Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy, where I interview entrepreneurs about how they built their businesses.
And one of my favorite entrepreneurs who I’ve gotten to know, because I live here in San Francisco, is Anthony, the founder of Hack Reactor. I just invited him over for scotch. Then he came over to my house for dinner. I just loved his business model. The business model behind Hack Reactor was, “Hey, the world needs more developers. I’m going to create developers. I’ll actually do it in this obsessive way.” I’m an obsessive person so I get it.
His obsessive way was let’s bring them in to one place to have them sit here and treat it kind of like a cult, the cult of development, the cult of get your work done, and make them live and breathe this and if they do that, if they buy into this world, they’re going to become phenomenal developers and they’ll be excited for having done this and then they’ll go out and get work. That was the promise. That’s what he built.
I checked with local—since I live here in San Francisco, where there are a bunch of their graduates, I checked with their graduates. Their graduates feel that yeah, they love the place. I’m amazed that it’s a hugely successful business. Well, since the Hack Reactor interview that I did, not with Tony, but with someone else at the company, they have been on a roll where they were buying companies.
Today, we’re going to meet the founder of one of the companies they bought. It’s called MakerSquare. They also create developers, just not in the same San Francisco Bay Area. The other thing that happened—this I didn’t find out through Anthony, didn’t find out through today’s guest but through others who I’ve gotten to know here in the space—the world of teaching people how to be developers was quickly profitable, allowed a few companies to grow really big, and then something happened and the industry went through a tough period. People lost money. Some of the businesses closed up. I want to find out how Hack Reactor fared through all that.
The guest we’re about to meet is Harsh Patel. He is the founder of MakerSquare, and today he is the CEO of Hack Reactor. Hack Reactor creates software engineers, and they help them get work.
This interview is sponsored by two companies. You’re going to know the first one. It’s the place where you hire developers. It’s called Toptal. You’re going to think the second one’s name is a little bit odd. I finally have an explanation for what it means. It’s a conference called Baby Bathwater. I’ll explain what that means in a moment and why I’m talking about them. First, Harsh, good to see you here.
Harsh: Good to see you too. Nice to be here.
Andrew: Hey, last time I did a Hack Reactor interview, I think you guys were at $7.5 million in sales. What’s the revenue like today?
Harsh: A little north of $20 million.
Andrew: $20 million?
Harsh: That’s right.
Andrew: And it’s in-person training, but you guys also have an online component. What percentage of the business is the online, the new online component?
Harsh: I would say it fluctuates between 10% and 20%.
Andrew: That’s it? So, mostly, we’re talking about an in-person experience that people come in and how long do they go through the program?
Harsh: 12 weeks.
Andrew: Is it still as intense as I remember it, where people would basically—I don’t know that they would live there, but they would kind of live there?
Harsh: You know, it still is. Less people live there now than before.
Andrew: Did they literally—did anyone actually live in your office?
Harsh: There’s a couple stories where out of the thousands of grads, one or two they later found out that they did, but we didn’t know because we expected students to stay in until 11:00 or midnight and come back at 8:00, 9:00 in the morning.
Andrew: So no one would know if they happen to sleep in the office the few hours in between.
Andrew: I want know about how you created MakerSquare. The thing that intrigues me about this whole business is there wasn’t much investment in it, right? When you started it, what did it take to actually launch—beyond getting students, and we’ll talk about that—but to actually create this business, what did it take?
Harsh: For us, it took essentially four really motivated guys and a bunch of hard work, just putting up the website. In terms of financial actual capital, I think the four of us put in money to buy SXSW tickets because we started MakerSquare in Austin, which, in hindsight, was a worthless spend.
Andrew: You didn’t need SXSW tickets?
Harsh: We didn’t need SXSW tickets to start something.
Andrew: Here’s the secret of SXSW—don’t buy the tickets. You don’t want to sit in any of the events. What you want to do is go out and get the free tacos from the startups, go out for drinks at the free events, and get to know the other entrepreneurs. I get it. That’s all it took. Office space, you didn’t need to have a long-term commitment. You didn’t need to hire teachers because you guys were doing the original teaching yourselves. There isn’t much to the space and meanwhile, you built it up before the sale to how much in sales? How much revenue?
Harsh: It was pretty small at the time, about $1.5 million.
Andrew: That’s fantastic. Then you say at the time why? Where did it go beyond that?
Harsh: Oh my god. It went all the way to I want to say $8 million to $10 million. But Hack Reactor purchased MakerSquare right when we were around $1.5 million. Then right after the sale, we kept the MakerSquare brand and then expanded from there and that brand we got to about $8.5 million and then we decided to call everything Hack Reactor. So, to answer your question, it went from $1.5 million to right around $8 million to $10 million-ish.
Andrew: Impressive. This is a business I should have frankly thought about. How many people want to be developers? I was in San Francisco. I could have created one in San Francisco. The speed at which these businesses took off was phenomenal. Again, the pain when things went bad was also something that I want to talk about. It’s kind of emotional. Let’s get into what you were doing before, because you don’t have a lot of experience in entrepreneurship before MakerSquare. You’re a guy who started out as a project manager and you wanted to learn how to code. Why did you want to learn how to code?
Harsh: So I had a team of developers who I was managing to build a product for teachers. I used to be a middle school fifth grade teacher. After that, I got together with a guy who reached out to me. We basically created a company where we’re building software for teachers.
Andrew: You were a teacher. You got together with a guy who—what did you guys want to build?
Harsh: Software for teachers. So the first thing that we built was a text messaging platform, kind of similar to Remind101, they’re just called Remind now, also a very successful ed tech company, great product. It was similar to that back in the day.
Andrew: Okay. Did you guys ever launch it?
Harsh: We did launch it. We launched it, got some funding from an early cofounder in Zynga. Then I basically hustled and went to classrooms and taught teachers how to use it, and we got users and stuff. We couldn’t really get it to a point of profitability. Around that same time, I was managing that team of developers and I was like my background is biomedical engineering and I knew some code through like MATLAB and whatnot, but not web development. So then I was like, “This is frustrating. I wish I could just write some of this code.” Instead of relying on someone else, I started teaching myself.
Andrew: How did you teach yourself?
Harsh: All the stuff online. This was like six-ish years ago, so Codeacademy was the most popular thing to learn programming online. Then just building little apps—I worked with a friend and he and I would build little things together. We both had day jobs, and in the evenings, we’d get on Google Hangouts and pair program into the night.
Andrew: So why would you need a web development course? Why did you go to sign up for one?
Harsh: That was the only thing that was there at that time.
Andrew: I mean if you’re learning it on your own, why do you need a course?
Harsh: I thought I wasn’t good enough to learn it on my own. I was like, “Someone’s got to teach me the real deal. I feel like I’m just taking guesses here. I’m finding stuff online and I’m building stuff with it. Is it a piece a crap? Is the code good? I just don’t know.” I figured if there’s a course for it, they might know better than me and I could learn from that.
Andrew: How was the course that you took?
Harsh: Really bad.
Andrew: What made it so bad?
Harsh: So I knew exactly what made it so bad, to be honest, because I had just finished being a teacher.
Andrew: Yeah. I’m looking at your background. Not only were you a fifth and eighth grade math teacher. You also were a volunteer at Khan Academy, which does phenomenal education, right? You worked on the Teacher Toolkit product. Tell me based on that experience what did you see that was bad?
Harsh: It was very similar to a traditional college experience. There’s a lecture and then there’s a little bit of lab and then you’re done. There’s no like—all the stuff that I kind of learned creates a good classroom atmosphere, which is like everyone needs to know each other. Everyone needs to be friends, if not at least know each other’s names and be acquaintances. If you create that community, then everyone is going to help each other. As a student, if I’m learning from two other people next to me, that’s way better than learning from just the instructor. It’s like the one to many versus many to many. Many to many is way more effective.
