did it.
His name is Cahlan Sharp. He is the founder of DevMountain. It’s a top code school which holds in-person classes. That means you fly out. You sit there. You immerse yourself. You learn and then you come out ready to get a job as a developer. He founded the company in 2013 and sold it in 2016, in a deal that’s reportedly worth up to $20 million, according to my research. We’ll find out actually if that research is accurate or not.
This whole interview is sponsored by two great companies. The first company will help you hire your next developer. It’s called Toptal. The one will help you actually close sales if you or your team are doing one-on-one sales. That software is called Pipedrive. I’ll tell you more about both of those later. First, Cahlan, good to have you on here.
Cahlan: Thanks. Appreciate you having me on.
Andrew: Here’s what I saw in researching you for the sale price. Capella, that’s a publicly traded company, paid $15 million in cash plus another $5 million if you meet certain milestones. Does that sound right?
Cahlan: I think that’s what’s in the press release. So it sounds accurate to me.
Andrew: That’s a huge, huge impact on your life. Do you remember — you do, actually, don’t you — the day when you found out that this deal to sell your company went through? You were actually in a restaurant I heard.
Cahlan: Yeah. So, as many entrepreneurs will tell you that have gone through an acquisition, it’s a remarkably difficult, stressful, anxiety filled process. I used to hear people say that selling your company was one of the most difficult things you could do and I didn’t really believe them. I’m sure a lot of people probably don’t believe it’s true because you’re looking at it after the fact, the outcome. You see the outcome and you thought, “That must have been great.” It takes a lot of pain and sweat and toil and anxiety and everything to get to that point.
Anyway, yeah, I was at a restaurant. I think I was bottled up with so much anxiety and stress over the last six months, four months or whatever it was that I almost had a panic attack in the restaurant. My wife and I had gone to the restaurant to kind of celebrate and decompress a little bit after everything was finalized and the press release was out. I just started almost hyperventilating. I had to get out of the restaurant and walk laps until I was able to calm down and finish our meal. It was a pretty crazy experience.
Andrew: I was expecting that after that sale, all that anxiety would just release. You and I have now spent like 40 minutes with you racing to the office, talking to me a little bit on Skype over the phone, talking over the phone, dealing with all kinds of issues. You sat here, I sensed the weight of the world is your still on your shoulders. Why? Why do you still have anxiety? The thing is done, dude?
Cahlan: Well, I think the acquisition is done but DevMountain, I think DevMountain’s story is far from over.
Cahlan: I was just talking to a friend earlier today. I still am very connected with DevMountain’s mission and what we want to accomplish. We’re still doing great things and want to continue to do great things. So one of the things that maybe you don’t hear or expect to hear from entrepreneurs after a sale is that it definitely doesn’t solve all your problems. There’s still more problems and there are still more problems and more stress.
Andrew: What problems do you have right now? By the way, this isn’t like me being skeptical.
Andrew: This is me kind of challenging you so we can identify for the audience.
Cahlan: Definitely. Well, first of all, I think it’s interesting–one of the things I’ve learned is that human beings are remarkably adaptive. So no matter what situation you’re in, the worst of the worst or the best of the best human beings will adapt to that situation and they will find things to worry about. They’ll find things to stress about. No matter what walk of life you’re in, I believe that’s true.
So, from the personal side of things, I’ve got one check mark in the back of my brain, one goal or whatever it is, life milestone we’ve met, my wife and I, we’re happy that we’re here, but at the same time, we find other things to worry about.
Andrew: Like what?
Cahlan: We have kids. We worry about our kids all the time. We worry about things at home and if our kids are developing, if we have good relationships with them. We have family, siblings, parents, cousins and all that kind of stuff.
Andrew: I see.
Cahlan: We’re always connected with and worried about just like every human being does.
Andrew: Speaking of family, there was an incident with your sister when you were eight that made me say that you were one of the most risk-averse people I ever met. You know the one I’m talking about, right, where she wanted to ride something?
Andrew: What was it she wanted to ride? What happened?
Cahlan: So I would say that my DNA is a really good combination of my mom and my dad. My mom is a lot more bullish, exciting, spontaneous, go and get it done grit-type person. My dad is a lot more conservative, think things through, measure calculated risk, that kind of thing. My mom wanted to let my younger sister ride a four-wheeler for her first time, and I felt like again at a young age, I felt like she was too young and I tried to tell my mom that, tried to express to her my concerns about her riding a four-wheeler.
Luckily enough, my mom pulled her off the four-wheeler just as it was going over the edge of a little ravine-type thing. It probably saved her from some pretty serious injuries. That just validated in my mind that I needed to be careful and cautious and paranoid and all those kinds of things.
Andrew: And you started this business not because you were someone who wanted to take a risk and say, “Who cares? What’s the worst thing that can happen?” But you told our producer that it’s because of an accident. You had a good job. What happened?
Cahlan: My first venture, my first business ever that I personally started was a result of a bait and switch from a recruiting company. So I was working a good salary benefit position, large company, fairly stable environment and was lured away by a recruiter that was telling me about a company that was willing to pay me 25% more than I was making, same kind of benefits package, same kind of thing. I thought, “Hey, for 25% more, why not? This seems like a great deal.”