Andrew: You’re the second person I’ve talked with who said the same thing. The founder of Knowledge Matters said the same thing. He said that students want to learn from each other. I still don’t understand it. Don’t you want to be guided by the person who knows what they’re doing, who tells you exactly what you need to do? You’re nodding. Why would you also want to get direction from other people in your program? I’m not saying that’s not the right move, I just want to understand it.
Harsh: Yeah. I think both are needed. You need that expert person to set the foundation, to set the roadmap and be there when you are stuck with something really hard. At the same time, sometimes experts are blinded to what it’s like being a beginner. So you need other beginners next to you to relate to and learn the incremental things from, and then you need the expert who can guide you towards making sure those incremental gains you’re making are all leading to a direction that’s good.
Andrew: All right. So they didn’t have that. Was there anything else you didn’t like about the program?
Harsh: Yeah. So the teacher himself was a very traditional lecturer. There’s a couple very easy to learn and effective techniques for running a good lecture. When you’re a lecturer, you want to get feedback from the people you’re lecturing to. You want to know are they learning this stuff, or am I just talking to a blank wall? There’s stuff like think, pair, share, where when you ask a question, instead of just saying hey, for simplicity purposes, what’s one plus one? A couple of people raise their hand. You call on one person, they tell you, “Oh, it’s two.” You think that everybody knows that one plus one is two because you think that way.
If you do something called think, pair, share, you say, “I’m going to ask everyone a question. What’s one plus one? I want you to think about it for 20 seconds, pair up with someone next to you and tell each other what you think one plus one is,” and all of a sudden the whole room bursts out in interaction. Then you say, “All right, what’s one plus one?” Then everyone’s hands go up because they feel really comfortable sharing. They’ve already vetted whether or not they’re right or wrong. They get to know the person next to them. All of a sudden, you’ve created this community where everyone feels comfortable interacting with each other.
Andrew: And you know that—and you’ve got the feedback that they know the answer or if you look around and see multiple people don’t get it, then you realize you’re not explaining it right. That’s really smart. So I always thought asking questions was the answer because you’re basically introducing the Socratic method that’s worked ever since Socrates, where you’re not telling people, but you’re asking them a question and drawing the answer out of them.
You’re taking this a step beyond and saying, “I want them all to tell someone else, one other person to make sure they’re all getting that response in.” I see why you would sit in that class and you would get frustrated when you know all this stuff. When you know how good teaching could be, it sucks to see it suck.
Andrew: All right. So then you said, “I’m going to create my own class.” Go from not knowing how to do this and seeing a problem to creating your own school, your own business seems like a pretty big leap. How did you take that leap? What made you take that leap?
Harsh: I think it was—I’ve always been an entrepreneur-type of guy. So it didn’t really seem like a big leap or a big risk. I remember even all the way from second grade when I literally first came to America. I found a buddy on the school bus and we’d sell hand-drawn Nike swooshes and stick them on people’s shoes for a quarter.
Andrew: So you would draw it on a piece of paper?
Harsh: Literally like lined notebook paper, cut it out. . .
Andrew: You would stick it on their shoes and charge them for that to make their shoes into Nikes.
Harsh: Exactly. They loved it. We sported those, walked around the school and everyone’s like, “Look at those guys.” Anyway, I’ve now since learned that this wasn’t the first business venture that I had kind of gotten myself into. It was probably like the tenth. The tenth was the biggest one. It didn’t feel risky, or it didn’t feel like a big deal. We just followed the steps of what we knew was the right thing to do next.
We were like, “We should make a school.” “How are we going to tell people about the school?” “Let’s make a website.” “How are we going to let people know the website exists?” “Let’s find out where everyone’s talking about coding schools and tell them, ‘Hey, we have a coding school in Austin, Texas now.'” You just kind of problem solve the next thing in front of you, and when you look back, you’re like, “Now there’s a school on Congress Avenue in Austin, Texas? How did that happen?”
Andrew: So you build up the website. I heard you spent all night. You wanted to make sure to get it right. You got the website up and running, and then where did you go to tell people about the school in Austin?
Harsh: The first place was Quora. This was way back in the day. The only place where people were talking about coding schools was on Quora. There was this one post that was basically like, “Hey, where are all the coding schools in the U.S.?” There was like three listed on there. We were like, “Wait, anyone can edit this post? I’m going to edit it and put ours on there.” All of a sudden, people are finding us. So that was the first place. Then after that was like this on the ground hustle in Austin, Texas, where we’d go to every single meetup and kind of tell everyone what we were up to.
Then we would ask some of the well-known engineers in Austin to see if they wanted to mentor for our students once we had a class. Then that got them really excited about what we were doing because they were like, “Mentoring sounds fun.” Then all of a sudden, a lot of people knew about what we were doing. When a prospective student would ask anyone in the tech industry, they would run into someone who was like, “Oh yeah, I know those guys.” That social validation from an engineer was huge.
Andrew: And to mentor, all they had to do was what?
Harsh: Once a week, meet with a student for an hour.
Andrew: With one student for an hour.
Andrew: I see. That makes a lot of sense. One of the things that you guys did—I’m looking at an earlier version of your site right now—and others did too is the apply.
Harsh: Oh yeah.
Andrew: It wasn’t, “Click here to pay.” Why did you do the application process?
Harsh: It kind of just made sense, one because it’s a school and I don’t know who would fork over five figures worth of money from a click here to buy this thing. It’s like buying a car online because they see the cars around them, they can go to a showroom and check it out and then they’ll buy it online. Anyway, that high ticket item, you don’t expect them to just hit the buy button online. So apply was a way for them to interact with us and see if they even wanted to do the program. So it was a two-way street.
Andrew: It was for you to see if they’re the right fit, but also for you to sell them because you know that a landing page is not going to sell them on something so involved.
Andrew: How much were you charging?
Harsh: At the time $8,000.
Andrew: That’s a pretty high thing to ask. How did you get comfortable asking for $8,000? I think a lot of schools would have just said, “I’m just starting out. What do I even know? Let’s just ask for a few hundred dollars and then I’ll ramp up to the right price.” You guys started out high. Why? How did you know?
Harsh: So we had a little bit of help because we knew what other people were charging. We weren’t the world’s first coding school. We were the world’s third or fourth or something like that coding school. So we could see what other people were doing and finding success with. We kind of just modeled that. We wanted to be a high-priced thing because a couple things. One, we knew that eventually we’re going to eat up the margin and hire more people, and in order to make a good product, it’s going to take some money. Two, it was still right around the price range of what other coding schools were offering. So we kind of had that cheat code.
Andrew: The one that got a lot of attention was—I think they were called Code Academy versus the only program, which was Codeacademy. They then became Starter League. They were acquired by Fullstack Academy. They’re the ones. Were they the one that got your attention at first too? Was there someone else that you were especially inspired by?
Harsh: Yes. Starter League, Code Academy, we’re big fans. Mike and Neal, the guys that started it, one of our cofounders actually went through Code Academy in one of their first few cohorts.
Andrew: So you go through it and you say, “I can do this. It just takes a room and really knowledgeable teachers and you’ve got this.” It’s not the kind of thing that can scale overnight to the whole country, so we can do it in Austin. Fair to say?
Harsh: Almost fair to say. The thing that Code Academy wasn’t doing was making it like an immersive program. Code Academy was still a part-time program at the time. We were like, “Wait, if you’re going to do this, you should go all in. That’s the best way to learn it.” So, for us, it was like, “Okay, we can do this because we’ve seen these guys do it. Also, we have this unique thing that we feel passionate about, which is go all in and make the education good. No one else is doing that. We should put that product in the right place. ”
Andrew: All right. I’ve got to tell you about Baby Bathwater now. I would like you to come.
Harsh: I’m really curious.
Andrew: I would like Anthony to come. Here’s the deal. You know how a lot of conferences you go to are full of stuff you can basically get online. You can listen to a speaker talk online. Often, if you’ve been to another conference, you’ve probably heard that same speaker in the room. It’s kind of awkward to not show up for those long times. You feel like you have to because otherwise, you paid the money, what’s the point, or you paid and you’re over there and you’re not going to the session, what else are you going to do? Now you have to go do work to figure out this new city to say where you’re going to go and who you’re going to go with. It becomes this forced activity. In some cases, it’s helpful. In many cases, it’s not.
So these guys at Baby Bathwater said, “Let’s look at all the things we don’t like about conferences. There’s big egos for some of the people who come in there. The speaker dinners are favoring the speakers, and that’s really where the conference is, but everyone else is left out of it. You have this whole VIP bullshit. You have selling from the stage if you pick the wrong conference, stale hotel rooms that don’t feel inspiring, and bad food that you have to go through because you want to get together with other people.”
They said, “What if we do something completely different? What if we just go and pick our ideal situation? Our ideal situation is as entrepreneurs, we want to get to know other entrepreneurs. We want to talk with them and do the fun stuff.” Like every time I go to a conference—I was just talking to my team. I said, “Here’s the plan. When we go to conferences, I don’t want to be in the rooms most of the time. I want us to set up all this stuff.” They said, “How about if we set it all up for people?”
So they did. They have set something up where they take care of everything. They take care of the room. They take care of the food. They take care of the activity so that you’ve got stuff to do with people who are coming to the conference. More important than all of that, they curate the people. Just like a conference would ordinarily curate the speakers, they curate the guest list, keep it small so that it’s the right group of people.
So all that stuff, the selling from the stage, the speaker dinner, etc., they call that the bathwater. Most people go to conferences because there’s that stuff and they say, “I don’t want to deal with all that.” They say that’s the bathwater. Why throw out the baby with the bathwater? That’s partially it. The other part is, frankly, they’re a little quirky and they love the idea of seeing people who send checks make a check out to Baby Bathwater.
Harsh: I love it.
Andrew: They’re doing this at Powder Mountain to make sure there’s a right set of activities. I’m not even a skier and I’m going there. I’m reaching out to past interviewees and saying to them, “Let’s get together at this event.” For me, I’m going to the event because I want to talk through my business with other entrepreneurs who have built good businesses. Like you, imagine if you and I got together and just sat for a couple of hours and talked through, “Here’s what I’m going through. You’re in the education space. What could I do?” Get like feedback from each other. You might say, “Hey, I’m trying to raise my profile here. I’m taking over this new company. What can I do?” We’d spend maybe an hour on that.
Imagine if it was a weekend with not just me but other phenomenal entrepreneurs. That’s the idea behind Baby Bathwater. I’ve got a special URL if you want to go check it out. Come through this URL. You will be part of—actually, I don’t even know that it matters that you’re coming through me. It’s such a small group of people. We’re all going to be hanging out together. We’re all going to be in each other’s faces. I see.
It looks like they’re giving you a discount if you’re approved. Motherfucker, this is really low. For the event, it’s $1,250 all inclusive, at Powder Mountain. I didn’t see the price. I didn’t realize they were giving us a low price. I don’t think they should do this. Hang on, time out. It’s not like the event costs $1,250. It’s $1,250 off the regular price of the event if people go to BabyBathwater.com/Mixergy. Good. I thought this was way too cheap. There’s something wrong with an event that’s too cheap.
Great event. They put you up. They get you food. I’m going to make sure that you get good scotch and good experience. If you are approved and use the URL BabyBathwater.com/Mixergy, it’s going to be $1,250 off. That’s what the real price is. Go check them out, BabyBathwater.com/Mixergy. Apply if you’re interested by going to BabyBathwater.com/Mixergy. You’re going to see some people who have gone to the conference. I’d urge you to just shoot them a message and say, “Hey, I heard you went to this conference. What do you think of it?” I have found having asked that that people will rave about the conference.
Remember Chris Stoikos, the guy from Dollar Beard Club? You didn’t see this. I interviewed this guy. I see in my notes that he’s making over $1 million in a few months selling beard oil. I don’t believe him. I said, “Show me your screen.” He’s at the airport. He starts doing screen share, showing me his revenue. I go, “Holy crap. That’s amazing.” He was flying back, I think, that night from Baby Bathwater while I was doing the interview. He was like going into the airplane. That’s the kind of entrepreneur that you get.
If you’re interested, I would love for you to show up at this conference. Be there with me. We’re going to hang out. Go to this URL, BabyBathwater.com/Mixergy. This is the event I’m really looking forward to going this year.
All right. My sense is that I would like to get together with you, but I’m looking at you and I’m sensing this experience, you might be too uptight for it, like hang out with Andrew over a weekend, we drink, we talk. You don’t have to drink. What does that feel like for you?
Harsh: Are you kidding me? That sounds awesome.
Andrew: Does it feel like you? Is it the kind of thing you would do?
Harsh: Yeah. That’s the exact kind of thing I would do. Tony and I do that all the time, actually.
Andrew: Do you guys kick back? Do you kick back?
Andrew: What do you do when you kick back?
Harsh: Play squash. We play racquetball. We just walk around town. We grab some whiskey and hang out at his house in the kitchen.
Andrew: In the kitchen—so you guys just sit in the kitchen. He brought me a good whiskey. He’s a good whiskey drinker. He’s got good taste.
Harsh: Yeah, he is.
Andrew: So you just hang out in his kitchen and you dream and say, “What if we did this? How about if we grow the company that way?” That’s the thing?
Andrew: What’s an example of a topic that you guys talked about in person over a drink?
Harsh: A lot of times it’s about how to handle conversations with people, like what to do about okay, here’s an example just a couple nights ago or last night. It was me, Tony, and another one of our friends, Nick, who used to work at Hack Reactor, then went through the program, graduated, now he’s a software engineer making a bunch of money.
He just started his first day on the job this Monday. He comes back and he’s like, “All right, guys, I’ve got a story for you.” We’re like, “Tell us, how’d your first day go?” He was like, “Well, I log on and,” he works remotely—so he gets on, meets everybody, has his one on one with the director of ops, who’s kind of like onboarding him. It’s a small company. They don’t have an HR department or anything like that. He is video chatting with a guy and they get to the sexual harassment piece of the onboarding and the training and he hears another guy in the room that laughs and he’s like, “I wonder why he’s laughing at this portion of the training.”
And then he gets a message saying, “Hey, this person’s ass is awesome, by the way.” He was like, “What? We’re literally talking about sexual harassment and you are literally doing the thing you’re not supposed to do on my first day at the job during my onboarding.” He was just dumbfounded. He was telling us about it and he was like, “What should I do?”
So the three of us, we were like, “First of all, this place is crazy. This is nuts that this is your onboarding experience.” He was like, “Do I tell the guy that sent me that chat that’s not cool, don’t do that? Do I tell the ops person that was onboarding me that this guy said this to me and how that’s not—do I tell my manager? What do I do about this situation?” Tony and I were just riffing, “What if you do this? What if you do that?” Ultimately, we played out a bunch of scenarios.
Andrew: What’s the answer to that? I know what my answer is, how I would react to it. What’s yours?
Harsh: Here’s the only answer. I’m saying your answer is bad without even hearing it.
Andrew: It’s almost definitely bad. This is what I would do. What’s yours?
Harsh: You talk to your manager and say, “Hey, man, this is what happened during the onboarding yesterday. To me, that’s unacceptable. I’m concerned about it because I just joined this company. I feel a sense of responsibility to make sure that we as a unit, we as a company now don’t tolerate this kind of thing because we’re not going to be attracting the right type of people. Let’s say I had 10 friends who were in the same situation I was on the first day of onboarding and they got this message, 5 of them would leave. Now we’re cutting away good talent. We can’t have that.”
Harsh: That got them on the exact same page of like, “Okay, we do have to do something about this. This guy’s on my team about it. He’s not accusing me of something or saying words like ‘you’ or ‘me.’ He’s saying words like ‘we’ and ‘our.’ He’s participating in the solution.”