So I showed up the first day on the new job and asked about where I should go to sign up for benefits and health insurance. They said, “What do you mean? What kind of health insurance? You don’t get any health insurance. You’re a contractor.” I said, “What’s a contractor?” I didn’t have any concept of what a 1099 employee was. So I quickly found that that’s why the 25% because I didn’t have any benefits.
So I was sort of misled and first very upset, as you can imagine, and angry with this recruiting firm. I kind of came to a place where my wife and I said to ourselves, “If we’re going to be contractors, let’s just be contractors. Let’s make it a consultant business. Let’s make it more than selling our time.”
Andrew: And let’s take on other clients.
Andrew: What was the company you became a contractor for?
Cahlan: It was just a small–they’ve grown a lot since then and have been acquired–but at that time they were certification, kind of online education company.
Andrew: I see. It seems like you kind of dabbled in this education for a while. I saw on your LinkedIn profile you were a course developer at Brigham Young University. You were a senior software engineer at a K-12 school. Is that right?
Cahlan: Yes. So my first exposure to web development was in an educational context and maybe that’s why I’ve always kind of been close to the two of them. So I went to work, my first real job in college was as a web editor was for an online set of courses the university provided to high school students. I found myself proofreading all these long boring texts in HTML looking for inconsistencies and formatting errors and any other kinds of errors I could fine.
I sat down the row from these programmers that were treated like rock stars, and they just seemed like they could build anything. Anything they wanted to do, they could create it. I was thrilled by the idea that these guys commanded so much respect in the workplace, but really they could do whatever they wanted to do. There was really no limit to what they could accomplish. That’s where I started getting into and learning about development and software engineering.
Andrew: It seems like you noticed the same thing I did. There are a bunch of schools out there that teach coding. They’re in person. It doesn’t take that much to start them, and the opportunity for a guy like you who knows a little bit about education, who knows how to code to merge the two and create the school just made sense. Am I right? Or am I superimposing my world view on your story?
Cahlan: No. That’s really accurate. I was moving back from the Bay Area to Utah with a startup at the time, and I was looking for something else on the side to be involved in. I was at this introspective point in my life where I wanted more than just another job, another startup to be a part of it.
So I was reading some–I can’t even tell you where it was from–but it was some kind of offhand comment that someone had made at a conference where they talked about solving real problems. Silicon Valley often gets accused of solving problems that are really not problems at all, first world problems, making more features for social networks that are debatably helping the world maybe not. I was kind of searching for something like that.
As I kind of caught hold of this thought of creating an educational experience that helped people to become employable and having the evidence in front of me of other code schools starting to come up around the country, it really kind of resonated with me and I thought what better problem to solve than to help people get educated and help them make an impact.
And really for me that’s been one of the most enduring, motivating pieces of DevMountain is that I’ve never been a part of another company that I’ve customers come up to me and say, “Your product, what you’ve built, changed by life.” But at DevMountain we have those stories almost every day. So it’s fascinating. It’s exciting. It has all the great parts of being in a startup, but it also has the wonderfully fulfilling side of you feel like you’re making a difference. Even if it’s just for a few people, you’re making a bid difference in their lives
Andrew: You know what, though? I interviewed Neil Griffin from The Starter League back in 2012 and at the time I thought, “Great idea, too late.” Why didn’t you think it’s too late? You started your business a full year after that interview, “This idea had been exposed, Jason Fried was already starting to back Starter League. These guys could go big. The world doesn’t need another school.” Why did you see an opportunity where I might have missed it?
Cahlan: Sorry. You cut out for just a split second. Could you repeat that question?
Andrew: Why did you see that opportunity despite the fact that there were already other schools there?
Cahlan: I think first of all, even though there were other schools, at the time all those schools were in larger kind of tier one markets, as I refer to them–San Francisco, Chicago, New York City.
Andrew: Yeah. I see your headset just cut off again.
Andrew: I was wondering about that headset. I’ve been thinking of getting a Bluetooth headset and now I see maybe wired is better.
Cahlan: Well, I’ve had it on for like 12 hours straight, but it might be the battery. Are you hearing me okay?
Andrew: I can. Yeah.
Cahlan: Okay. If it has any more problems I can grab the connector here.
Andrew: Back to the question, which is why when you saw all these other schools and your answer was these guys were all in bigger cities. These guys were all in Chicago, San Francisco. There wasn’t one in Utah where you were.
Cahlan: Exactly. I think that’s important for two reasons. One is Utah needed something like this, just like many of these other markets needed it, maybe not at the scale that San Francisco needed it. But there are hundreds and hundreds of companies in Utah that need software developers, just like there are companies in San Francisco that need software developers and they have the same paint points.
The other thing I saw in that is there’s an opportunity for somebody like DevMountain where we believe not just in the impact of what we’re doing but having an aspect of our mission that includes accessibility. So we are typically significantly cheaper than the other competitors in our tier of equality and what we provide.
So we get a much bigger kick out of helping somebody who’s a Subway sandwich maker become a software engineer than we do helping a Harvard MBA grad become a software engineer because those people are already going to be successful. They’ve got the resources. They’ve got the talents.
Andrew: The other schools charge, what, $20,000 I think for how many months, usually? What is it, six months?