Andrew: Right. It’s not, “It offends me.” It’s, “It’s going to hurt us as a company. We’re all together even though I’m new here.” That is so good. Mine is always I accept whatever anyone says. If you sat down with me and you said, “Listen, I just can’t stand interviewers.” I’d be like, “Tell me why.” I just want to know. I want to be as open to everyone’s crazy opinions as possible. That’s why I’m a great interviewer, but also probably would not be good in a situation like that. I’d like for people to tell me their most outrageous thoughts, their most inappropriate thoughts. It makes me a good interviewer. It makes me great at dinner, but would not make me the best new hire for this company.
All right. So you now are going out on Quora. You’re talking at meetups. You’re bringing in these mentors. How many students did you get your first round?
Andrew: And where did you do this? Where’d you get office space to do it?
Harsh: Right on Congress Avenue. Have you ever been to Austin?
Andrew: Yeah. That’s where Regus has an office. When I needed to get away from SXSW, I went upstairs to Regus and hung out in their office.
Andrew: That’s [inaudible 00:30:36] Central, right?
Harsh: Yeah. We were on 6th and Congress. It’s like an old historic building. It was the cheapest thing we could find.
Andrew: How much did it cost? This is the egghead business person in me. I’m curious.
Harsh: What did it cost? I think it was like $14,000 a month or something like that.
Andrew: $14,000 a month?
Harsh: Is that a lot or a little?
Andrew: That’s a lot more than I expected. I guess I always thought that you guys had a deal on this. You basically are bringing in a quarter-million dollars? $224,000? And then it’s $14,000 a month, so $30,000, maybe $90,000 total in office space.
Andrew: That’s fantastic. Now it’s time for you to teach. You know how to teach. Not you, actually, I looked at the website. It’s the three others who were teaching, right? You weren’t one of the teachers?
Harsh: Two others. I was the test subject for our teachers when they were building new curriculum. I would listen to it and be like, “You can’t do that. We’ve got to build an exercise for this. You can’t just talk at me about how you should do this.” I was the one that was like, “No, we need to create exercises for this. We need them to do exercises, then lecture, then exercises again,” more like shaping what I know to be effective regardless of what you’re teaching. So I was kind of like the guinea big for them. But we actually hired instructors.
Andrew: Yeah. It looks like Mike Ornellas was one of the earlier developer instructors.
Andrew: One of your cofounders, Shehzan, was one of the instructors.
Harsh: Shehzan, yeah. Gilbert, Matt Buck, Gilbert Garza.
Andrew: Osei Bonsu?
Harsh: Osei Bonsu, yeah.
Andrew: So a lot of instructors, actually, as I go through this. How much did you have to pay in instructors?
Harsh: It changed over time. At the beginning, a little because we also offered equity and then later one, more market rate because we stopped offering—in hindsight, it was a very generous equity package. But anywhere from like $60k to $120k-ish, a year.
Andrew: So you were already committing to more than just the 10 weeks. You were paying them annually because you knew you would do this multiple times.
Andrew: Okay. Oh wow, look at you—Josh Baer you got as an instructor, as an advisor?
Andrew: From Capital Factory. He’s the investor, the entrepreneur. He’s fantastic.
Harsh: I’ve got a story about that.
Andrew: The guy from Return Path.
Andrew: You had a lot of people all ready to go and teach. Did you make a profit that first round?
Harsh: Honestly, I don’t know. We were too busy doing the stuff.
Andrew: You just knew, “We have enough students here. We know the revenue is strong. This is successful. We don’t have to figure out whether we made enough money today or not. It’s basically profitable. If we continue, it’s definitely going to grow and be profitable.”
Harsh: Yeah. I now know that we were basically operating from a cash flow perspective, not a accrual basis. We were like, “Bank account is good. Let’s not focus on the money. Let’s focus on the teaching.”
Andrew: The other thing that stands out to me when I look at the early website is you hired people to also be—what was the title for it? To basically be career developers, to make sure the people who graduated ended up with jobs, am I right?
Andrew: What was their job? What did they have to do to help ensure that your people got jobs?
Harsh: At the very beginning, they were both doing sales to companies to be like, “Hey, we’ve got developers for you,” and also working with the candidates to be like, “Let me look at your resume. Let me make sure you’re applying to jobs. Let me look at your cover letter. Let me do a mock interview with you to make sure you don’t sound like a weirdo or a loser that no one wants to work with,” and then let me be the one that gives you that feedback no one else is going to give you about, “You need to talk to me when you’re interviewing,” or, “You can’t say um so much, or you can’t get stuck on this one thing. You’ve really got to be brief in the first conversation.” All that type of feedback, frankly I don’t know why colleges don’t do it, but they should because that’s what actually gets you the job.
Andrew: No, they don’t. Did you guys also charge the businesses?
Harsh: We did not at the beginning. We did later. We found this really—in hindsight, now it makes sense, but this weird phenomenon at the time, which is once we started charging, they started hiring more.
Harsh: Now all of a sudden, we weren’t giving a way a free product, we were placing value on our product.
Andrew: And you could maybe make more money from placing people than you would from tuition, couldn’t you?
Harsh: Yeah, technically you could.
Andrew: What is it? $30,000 is what a headhunter would get for placing a good developer? Maybe not a new developer. That’s might be $20,000.
Harsh: Yeah. The industry standard is like 10% to 20% of the first year salary.
Andrew: That’s phenomenal. All right. Now you’ve got something that actually starts to make sense. How do you grow it? What’s the next step?
Harsh: We did a bunch of different things. We didn’t think about growth until we had kind of built the existing system to operate without us. Then we were like, “Okay, now let’s look at the finances. Now let’s figure out how much money we’re making.”
Andrew: It was all about how do we get enough teachers one so that we don’t have to guide the curriculum and teach it all ourselves? How do we get someone to place our students? What was the hardest job for you guys to replace?
Harsh: Ownership of the whole experience.
Andrew: The student experience. A student comes in, applies, what do they see right away? At first it was a Typeform. Do we keep a Typeform? What questions do we ask? How do we tell them yes or no? How do we get them in a meeting? How do we then make sure that they’re shepherded through the process and get a job? What’s the title for that?
Harsh: Now it’s campus lead.
Andrew: Campus leader?
Harsh: Campus lead.
Harsh: At that time, we had no idea. First, we were like maybe it’s a product manager. Maybe it’s a class lead. Maybe it’s like a student experience manager. But it was really just someone who could take full ownership of the container. That was the hardest because you get all sorts of stuff thrown your way, like student issues, issues that students have with the program, issues that students have with each other, issues that teachers have with students or teachers have with each other, all sorts of dynamics. This is a people business. This isn’t a SaaS product. So there’s so many human dynamics at play.
Andrew: What do you hire for that? What are you looking for when you’re hiring someone to take the whole thing over?
Harsh: Empathy, someone who can put themselves in someone else’s shoes and then shepherd a conversation to a positive conclusion. It’s all about conversations.
Andrew: I’m looking at a blog post from someone who went through this process. He says that he was contacted to do a technical interview at first and then was it a psycho check? “Make sure that you’re a normal human being who doesn’t wear a full-length leather trench coat with a fedora,” is how he put it. This is a blog post by Mike Dao.
Harsh: That name doesn’t sound familiar.
Andrew: I don’t know if he ended up working with you guys. I’m just kind of breezing through research as we’re talking here. So you did a technical interview with people? What are you looking for in a technical interview from someone who says, “I don’t know how to program, I want to learn?”
Harsh: So we did not start from zero. If someone’s interested in coding, we didn’t say, “Hey, come to our program.” We said, “Here’s a bunch of resources for you to learn on your own. We need to make sure you can learn on your own and that you actually like this stuff. Come to us once you know, ‘I like this stuff and I want to accelerate my path. I don’t just want a pathway to follow. I can already do this myself. It was just going to take me a year or two. I’m already motivated to do it myself. It’s going to take me a year or two. I’m coming here because I want it to take my three months, not a year or two.'”
Harsh: So you have to do a technical interview to make sure that they’ve done the work themselves to be able to know that they’re going to like this stuff and they can teach themselves.