Cahlan: It’s usually a three-month to a six-month program depending–there are some that are six months. There are some that are three months.
Andrew: And they do $10,000.
Cahlan: They’re from $15,000 to $20,000, and we’re at $10,000.
Cahlan: So we’re trying to strike a really good balance between that impact and the quality that we need as well as the accessibility and not just providing it for the–
Andrew: So, here what I see you need for something like this. You need a location where you can actually train people. You need the people to actually do the training and the people to get trained. Why don’t we break that down? The actually training, the teaching, who was going to do that under your plan?
Cahlan: Who was when we started?
Andrew: When you sit down writing your business plan, who was supposed to do it?
Cahlan: I never actually wrote a business plan, but when I sat down, it was kind of want to teach classes. It’s important probably to realize I never started DevMountain with the intention of creating this large business where next year we were planning on having almost 1,000 learners come through our programs. I started it really because I wanted to teach classes on the side.
Andrew: And so were you going to teach all the classes?
Cahlan: Well, I knew I couldn’t teach all of them physically, because I had a full-time job and my wife would divorce me if I were teaching every night of the week and weekends and going to work every day. So I basically recruited a couple of guys that helped me teach as kind of contractors, and I paid them for every night they taught. Then I just basically wrote the lesson plans and tried to have all the structure in place so that the lessons were coherent between lessons and there was kind of a linear path from point A to point B, and really after having that first class and seeing the impact it had on those students lives, it was like, “Wow, we can only get better from here.”
That first version, as you can imagine, I would write lessons and then afterwards throw them out the window because we realized that they were too fast or too slow or not the right content or whatever it was. So we rewrote probably half the curriculum after the first cohort and then 25% after the second cohort, and then we just got better and better over time. It was somewhat driven by me wanting to make a difference here in the local market. Then, as we kind of got into it, we realized there was a much better opportunity there than maybe we had realized initially.
Andrew: So, when it comes to creating a minimum viable product for software, if the software doesn’t work out, it’s okay. You can create another one. But if you’re trying to teach students, if it doesn’t work out and they’ve paid $10,000 and they’ve committed their time, how painful is that?
Cahlan: Oh, it’s extremely painful.
Andrew: How do you recover then?
Cahlan: The way I describe it to people is I say these students are putting everything on the line. If they’re putting everything on the line, then their chance for success is great. The chance to change their trajectory and get a higher income earning potential is great, but also if they fail out of this, they’re going to be in a really bad place, so we have to do everything in our power to make sure that we give them the best possible educational experience and we put them on a path for success.
Ultimately, in any service business, there will always be cases where you fail or in some cases, especially with education it’s a two-way street. It’s not just you providing a service. The student has to engage with you. We tell the students the more they put into it, the more they get out of it. So in some cases the students fail to do that. They fail to be able to perform or to meet the expectations that we have for them. Luckily those are rare.
But for somebody like me, and I think for a lot of people — we hire we try to hire passionate people — those are the people we worry about and those are the people that keep us up at night because we thought, “Man, what could we have done more to help that person that didn’t succeed?” That has driven us to have a relentless focus on quality and student experience.
Andrew: What’s one thing you learned that you now look back on and say, “We do this from now on to give a better experience or avoid a mistake that we made in the past?”
Cahlan: So I’ll tell you after our first immersive cohort, which was about a year into DevMountain’s history. We started off just with part-time courses initially and then we started doing immersive, full-time classes. After our first immersive class, we sat back and said, “We are in way over our heads.”
In this environment of intense education, it takes a huge emotional toll, intellectual toll. For some of these students, they were going through some very real-life stuff at the time. One student got divorced while he was in class. Other students had pretty crazy breakups. It’s a very intense kind of crucible, and I strongly considered after the first class hiring a part-time therapist that would come in once a week for office hours just to help students talk through life stuff.
Andrew: Makes sense.
Cahlan: Because as an instructor, I felt totally equipped to help them with any kind intellectual or kind of conceptual problems they had, but when it came to, hey …
Cahlan: When it came to. . .
Andrew: I think you might actually need to bring that cable for your headset.
Andrew: I’ll tell you what. Do you want to go grab that and I’ll do my first sponsorship message?
Cahlan: There you go. Let’s do it.
Andrew: All right. So first sponsor, if you’re listening, you probably have heard me talk about them for a long time and may be wondering, “Why is Andrew constantly talking about this one sponsor?” Well, that’s because Toptal is getting real results from having sponsored interviews on Mixergy.
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You didn’t end up hiring a therapist, but you’re saying you realized it’s not just about teaching them to develop, it’s about helping them with their life issues. How did you adjust your business to take action based on that?
Cahlan: So we had one of our students from the very first class, actually, who was not really in the class for becoming a coder, per se, was just kind of interested in getting involved in technology. She came to us and said, “Hey, I really think I can help you guys to create kind of a student success program, where I’m helping the students day to day to manage stress, to set goals, to deal with the soft skills and the life issues that come up during class.” So we hired her. Even though we had like a shoestring budget, we hired her, and from then on, that’s been a critical part of our program is having that student success piece.
Andrew: How do you measure success?