Andrew: All right. I’ve got an early application that you guys have on Typeform.
Harsh: You’re digging up everything. What is it?
Andrew: Yeah. As we talk, if you tell me something, I want to go see it for myself to get a sense of it. So if there’s an application, I want to go and see it. That’s interesting that on your application, of course, you ask for people’s LinkedIn profile, their phone number, etc. The thing that stood out was you also asked for a link to their TeamTreehouse.com URL to see their work their or their CodeSchool.com or Codeacademy. You wanted to see the work that they’d done on online programs to get a sense of whether they started something for real and whether they’d be a good fit. You know what else stands out for me on this?
Harsh: What’s that?
Andrew: The price. I’m looking at Typeform from 2014. By then, you’d already started to increase to your price to roughly $1,400 to $1,500, right?
Andrew: How’d you know to increase the price? What was it that signaled to you that it’s time that you can go hire?
Harsh: My cofounders will tell a version of the story, but the version of the story they’ll tell you is Harsh one time decided to pull up the site’s HTML and change the price and not tell anybody. We got the same amount of students coming in and the same amount of people interested except we were making more money. Most of that is true.
Andrew: What part is not?
Harsh: All of that is true.
Andrew: It is?
Harsh: All of that is true. I kind of just wanted to see the price sensitivity. I didn’t know. We didn’t know if $8,000 was right or not. We were spending enough money where we were eating enough margin where I was like, “Okay, I can see a world where in six months or a year, we’re going to be spending more per student than the tuition we’re bringing in. So let me try to solve this problem.”
Andrew: What were the big expenses?
Harsh: Staff. Staff was the biggest expense.
Andrew: The staff was there to teach? What else?
Harsh: You have admissions. You have finance, the technical teaching staff, the non-technical classroom leader, the career coaches and the employer partnerships folks. Over time, that would just seem that different people were asking, “Hey, I think we should have a person doing this. I think we should have a person doing that.” I was like, “We’re eating into our margin. That’s not sustainable. And I agree with you. We do need to have a person doing that. We’re going to have to raise the price.” There were all these discussions about, “What should we raise the price to?” I was just like, “Fuck it man, I’m going to do it and see what happens.”
Andrew: Okay. And you increased it by about 50% and boom, sales didn’t go down. Where are people getting this much money? If someone doesn’t have a top job, how can they afford another $14,000, $14,000?
Harsh: All of it was coming from cash at the beginning. Folks had stuff saved up or their friends or family—sometimes, the really scrappy ones would take out zero interest credit cards because they had good credit and they would pay the whole thing with a credit card and didn’t have to pay it back for a year. That was awesome, really smart. But then over time, there was another ecosystem that developed of lending partners that were going to fund students to go through coding schools. Now that ecosystem is thriving in and of itself. There’s like three, four different competitors that are all hoping to lend to students going specifically to coding schools.
Andrew: Makes sense because you’re helping them get jobs, the market is good. If you’re proven to create employable developers, there is money that they can pay back. There’s one other thing that stands out that I want to talk about in a moment and I also want to talk about this rumor that I heard that you substantiate basically with the pre-interviewer with our producer.
First, I’ve got to tell everyone about this post, this Medium post. Where is that Medium post? I have so many tabs open. I cannot talk to people without having tabs open. There it is. It’s a Medium post by a guy named Thuso Mbedzi. He’s a UX developer, top-rated UX developer. Here’s the headline from this from September 28th, “Fuck, I Failed Toptal’s Test for UX/UI Designers—Here’s Why.”
This guy put in—I probably shouldn’t curse in your interview, but I’ve got to be real with what I’m reading here. This guy wrote a long post about what his experience was like getting into Toptal, how tough it was, how much effort he put into it, how excited he was to be moving along in their process. Then he took his eye off the ball because he had clients.
He went to work with the client and then at the completion of this hiring process, he wasn’t as available and he lost the opportunity and he’s kicking himself and he’s basically writing this post to tell the world about how much he wanted to work for Upwork—did I say Upwork? For Toptal—he did not want to work for Upwork. He wanted to work for Toptal. He is now still working for Upwork, I can see from his bio. He wanted to be on this network because he knew the work was good, the clients were good.
This is the kind of thing you guys can see if you go look online from developers, from designers, they want to be associated with Toptal because they know that Toptal gets them the right clients. They get the right environment. They want to work there. So if you’re looking for a developer, if you’re looking for a designer, do you want someone who’s the best of the best, the person who’s hungry to work, who will love going through this process and kick themselves for not doing well, or do you want someone who’s cheap? Frankly, sometimes you do. You want the person who’s cheap.
But when you want the best of the best, the person who can outthink you, who won’t just do what you tell them to do, but will understand the problem and come up with a better way of doing it, now you’re talking Toptal. If that’s what you’re looking for, I urge you to go check out this URL.
Toptal was started by two Mixergy fans. One of them, Taso, came to a Mixergy event back when I was doing it at SXSW. He was a listener. He paid for a ticket. He came out. So they’re giving Mixergy listeners something they’re not giving anyone else. That is 80 hours of Toptal developer credit when you pay for your first 80 hours and that’s in addition to a no risk trial period of up to two weeks. Do you know Toptal? Do you guys place people in Toptal?
Harsh: We don’t. I do know them. They have a very good reputation. We haven’t worked with them. We haven’t found a way to. If we do, we might reach out.
Andrew: I guess some of your developers maybe could end up working with them. The idea is with Toptal, some businesses need to hire someone quickly. Sometimes they need to hire someone part-time, maybe it’s full-time, maybe they need to hire a whole team of developers all at once. They go to Toptal. Toptal has them in their network ready to go right away. I’m telling you guys, do your research and you’re going to love Toptal—Toptal.com/Mixergy.
You know, I’m surprised how many people who seem to be in competitive businesses to Toptal end up saying, “No, go ahead, they’re a whole other world from us. Go read the ad.” I always check. I checked with you. Maybe you’re investing in a competitor to Toptal. Maybe you don’t like Baby or Bathwater.
Harsh: No. I like Toptal and I now like—Baby with the Bathwater?
Andrew: Baby Bathwater, dude, BabyBathwater.com, the weirdest, wackiest name. Imagine telling your friends, imagine telling your team, “I’m not going to be around this weekend. I’m going to go to Baby Bathwater.”
Harsh: Yeah, or telling our accounts payable, “Please send this check to Baby Bathwater.”
Harsh: Sounds great. I want to do it just for that.
Andrew: Yeah. Here’s the second thing that I noticed in here. June 2013 is it? No, June 2014, you guys were going to go into San Francisco, $14,880 gets you into San Francisco. You were now starting to encroach on Hack Reactor’s territory, right?
Andrew: How did you decide that you were going to leave Austin and go straight into the heart of Silicon Valley?
Harsh: So anyone listening from Austin might be disappointed to hear this, but I believed it to be true three years ago now and I think it still might be true. The reason we went to San Francisco is because we felt like we were one of the best coding schools in the nation, but nobody was covering us because nobody—all the schools that were getting coverage were in San Francisco or New York.
We found that we were kind of just having a fight for the voice in the national conversation about coding schools even though our outcomes were super legit, way better than some of the other ones out there, and our teaching quality was really good. Our students loved the program. So we were like, “Hey, we’ve got to be in San Francisco. If we ever want to be a big player in this space, which we have dreams of, we’ve got to be in San Francisco.” Austin wasn’t going to cut it. So that’s what motivated us to be in San Francisco.
Andrew: I get that. I think you could have done a lot more without being in San Francisco. You weren’t reaching out to me, for example, and saying, “Hey, Andrew, I’m running this coding school, you need to find out about it.” I think that could have helped, but also I remember talking to Paul Graham and saying, “Why’d you leave Boston and go to San Francisco?” And he said basically, “Someone’s got to do it, and if you’re not the San Francisco person and some one else is, they’re going to get all the credibility. This is the place.”
Andrew: So you come into San Francisco. Was it hard to get students in San Francisco?