Cahlan: I think we measure success in I think there’s the initial placement of students and how many students are able to get jobs within x-days of graduation. And then I think also it’s just watching those people over time as they become mid-level, senior-level software engineers. It’s really neat for me to get emails or to talk to people that have gone through the program two or three years ago and now are making well into six figures and are really well on their way to becoming lifelong software engineers and it’s exciting.
Andrew: What percentage of your people get a job?
Cahlan: Roughly 85% of our full-time students are able to get a job within three months of graduation.
Andrew: Wow. How did you find other teachers to help you out in the early days?
Cahlan: So I think early days, it was actually difficult and it wasn’t at the same time. One of the things I’ve found about software engineers in particular–and maybe this is true about other industries as well–is that a lot of them are very actually eager to give back and to teacher others and to help other people understand.
Many of them are self-taught and they understand how hard it was to learn on their own. They’re eager to kind of lend a helping hand or pay it forward or whatever you want to call it. That was really critical, just finding people that cared and were passionate. A lot more people enjoy teaching than I think maybe most people realize. A lot of people enjoy teaching. They love getting in front of the classroom.
Andrew: But you still want to find the right teacher, right?
Andrew: What was your process for finding the right one?
Cahlan: Well, it was pretty unrefined. Early on it was kind of like, “Come in and teach a class and we’ll see how it goes. We’ll give you a lesson plan. You can prepare around that lesson plan and then come into class and we’ll see how it goes. We’ll take a survey and see what the students thought of you.” Really, it hasn’t gotten much more complex than that.
Basically, what’s changed now is that we have enough alumni. We have enough of a brand, I guess, that we have a steady pipeline of people that are willing to teach, and we ask them to fill out a basic questionnaire, we try to get an idea of their experience. We have them come in and teach, and if they do a good job, then we ask them to come back.
Andrew: But how did you find them? Did you go to your friends? Did you look online? Did you do job placement ads?
Cahlan: I think being an engineer myself, it made a huge different because the meetup groups I was a part of or the friends I had, I could ask and say, “Anybody willing to come in and teach a couple nights,” or something like that.
Andrew: You mentioned the curriculum. I’m looking at reviews of your school, and frankly a lot of them are really positive. But one I saw said that the curriculum, the lesson plan is what could use a little bit of work to this day. He said, “They actually know it. They’re aware of it and they’re working on it.” Is that true?
Cahlan: Yeah. I think one of the challenges, you have these dueling priorities where you want to continue to solidify something that is more and more stable. But by definition, the web development and these different technology fields are changing constantly. So you kind of have these competing priorities, where you want to bring in the latest and greatest stuff, but by definition if you bring in the latest and greatest stuff, you’re also making it a little bit rough around the edges. It’s a little more MVP. You’re trying things for the first time.
And then over time you’re hopefully refining that and making it better but it’s also getting outdated as time goes on. So that’s something that we’re always trying to work on, make our curriculum process, our curriculum development better, make sure we have high quality, always bringing in new stuff.
Andrew: That review that I saw was on a site called CourseReport.com, and the whole site is dedicated to reviewing boot camps, code boot camps. That’s how many there are out there, that this site is just running a business of just doing that. Do you think there’s still an opportunity to create a school like yours, a business like yours, or is it over at this point?
Cahlan: I think there’s always an opportunity. We feel the same way in terms of the tiers that we’re competing in. We have bigger schools that are much more well-funded than us or much bigger. We always think there’s an opportunity to compete, because ultimately what it comes down to is: Are you providing the outcomes that students are looking for, and are you providing it at an affordable rate? That’s number one.
Then I think as we are continuing to evolve in this industry, we haven’t seen the final iteration of boot camps. They’re going to continue to change. They’re going to continue to adapt to what the market is asking for. I don’t know what they’re going to look like in five years, but I think there’s a lot yet to be determined about who are the right players and what value are they providing and how much market share there is.
Andrew: Why did you want to do it in person? It feels like that’s a key component.
Cahlan: It is. Ironically, I’m a software engineer running a brick and mortar business, which is a little bit strange for me.
Andrew: Literally. I see bricks right behind you.
Cahlan: Yeah. That’s right. I think it points to a couple of things. We have not yet cracked the code in online education. I don’t know if anyone would disagree with that. Online education is supremely accessible. Anybody in the world can access online education. That’s the beauty of it, that’s the strength of it. There are so many things that we cannot compensate for when it comes to online education, that we can easily adapt to in face-to-face education.
Even just from a business perspective, establishing trust with your customers is much easier when you have your students in a classroom and you’re able to show them what you’re doing and you’re able to communicate with them verbally and they get a sense and an idea and a feeling for what you’re doing for them and they can trust you. In an online environment, it’s much harder to earn that trust and to retain it over time. And that trust and those kind of verbal, nonverbal things continue throughout the class.
You can tell by looking at a student if they’re struggling. You can tell by the way they ask a question. You can tell by the look on their face. It’s a lot harder to do that in online, right? I don’t think that … We’re interested in online. We use a lot of online tools, and I think we’re going to continue to evolve and do things online, but there is so much that we can do face to face that is really, really hard to account for online. Really, I believe that it takes the right kind of student in an online environment.
You look at MOOCs, massive online open courses. It takes a certain kind of person, a certain kind of discipline, a certain kind of motivation to complete one of those and get everything you need to get out of a MOOC. But if you sign up for a class, it’s kind of like getting a personal trainer. If you sign up for a personal trainer, you have a whole different set of motivations and accountabilities that you don’t have if you’re just going to the gym on your own.
Andrew: I would even say for movies. If I start a movie on Netflix at home, I’m much less likely to watch it all the way to the end than if I go to a movie theater, where I’m almost always going to watch it right to the end, even if it’s a bad movie.
Andrew: What’s your completion rate?
Cahlan: Our completion rate, I don’t have an exact number off the top of my head, but our completion rate is very high in our industry.
Andrew: Over 80%?
Andrew: Over 90%?
Cahlan: I’d say it’s probably between 80% and 90%. I don’t know exactly.
Andrew: How did you get your first customers? Now you have your school, you have your teachers, you have your curriculum. You need your students. How did you get the first ones? You weren’t a brand name. It wasn’t like you could say, “Hey, I’m going to toss this up on my blog and the world’s going to come to me.”
Cahlan: So I had a decent personal network because I taught classes at some local universities and just had previous students that I talked to. I tested the market with them. I’d send them surveys and say, “Hey, is this something you’d be interested in? What would you want to see taught? How much would you be willing to pay?” kind of did some market research there. I sent it out to those folks.
The other thing is this kind of speaks to the viability of the community and the market here in Utah is that there were so many people eager for this to happen, that as soon as the word got out, I had people coming out of the woodwork saying that they wanted to be involved or they wanted to be in the first class or whatever. Remarkably it didn’t take much to get the first class off the ground.
Andrew: How many people in that first class?
Cahlan: We had 17 in the first class.
Andrew: 17? And what did you charge for that part-time?
Cahlan: It was $3,500, if I remember that. I should say it was 17 people with 60 applications for the first class. We were pretty picky because we knew we had to have the right people in the first class, and we wanted to make sure we had a good experience. Otherwise if we took anybody and everybody, maybe it wouldn’t work for everybody.
Andrew: Who were you looking for?
Cahlan: What we looked for then and I think what we still look for now are three things. We look for passion. This isn’t the type of thing that you can do if you just heard that it’s cool and you could make good money doing it. You have to have a larger motivation than just a better income and or a different career. You have to have some kind of connection to technology. You’ve got to enjoy it. You’ve got to love it. If you don’t love it, you’re going to give up. It’s too hard to push through if that’s not a motivation for you.
Secondly, we’re looking for work ethic, which is very closely tied to passion. If you understand how to push through and work hard and if you understand how to manage stress and if you understand all those different things, you’re going to likely be much more successful. And then finally aptitude, and aptitude doesn’t necessarily have to come in the form of experience. We don’t necessarily look for people who are already coders or who have already done a lot, but we look for people who are problem solvers and people who aren’t afraid of learning something they haven’t learned before.
Andrew: How can you find all that? How can you tell if they aren’t dabbling in this but they really have a passion and interest in it? How can you tell if they have the aptitude for it? What’s your test?
Cahlan: Well, we have a few things. One is a telephone interview. One is a coding challenge. Our coding challenge is basically a quiz, where they try to figure out a few coding problems. And through those two things, it’s remarkable what you’ll find out, even just in a phone conversation. Once you’ve done a few dozen telephone interviews, you start to know what to look for and maybe some red flags of what you should look out for and how to tell how passionate somebody really is. It’s really hard. I believe it’s really hard to be genuine, or it’s really hard to lie about how passionate you are about something.
Andrew: So it was $60,000 in revenue for the first batch, right?
Andrew: You spend some of it on students, some of it on location. Where’d you do the teaching?
Cahlan: We did it here in Provo just at a coworking space.
Andrew: You rented some space there. That couldn’t have cost more than what, a couple thousand bucks?
Andrew: So you had a solid win on your hands. Now you had to teach those students. You told us a little bit about how you did that. You finished and said, “I think I need to quit my job and go full on into this.” Am I right?
Cahlan: Yeah. It kind of got to a point where I knew that DevMountain was only going to succeed or fail based on my giving it more attention. So, at that point, it wasn’t big enough to really pay the kind of salary that I was making as a software engineer, so we took a pretty large pay cut. But it was like, “Look, this is now or never. It’s either going to float or it’s going to sink based on us giving it more time.” We jumped into it.
Andrew: And even though you’re risk averse, you said, “I think I see enough here to tell me that the risk is reduced and worst case, I get a job. If I’m telling all these people they can code and get a job, I can do it too.”
Cahlan: Exactly. Even though I’m still fairly risk averse, what I have learned about risk is that sometimes it’s an illusion. In fact, that first company that I talked about, where I worked at, I had good friends that were laid off from that company. So sometimes job security is just an illusion that we tell ourselves to make ourselves feel better.
In some ways, the best job security you can give yourself is the job security you create. If you create a good business and if you create a solid, profitable business that’s going to pay you a salary, then that’s some of the best job security you can find. It was a little bit about betting on myself rather than just kind of taking the easy route. I felt strongly enough that the recovery from that risk was pretty minimal.