Harsh: It was. At the beginning, it was hard to get students. We didn’t have the same uptick as we did in Austin. I think our class sizes were like ten-ish. We were running San Francisco at a deficit for a little bit because we were competing with places like Hack Reactor and App Academy. Who else was there at the time? Hackbright, a couple other players that were already established there, but we knew that was something we wanted to do and invest in because we wanted to be a part of the national conversation. Ultimately, I think it got us to the White House.
Andrew: Being in San Francisco?
Harsh: I guess this is a guess and maybe I’m just connecting the dots because I’m convincing myself that it was a good idea in hindsight. The White House reached out to us after we launched in San Francisco, and they also reached out to other coding schools they had heard of that were doing a good job. I don’t think they would have heard about us much if we were just an Austin-based school.
Anyway, they had their short list of, “Hey, we’re going to invite Hack Reactor, MakerSquare, App Academy, Hackbright Academy,” all those were San Francisco schools, and Flatiron School from New York. I think that’s what got us that.
Andrew: That’s how Hack Reactor and MakerSquare connected, the two founders were there?
Harsh: Yeah. That’s how we got to know them well.
Andrew: Was it Tony who was there?
Harsh: Yeah. Tony and Shawn were there.
Andrew: Okay. Was there any resentment, like, “Dude, you just stepped into our territory. What the hell are you doing? We’re going crush you.” Was there any of that?
Harsh: No, there wasn’t, partly because Doug is the one you had on the show earlier a couple years ago. When we first started MakerSquare, Doug reached out and submitted an application to MakerSquare as a student. We’re like, “Ha ha, funny,” and then we submitted an application back to Hack Reactor. That got us—this was a little joke. We ended up getting on some Google Hangouts calls, and we were in touch with them from the very beginning.
Andrew: You always were?
Harsh: We were always in touch with Doug.
Andrew: Doug is a friendly person.
Harsh: Doug is the nicest human being you will ever meet in your entire life.
Andrew: Plus Doug has a need for people internally the way I do. I had to tell my assistant, “Look, you’re planning conferences for me. I want to go to dinner with people there. If you ask me who, I’m going to want everybody. What about the guy who opens the door? Why aren’t we talking to him?” Doug is like that too. He’s got that same need as me, where Tony, I think, is a little more disciplined in his love for people.
Harsh: So Doug was just being super nice. We were just going back and forth, and we were sharing what we were up to in Austin, like what was working, what wasn’t working. Doug was sharing what they were up to.
Andrew: Why? You were kind of sharing enough that it’s not risky for you and you’re connecting with them, but not so much that it’s dangerous for you, right?
Andrew: You were being fully open?
Harsh: Fully open about everything.
Harsh: A little bit of being naïve and a little bit of recognizing that they cared about the same thing we did, which was student outcomes, which means like, “Hey, their heart is in the right place. They’re just like us. Why the fuck not? Let’s just share and we’ll both get better.”
Andrew: I don’t know Anthony, Tony, as well as you do, but here’s my sense of him. He is a really nice, laidback guy who’s a freaking killer on the inside. I feel the energy from him. I don’t know how you replaced him, but I feel the energy from him, that he would have done well in a “Game of Thrones” type environment in another world and no one would have known that he was killing them.
Harsh: Yeah. That sounds about right.
Andrew: Do you feel in retrospect that maybe he was pumping you for data or something?
Harsh: No. I don’t think so at all.
Andrew: I bet he has a CRM somewhere with everything that you said.
Harsh: That would be awesome.
Andrew: And your favorite drink just in case.
Harsh: Yes, he would have that. He would have the favorite drink first.
Andrew: So you guys kept talking. You kept in touch. You finally met with Shawn and Tony in the White House. The White House brought you guys in to talk about how veterans can get jobs in the new economy. The new economy involves development. They wanted to pick your brains and learn from you. You got the honor of going over there and the credibility that comes from it. Does that then lead to a sale?
Harsh: Pretty much.
Andrew: It does. Why would you sell? You’re growing. Why sell?
Harsh: We didn’t have any intention of—we didn’t know anyone who would want to buy a school, to be honest, when we first started the thing. Our only goal when we first started the thing was let’s make a good school, and we did. We kind of achieved that goal, and then we had to refigure out what we cared about once we achieved that goal of creating a good school and figuring out how we were going to grow it. So we had no intention of selling to anybody, but then we had a couple other players who ended up buying a dev boot camp and The Iron Yard come out to us and say like, “Hey, we want to do a partnership,” and that usually means, “We’re interested in buying you,” which I now learned.
So we had them and they were like, “Hey, we want to buy you.” We’re like, “What? That’s weird. Why do you want to buy a school?” Then we were like, “Wait a minute, I guess we did build a business that people want to buy,” and we were like, “We wouldn’t really feel proud to sell to the people that reached out to us.”
Andrew: Why? What was it about them?
Harsh: DeVry University and University of Phoenix. They had a very bad reputation in the for profit industry.
Harsh: We were like, “This isn’t the last business that we’re going to start. If we are going to sell MakerSquare, we want to sell it to people that we feel good about who we would place a bet on in winning in the industry in the long term.” I was like, “That’s not University of Phoenix. That’s not DeVry.”
Once they were giving us offers, we were like, “Who would we want to sell to?” We were like, “Hack Reactor, those are the guys we think are going to do well long term. We get along with them. We have a shared value system of we want students to get jobs. We obsessively care about that.” We were like, “That feels way better. So if they can give us the same thing, let’s go with them rather than these other guys.”
Andrew: How did they get the cash to buy you guys out? Did they have outside funding?
Harsh: They didn’t have outside funding, and they didn’t have all the cash the other guys were giving us. We felt like not taking all of the cash and reupping a little bit into Hack Reactor felt good.
Andrew: You wanted a little equity.
Harsh: Yeah. We’re not done with this coding school industry.
Andrew: How much did you sell it for?
Harsh: I don’t know if I want to tell you that.
Andrew: Ballpark it. We’re talking about $1 million to $10 million? $11 million to $20 million?
Harsh: $1 million to $10 million.
Andrew: Okay. Part cash, part equity in the business?
Andrew: Do you remember the day when the money went into your bank account?
Harsh: I do. Tony and I walked over to Chase Bank together and did a little transfer.
Andrew: Oh, really? In the bank?
Harsh: Yeah, at Chase. It was almost an afterthought. I’m an idiot, right? We were all still so interested in growing the business. That’s what we cared about. We were like, “Okay, in order for us to grow this thing together, god dammit, we have to do all this paperwork and legal stuff and money transfer and all that stuff. What are you guys doing with the students over there? Here’s what we’re doing.” So we’re just focused on all this other stuff. Obviously, the money was important, but at one point, we were in San Francisco and we were like, “Wait a minute, let’s walk over to Chase and do the transfer now.” And they were like, “Oh yeah, let’s do that.”
Andrew: And you became a millionaire in cash that day.
Andrew: You didn’t? Because you had three other cofounders?
Harsh: Exactly, and we had a couple of advisors we gave equity to and we were generous with our initial staff, all sorts of reasons.
Andrew: Right. You said you gave them equity.
Harsh: Yeah, exactly. So no, not millionaires, but enough where we were at least keeping up with all of our friends who were doing banking and finance jobs for the last several years while we were—
Andrew: Keeping up or beating them?
Harsh: Beating them at that point.
Andrew: Here’s the thing. It’s so painful as an entrepreneur. You can work your ass off, take all these risks, you go to sleep at night knowing you could lose it all, including your credit, which would make it hard to start another company. Meanwhile, we all have friends who are in finance who don’t have any of those risks. Yeah, they’re risking stuff, but it’s basically other people’s money and the next step in their career who often make tons of cash.
Andrew: They then get tons of stuff. If it’s not the right cars, and it often is that, it’s also these homes that they’re buying. It’s also this random real estate thing.
Harsh: Yeah. You go hang out with them and you’re like, “Damn, what the hell am I doing?”