Andrew: Ari Desormo, who produced this interview for us here at Mixergy, said that your initial plan was also to make money by placing these developers at jobs. I know Toptal makes money by placing developers. It made sense for you guys to think that would produce revenue. But it didn’t. Why not?
Cahlan: Well, I think first of all, we’re generally creating developers that are new to the industry. So they’re junior level developers. A lot of companies aren’t as interested in paying recruiting fees for junior level developers as they are for mid or senior level developers. That’s number one.
Andrew: I see.
Cahlan: I think number two is we had enough friction with the local market here that we kind of made a conscious decision that we didn’t want to put our students in a situation where we were pushing them towards certain jobs because those paid as opposed to other employers that didn’t pay. We felt like that was a little bit of a conflict of interest for us. Really, if we could get students jobs, that was all that mattered in the end, and we would do much better by getting them a job than just trying to get a placement fee out of them.
To this day, 60% of our students are coming in from word of mouth referrals. That’s really where we’ve put a lot of our effort and time and energy. Who knows? Maybe someday we’ll figure out a different strategy for employers that makes a lot of sense for us and is a solid business opportunity. But until we get to that point, we’re fine with where we’re at.
Andrew: I’m looking at an early version of your site, one from 2014 under the section, “What is DevMountain?” It says, “We are an afterhours intense coding school where students are trained and mentored by industry experts.” At what point did the afterhours part go away and the intense part get emphasized?
Cahlan: It was a culmination of a few things, but I’ll tell you one anecdote that really pushed us over the edge for it. That is we had one student that came from California, quit his job and basically did the part-time class. He was going all in. Even when he wasn’t in class, which was nights and weekends, he was working all day, studying all day.
As we watched students like him, we realized there was a huge difference between how much time he was spending and the outcomes he was getting, how further along he was getting than his peers. So we said, “Okay, if it’s ultimately in the student’s best interest to spend as much time possible in the time we have with them on this, then why don’t we create an environment where people who want to can dedicate that time and they’re not just sitting in a room by themselves working on their day’s stuff, but we’re helping them and we’re mentoring them and we’re teaching them during that time as well?”
So, even though we started off with this idea of being a part-time only boot camp, once we saw the difference in outcomes with the full-time students and how much more we could ensure their success, it was really kind of a no-brainer.
Andrew: So is that like three batches in or four cohorts in?
Cahlan: Let’s see, I think that was after our third cohort that we did our first immersive. Yeah.
Andrew: So, at that point, you raised the price to $10,000, right?
Cahlan: I think it was just under $10,000 at that time. Yeah.
Andrew: How many people did you accept in?
Cahlan: I think we had roughly about 17 again in that first class.
Andrew: 17? So I’m looking from a site from that period. You say, “Explore our courses,” and you’re listing five different courses. I see. It’s web full-time versus web part-time, iOS full-time versus iOS part-time and UI/UX part-time. I see. So you were doing a little bit of both and maybe you had a couple of cohorts going on at the same time. Is that it?
Cahlan: That’s right.
Andrew: I see. Okay. So we’re roughly getting to about half a million in revenue at that point.
Andrew: So very fast things are starting to move up, your expenses are still relatively small. You still are hiring developers to teach, but they’re doing it part-time so you don’t have to pay heavy developer costs. You had a solid winner I’d say two, three years into it.
Cahlan: Yeah. At two, two and a half years, we knew it was a great business model. It was just a question of how far can we take it.
Andrew: Okay. And did you have any sense that you could maybe expand beyond Utah, or was it always we’re going to be in two different cities in Utah but that’s it?
Cahlan: I think expanding in Utah gave us confidence that we could do it elsewhere. Even though Salt Lake City and Provo are within 40 miles of each other, we had a lot of the same pains that you would have going 400 miles from the other location. You still have to set up a new location, negotiate a new lease, hire new people. So it was kind of a soft run to doing a larger expansion. So we felt pretty confident about it.
Andrew: You said the stars, you told Ari, “The stars aligned and we hired a guy to build the full-time class.” What stars needed to align, and what did this person do for you?
Cahlan: So the first person who came on and helped us build the first full-time class was a previous graduate of one of the first boot camps in the country and had a really good experience and was an extremely talented guy, very smart and was very passionate about the experience he had and was obviously passionate about helping us to achieve a similar level of quality here.
Even though we were hiring him on really as more of a software engineer, we were kind of kicking around this idea of creating our first full-time program, and we basically said, “Hey, how about you help us build this first full-time program and let’s build it the best way we possibly can.” He jumped on it.
Andrew: All right. Let me talk about my second sponsor and then come back and ask you how you built up from there. The second sponsor is a company called Pipedrive. Actually, I want to explain what Pipedrive does by telling you how you guys might use it at DevMountain.
Here’s the idea. Pipedrive is actually used to grow sales. So it forces companies to lay out all the steps in their sales process and then as a team, they all collaborate to close their sales. Your sales are a little bit different, because you’re not trying to persuade people to say yes, you’re trying to screen the people out who should be no’s.
So here’s what I would do with Pipedrive. First of all, you probably have a form that people fill in when they want to apply. Using a Zapier connection or alternatives, you can take everyone that fills out that application and automatically create a card for each one of them, complete with their name, their phone number, and the responses that they filled out to their application and that card would go in the first column of people who applied.