Andrew: What kind of universe are we living in where they are more valuable to the economy than we are? We’re not talking about the heads of these banks. We’re talking about some dude who does practically nothing, but because he’s in the finance industry. . .
Harsh: Making PowerPoints to sell companies makes six figures.
Andrew: I remember the founder of Living Social told me that he was going home on a Segway because he had to like analyze every minute of his day, he’s that kind of a person. That’s what you need to do as an entrepreneur, maximize time, maximize money, like every little bit. Meanwhile, some of these guys right out of school.
Andrew: Here’s the thing. I’m now living in San Francisco. I don’t usually like rumors, but now that I’m doing interviews, I need them to understand what’s going on in the space. The rumor I heard was this whole space went from rising and going from heights to heights, as they say in the UK, to a crash, where some of the schools closed, including the one that sold for a pretty good amount of money.
Harsh: Dev Bootcamp?
Andrew: Dev Bootcamp closed after selling. Others struggled. You guys had to do cutbacks. What happened? Tell me about the cutback and what it was like for you and then tell me broader in the industry why did this happen?
Harsh: Yeah. So I think I’ve got to be honest, I don’t know exactly what happened. If I did, we would just never do that thing. It’s a lot of looking at some datasets and inferring and whatnot. I don’t know exactly what happened. I can’t say, “Here’s what happened.” At least for some of the other players—we knew how hard it is to run a good school, which is good outcomes, while running it at a profit, which means you get to keep going. Sometimes profits get a bad—if you’re making money, sometimes people feel that’s a bad thing in education, when really, it means, hey, this institute is going to stay on for a long time if they’re profitable.
So, anyway, we knew how hard it was to be profitable and have good outcomes. Yet, some of these other places were taking on tens of millions in funding. We’re like, “What the hell are you using that on?” If you gave us $10 million, we would probably park it in the bank and keep doing our thing. We might start a couple growth—they were just burning through cash. Yet, their outcomes were not getting better and they were not creating a profitable business.
I think that came back to bite them. When prospective students got smart about what school to go to, they got smart about choosing the school that’s going to be the best for their career, which means good outcomes. Once that student stream stopped for other schools, they couldn’t really bring it back up because it takes time to prove that you have good outcomes. They just didn’t know how to operate a school on a unit basis to be profitable. I think they had too much money to use.
Andrew: Was it also that it was overbuilt? We went from having no in person schools that were really connected to this industry to suddenly having lots because it felt like anyone could create it?
Harsh: Yeah. I don’t know if that’s—probably. I don’t know for sure, but I think so.
Andrew: You had let people go, how many out of how many?
Harsh: Yeah. We had to let a lot of people go. I think like 30 or 40ish.
Harsh: It was tough. It was obviously tougher for the folks that we had to let go. It was really tough for us and therefore, it was like insanely tough for the people we had to let go. But you’ve got to do it. You owe it to the students and the staff to make sure your school is going to stay around for a long time. You can’t really shy away from that. You’ve got to do the hard stuff and you’ve got to do it as best as you can.
So it was a really tough time. Our revenues were decreasing. Our costs were flatlining/increasing at times and we had a lot of staff. We just had to cut costs. In all of 2017 while our revenues were declining, our profit was going up because we were getting so good at optimizing the business. So, in hindsight, it’s a good thing. We’ve not set ourselves up from a cost basis wise to be a lot more efficient than we were a year and a half ago.
Andrew: What’s one area of efficiency that’s resulted in big cost savings?
Harsh: Figuring out what it takes to run one classroom unit.
Andrew: What do you mean?
Harsh: Frankly, it’s just letting go of different personnel that isn’t crucial for a class—
Andrew: What did you think was crucial but in retrospect is not?
Harsh: We had a large engineering team at the time. I want to say like five or six different people that were working on different projects that were going to be good infrastructure for the school. They just never came to fruition.
Andrew: Like what? What’s an infrastructure thing that you guys want?
Harsh: So we built this thing called Showrunner. Tony built this thing called Showrunner. It might be Tony’s single largest contribution to the world. This thing is the best. It’s pretty simple. It’s an Asana system that dishes out—it’s an automated Asana system that dishes out tasks to people that are supposed to do the tasks. So all of our staff, when they wake up in the morning, they have a task list assigned to them, “You’ve got to do this, this, and this today.”
Andrew: It automatically does that?
Harsh: Yeah. Every night it will dish out the tasks. We structured everything to like, “We have week one, day one, this is what happens. Week one, day two, this is what happens.”
Andrew: So somebody just fires it up and all the tasks go out to the right people and it’s called Showrunner because it runs the show at Hack Reactor?
Harsh: So we started implementing that all around our schools. We’re still implementing it. That’s an efficiency type of thing, where now you need less people to run a school because you don’t need the person every day waking up and deciding what’s everyone going to do? And each person can be a lot more efficient because they don’t have to think about what they have to do. It’s so freeing when you don’t have to make the decisions of, “What am I going to do today?”
Andrew: I’m looking at this article here. Asana did a case study on you guys.
Harsh: They did.
Andrew: I told you, everything you tell me I have to check to see what is Showrunner. Yeah, here it is. “After using Asana’s template feature to copy projects and processes, the Hack Reactor team added more functionality through the API and created a program called Showrunner. We got this giant class template. We wrote a system with the Asana API that automatically copies over all the tasks needed for a new class and then automatically assigns those tasks we built on the API and it allows us to assign repeatable tasks to the right people, all the right things at the right time, every detail is covered.”
Andrew: By the way, the word “checklist” I think is mentioned a couple of times in here and other phrases that make it seem like this is just boring, it’s not. You’re right. This is what gives you superpower as a company, but I found whenever I want to implement more checklists like this, people think, “Don’t tell me how to do my work.” I’ll give you an example. If I’m doing a live event, I know that the chatbot that we have is going to get the most people to show up live at the same time.
Anyone can create a chatbot. If I teach you how to do it, you can create it. It feels like I’m robbing you of your creativity and I don’t trust you if I say, “All right, Here is the checklist of the five things I need you to do to set up this chatbot.” But it means that you’re not going to screw up and it means if you come up with the sixth idea, you’re going to remember it the next time you have to create one of these. Was it hard for you guys to sell it internally?
Harsh: Tony had done the hard work, so I didn’t have to. It actually isn’t hard to sell it internally anymore because people get it.
Andrew: Once they see it, they love it, and then they become evangelists of it, but until they do, it’s painful, right?
Harsh: It is painful. The painful part is when you’re building the template, like hey, what are you doing on this day? Tell me the tasks that you’re doing.
Andrew: Why is that difficult?
Harsh: Because there are tones of you’re taking my job away. You’re automating my job. Why are you doing this?
Andrew: Maybe you want to know so you can replace me with someone else because you’re asking me what to do. Yeah.
Harsh: Exactly. But you do it and you put someone in our classroom enough and after like one, maybe two cycles, they’re like, holy shit, I never want to think about what I’m doing that day again. I want to someone else to tell me what I’m supposed to because it is the same every time. We’ll make improvements on it, like we’ll notice like, “Oh, wait, we should do this thing on week 14, day 2,” and it will edit the Showrunner.
Andrew: That’s the beauty too. When you come up with—imagine you see a problem. Usually you see a problem and you go, “At some point we should fix it, let’s make a note.” Not make a note, go to the checklist, add item number six.
Harsh: Have your read “The Checklist Manifesto?”
Andrew: Yeah, I did. I always thought I didn’t need to read it. I got it from the title. What I ended up doing was getting the audiobook. The audiobook was pretty interesting, at times kind of, “Okay, I got it.” But I got a few techniques from it. Did you read the book?
Harsh: No. I read the CliffsNotes.
Andrew: You feel like you kind of get it. You read the CliffsNotes? What service do you use to read CliffsNotes?
Andrew: CliffsNotes itself still operates? They’re still in business?
Harsh: It was a couple years ago. I haven’t checked today.
Andrew: I think the CliffsNotes are probably fine. One of the thing I got from it was I was over checklisting things, where everything would have a lot of items. He has this whole chapter about how I think it was Boeing helps their pilots in crisis by creating checklists that don’t have every step. The reason for that is if people feel like they have too many steps they know, they’re just not going to reach for the checklist. It signals to them they already know every item in the checklist, so why bother with this checklist? If it has just the key items they need to know and they’re likely to forget, they’re more likely to go through the checklist and actually get it used.
The secret of these right checklists, especially in aviation is to understand how to simplify it to the point where you have just the items you want and none of the ones that are obsessive and distracting from what you want. For me, I got so into checklists that I would checklist every step. What I should have also known is people are upset with this for a reason. It feels like a drag for a reason. I’m over checklisting it.
Andrew: That makes sense.
Harsh: That was one of my big insights from it.
Harsh: We got into a rabbit hole from the original question of what was the stuff that you were building. What was the engineering team building? So this was one of the useful things that we found the team was building. They were making iterations on it, but not really shipping it. A lot of that, ultimately that ends up being my fault, I should have done something about it. Tony should have done something about it. Everyone should have done something about it.
But we never really had the jolt to audit and asses it until we were like, “Holy shit, we’re going to run out of money.” We have to asses every single thing that we’re doing. We have to audit everything and make sure we’re spending money effectively. That was the jolt it took to audit that portion of the business.
Andrew: I get it. Let me close out with this. Why are you in charge? Anthony is a young guy. Anthony, he prefers to go by Tony, doesn’t he? I’m very informal with him. Tony is a very young guy. He obviously still has energy. He’s still involved in the business. How do you go from being the COO to suddenly running the thing? Why?
Harsh: Tony and I talk about this a lot. There are things that he had to do, he had to work on getting better at that come naturally to me.
Harsh: Like the great example is that conversation that I mentioned from Nick, that sexual harassment thing, like how do you bring that up with your manager. It took me a couple of tries like, “This is what you do.” It’s not as mentally taxing to me to come up with that and then also to execute on that conversation. It is mentally taxing for me to build Showrunner.
So Tony’s skill set for stuff that naturally came to him was different than mine. Mine overlapped more with the things that the company needed. Tony would be the first one to tell you this, but I’m better at giving feedback to people, both positive and negative. It doesn’t feel like an attack. When Tony did it and worked on it and worked on it, somehow he would have a greater rate of people being mad at him.
Harsh: Yeah. It sucks. If you know Tony, it’s nothing personal. There’s nothing there that’s malicious and everything. Not everyone picks up on that or knows that and has that context. So a lot of the conversations were really mentally taxing for him. When someone said something bad about him, when someone left a bad review and mentioned his name or something, it was really tough on him.
Andrew: I’m surprised. I would never have thought that he would care. I love it when people leave bad reviews about me. I like the feedback. I feel like the only way you get feedback is if people really love you, which I love, or really hate you. Otherwise, if they’re indifferent, I get nothing.
Harsh: I agree with you and I think Tony would too.
Andrew: Still, it’s emotionally painful for some people.
Harsh: Exactly. It’s emotionally painful. For me, I think this is one area that Tony and I are similar on—it is emotionally taxing for me, but I’m able to be like, “Fuck it, I did the best I could at the time I had to make that decision about that thing. What good is it going to do for me to keep worrying about this? I’m going to work on the next thing that’s in front of me.”
Andrew: That is something that I still wrestle with. I don’t care if someone insults me or something, but when I accept that I made a mistake and I could correct it still, even after correcting it, I still feel I have to get to the point where I say, “Screw it, you have to make a lot of decisions in business. Some of them are going to be bad. You yourself will regret them later on. But if you don’t risk that regret, if you don’t allow yourself to make mistakes that lead to regret, you’re never going to move.” I get it.
Andrew: So did I ask what your revenues were? No, I didn’t for Hack Reactor. Where are you guys now?
Harsh: We’re just north of $20 million.
Andrew: Just north of $20 million as a company. So, basically, you’re part of Hack Reactor. MakerSquare, the thing in Austin is roughly half the business.
Andrew: Are you guys still acquiring companies? Are you ready, if someone in my audience has got a coding school and wants to partner up with you, are you ready to do it?
Harsh: We’re a lot smarter about it now. We did a couple acquisitions that didn’t go well, but we would be willing to do the evaluation.
Andrew: Okay. You guys are opening up to anyone who wants to go sign up if they want to learn from Hack Reactor. What cities are you in?
Andrew: I know what they are.
Harsh: New York, Austin, L.A., San Francisco, and then we have two remote locations.
Andrew: The remote are not learn at your own pace, watch these videos. They’re, “Hey, dude, you’re here with us.”
Harsh: It is honestly the best school on the internet.
Andrew: It’s supposed to be real time, you show up, when we show up, be there.
Harsh: There was a time when my only job was to run the remote team. I did not appreciate how good of a product it was until I ran the thing. One thing, Andrew, we’re really shitty at marketing. We’re really good at doing a good job with students and everything, but we just don’t have that marketing DNA.
Andrew: I accept that. I think you guys really are shitty at marketing. You are. You’re never par—Hack Reactor is never part of the conversation, never. The only time I ever see Hack Reactor—I’m in the freaking space—the only time I ever see Hack Reactor is I live in the Mission, I see all these dudes with Hack Reactor—here’s where you’re good at marketing. Your people will have a t-shirt and they care enough about the school and the program that they will wear it.
Harsh: They fucking love this place.
Andrew: Right. They love the place. Exactly. That’s the best thing. I will see—now I’m dropping my kid off at school. I see some of the dads or one of the dads, at least, has a Hack Reactor shirt or a hoodie or something. I see it on BART. That’s the one big place. I’m frankly surprised that you guys reached out to me and said, “You should interview Harsh.”
Harsh: We’re getting better. Anyway, that remote thing, it’s the bomb. It doesn’t, in our marketing material and stuff, it doesn’t come off that it’s the bomb. I haven’t found a better school on the internet. Obviously, I’m biased.
Andrew: I think also you guys are dealing there with, at least with me, this is where I could be misunderstanding it. I at first thought remote meant online, learn at your own pace, and considered it on par with Treehouse. It’s different than Treehouse. It’s more of the in person.
Harsh: I don’t know what to call it. How do you name a synchronous, face to face, all day, every day video chat program? I don’t know.
Andrew: That is a tough one. All right. You guys call it remote intent immersive. That’s as close as I could come up with.
Harsh: If anyone listening has got a better idea, I am all ears.
Andrew: Cool. What’s a good way for them to reach you. I’m going to guess—your email address, I don’t know it offhand. It’s going to be Harsh@HackReactor.com.
Harsh: That works. That’s an alias to Harsh.Patel@HackReactor.
Andrew: Got it. Cool. Thank you so much for being on here. It’s HackReactor.com for anyone who wants to check it out. Frankly, if you guys are going to Baby Bathwater, email me so we can text each other before we go out there. I am so looking forward to the group of people who are going to be in there. Cameron what’s his name—why am I forgetting the guy’s last name, the COO. He is the guy who basically convinced me I’ve got to go, Cameron Harold. He knows how to be a COO better than anyone else. He runs this whole organization.
I don’t freaking know how to lead people sometimes. I’m good at it sometimes. Sometimes I’m horrible at it. He’s the kind of person who I want to go meet over there. I don’t know if he’s going to this trip, but I know that if he’s there and he’s loving it and he’s having real meaningful work-related conversations Baby Bathwater, that’s where I want to go.
If you’re going to Baby Bathwater, go to BabyBathwater.com/Mixergy to apply, chat with the people there. They’re good people. They’ll tell you whether you’re a good fit or not. I hope to get to see you there, BabyBathwater.com/Mixergy. And if you want an intense developer or designer to come work for you part-time, full-time, get a team of people, go to Toptal.com/Mixergy. Harsh, thanks for being on here.
Harsh: Thanks, Andrew.