Your next step is probably–I’m going to guess but I’m probably going to get this wrong–I’m going to guess the next step is to have them take a test. So Pipedrive can automatically send out an email with the Zapier connection to say, “Here’s a test. I want to see if you’re a good fit and if we’re a good fit for you.” Anyone who completes a test automatically moves on to the third column, at which point you say, “Schedule a phone call with us.” You can automatically send out an email to people saying, “Here’s a way you can schedule a phone call. You’ve made it past our first test.”
Once they complete their first phone call, you move them over to the next column if you think they’re right. If you think that after the first phone call they actually would be a good fit, move them to the next column. If you don’t, you drag them over to the lost section and actually say why you think they’re not a good fit so you always have that attached to their record and you understand why you guys are rejecting people.
The idea is you keep moving people through your Pipedrive, through your pipeline. That’s the simplicity of the whole process. I know there are going to be different people making phone calls. Any one of them could interact with … The more I talk about it, the more I realize it’s so hard to explain. I can tell you it’s revolutionary.
Here’s what people should do. You can try it out for yourself and see how it helped us at Mixergy book more guests, how it could help DevMountain get more of the right applicants to go through the application process and actually sign up, or how it could get someone who’s trying to grow sales to actually increase sales in a methodical way.
All you have to do to try it out is go to a special URL that I’m giving everyone, and frankly, this actually even works for you guys at DevMountain. The URL is Pipedrive.com/Mixergy. Pipedrive.com/Mixergy, when you go there, you can use it for two months, you can create your own pipeline and you can grow your sales, and then I want to hear from you, if you’ve done it, how well this has increased your sales.
Pipedrive.com/Mixergy and email me to let me know what you think. My email address is always available to you guys. It’s Andrew@Mixergy.com.
I see that you’re checking it out. What do you think of it?
Cahlan: We used Pipedrive for a while. Since the acquisition and everything, we’re kind of getting grandfathered into a bunch of other systems and everything. But I wrote a lot of API integrations for Pipedrive. So I’m pretty familiar with them.
Andrew: What kind of API integrations did you create for it?
Cahlan: So we created hooks into our own backend system for when students moved from point A to point B to point C, it automatically synced with Pipedrive so we kept synchronous parallel records of what was going on and our admissions folks could manually kind of advance them through the pipe, or they could automatically be advanced based on certain things happening.
Andrew: Yeah. I like that about Pipedrive, that it’s so easy to customize it by either writing your own pieces for it or just working with Zapier to connect it to other products. You said that word of mouth is where the majority of people come to you. What else do you do if you want to increase your applicant pool?
Cahlan: We do a lot of paid search/social kind of display ads. With the latest tools and online marketing and digital marketing, it’s remarkably easy to target certain groups of people that we hope are the kind of folks that we’re looking for, maybe certain age ranges, maybe certain geographic regions based on where we’re operating and where we think there’s good demand and then friends of people that have already interacted with our paids, those kinds of things.
Like a lot of businesses, we’re kind of getting past the point of, “Here’s the one strategy we use,” and we’re trying to be more holistically about realistically this is a pretty big decision for somebody and they need quite a few touchpoints with us before they make a decision. So they might see a billboard. They might see a Facebook ad. They may talk to a relative or a friend that has done it or been involved with it in some way. Usually it requires three or four touchpoints until they come into our system.
Andrew: You guys just before you sold had to redo your finances, or what did you have to redo?
Cahlan: Well, we had to kind of fine tune our financial model, because even though it seems really simple, you get all your tuition on day one and then you make that tuition last for the full cohort. When you have multiple cohorts and cohort start dates are not always predictable and they’re staggered and there’s seasonality to them, your cash is basically doing this all the time.
Trying to pick a point in the future and saying, “We need to hire a certain person here. Are we going to have enough money in the bank?” It can be really challenging if you don’t have a strong understanding of your business and a strong financial model. Yeah. We went through a period where we had to create and really understand our business down to the cent, down to the dollar. It was about a year ago. It was a lot of work.
Andrew: Who’d you hire to do that?
Cahlan: Well, one of our first people that we brought on was a bookkeeper, and she kind of moved into our de facto CFO. The poor thing has been asked to do everything you can imagine beyond what she was trained to do. So she’s been absolutely fantastic and very talented and up to the task. But we brought in some people to help her create that model.
Andrew: What kind of consultants do you hire to do that? That’s a pretty intense process.
Cahlan: Outsourced CFO firms a lot of times have that capability.
Andrew: I see.
Cahlan: We had some kind of specialist startup advisors that came in and had a lot of experience in this realm, so they helped us create some models and perfected it with the help of some of these CFO firms.
Andrew: Did you guys go, because of that, through a period where you had to lay people off because the revenue and expenses were hard to align?
Cahlan: Yeah. I think in any business, especially startups, there are times of everybody’s high fiving and there’s plenty to go around, and then there are times when maybe you’re waiting on funding or fine-tuning your financial model and keep getting to the next stage where you realize like, “Oh crap, we’ve got to change some things or we’re not going to have money in the bank in three months.” We went through some times like that.
Andrew: That was it. It was because of that. On the outside, I’m looking at it and saying, “Everything they do produces revenue. They get paid a lot of money. Their expense are pretty insignificant.” But that’s not true at all. Your expenses are higher than I thought, and it’s because you have to hire developers to teach, right?
Cahlan: Right. That and growth is expensive. When you want to plop down a new location and you’re hiring people and you’re putting money down for a space and you’re getting new equipment, that money has to come from your other locations that are already producing. Growth is expensive.
Andrew: And the whole thing was bootstrapped.
Andrew: And you brought in, you started at some point this story, you were saying, “I, I, I” and then shifting to we. You brought in a cofounder. What’s the cofounder situation?
Cahlan: Two cofounders.
Andrew: Didn’t it start with one though at first, where … How did you do it?
Cahlan: So initially, when I was just kind of teaching part-time classes, I partnered with the coworking space itself. They would provide space and business level stuff, and I would basically focus on the education, the product and the experience. After a while, when we realized this was much bigger than a hobby side project and it was going to be a full legitimate business, that’s when they kind of basically said, “Look. we’ve got a couple people that are really interested in helping out.” I met with those folks, we figure out how to structure it, and ever since then it’s been three of us.
Andrew: Did the coworking space still own a piece of the business after that?
Cahlan: No. We kind of basically said this is going to be much bigger than just this space, and we kind of bought them out of that arrangement, that structure, and then we kind of reformed it to a new company that was focused on the full-time and the growth and all that kind of stuff.
Andrew: I see. Who were the other two cofounders then who are still in the business?
Cahlan: So Tyler Richards, who comes from kind of a marketing/business development/design background, he kind of has been the design flair for everything that we’ve done, marketing, just that kind of person, and then Colt Henry, who has been the guy when it comes to everything physical facilities and kind of IT technology. So when we’ve live streamed classes, he’s been pioneering all the stuff behind that, everything from, in the early days, setting up tables and chairs and putting together equipment and negotiating leases to now working with budgets and the day-to-day operations and that kind of thing.
Andrew: How’d you find your acquirer?
Cahlan: So they found us. It was kind of probably once a month or so I would get phone calls from investment bankers or private equity groups or just kind of interested parties. I don’t know how many of those were legitimate interests and how many were just fishing expeditions, trying to get data or get information for creating a competitor or whatever it was. So I kind of always took them with a grain of salt, but they reached out to us. I think it was probably about this time last year.
Andrew: It’s Capella. From what I understand, first of all, they’re an education company and it seemed like they were going to roll up a bunch of these schools and then they seemed to have stopped. They got to two and that was it.
Cahlan: I don’t know if their plan has ever been to roll up a bunch of schools. But they’ve kind of picked two different schools, us and Hackbright Academy, an all-women’s school in San Francisco and are just kind of helping us in our market segments and target markets that we’re going for to achieve scale and grow the way we want to grow.
Andrew: How did things change after the sale?
Cahlan: Remarkably not very much. I’ve told people many times that this has probably been one of the best acquisition stories that I’ve ever heard of, where they’re serious about letting us run the business the way we understand it and they’re interested in supporting and helping and not micromanaging and taking things over and trying to steer the ship for us type of thing. They told us from the very beginning this is a business you guys understand, so you guys should run it and we are here to support you and give you the help that you need. It’s been really good.
Andrew: And you and I got introduced through Logan Rodgers, a guy who listened to Mixergy interviews for a long time. I’ve said for years that anyone who’s listening, if they come to San Francisco, should let me know so we can do scotch night together and he came and I got to know him a little bit.
I’m wondering if you know he doesn’t drink. I’ve said forever scotch night is not about drinking. He was totally comfortable. I think he just had water, and we had this incredible conversation about faith, about religion, about business. I think I even tried to get him to do an interview on Mixergy. I don’t know why he said no, but he said, “Listen to my friend. Let me tell you about what this guy has done.” And we talked about you a lot and he made the introduction. I’m glad you’re on here. It’s amazing what you built.
Cahlan: Logan’s a great guy.
Andrew: He really is. There’s something flying right over there. And your headset worked.
Andrew: It actually held up for the rest of the interview. I’m glad you did it. I’m glad you had it. Anyone listening to us should check out the site. It’s DevMountain.com. Did you guys used to have DevMounta.in and then changed it to DevMountain.com?
Cahlan: Yeah. For the first year or two years there was a guy who owned the dotcom who just used it for email purposes. He had it forwarded to his Facebook page. And I don’t know how many times it took me to finally convince him to sell the domain to us, but we finally got it.
Andrew: I like it, DevMountain.com. That beep is the live chat on your site. You probably recognize it. Every time I go to your site, I hear the ding-dong, “Do you want to talk?”
All right. DevMountain.com and my two sponsors, if you want to hire a great developer, there’s a company out there that will help make it easy for you. It’s called Toptal. Check them out at Toptal.com/Mixergy. And if you want the software that the two of us have used to grow our businesses, it’s called Pipedrive. Check it out at Pipedrive.com/Mixergy.
Thanks for doing this interview.
Cahlan: Thanks for having me.
Andrew: You bet. Thank you all. Bye.