Sebastian Thrun initiates aggressive plan to transform Udacity

“I’m a fighter. I believe in our people, I believe in our mission, and I believe that it should exist and must exist.”

Sebastian Thrun is talking animatedly about Udacity, the $1 billion online education startup that he co-founded nearly eight years ago. His tone is buoyant and hopeful. He’s encouraged, he says over an occasionally crackly phone call, about the progress the company has made in such a short time. There’s even a new interim COO, former HP and GE executive Lalit Singh, who joined just days ago to help Thrun execute this newly formed strategy.

That wasn’t the case four weeks ago.

In a lengthy email, obtained by TechCrunch, Thrun lobbed an impassioned missive to the entire company, which specializes in “nanodegrees” on a range of technical subjects that include AI, deep learning, digital marketing, VR and computer vision.

It was, at times, raw, personal and heartfelt, with Thrun accepting blame for missteps or admitting he was sleeping less than four hours a night; in other spots the email felt like a pep talk delivered by a coach, encouraging his team by noting their spirit and tenacity. There were moments when he exhibited frustration for the company’s timidness, declaring “our plans are ridden of fear, of trepidation, we truly suck!” And moments just as conciliatory, where he noted that “I know every one of you wants to double down on student success. I love this about us.”

Thrun has sent spirited emails before. Insiders say it’s not uncommon and that as a mission-driven guy he often calls on employees to take risks and be creative. But this one stood out for its underlying message.

If there was a theme in the email, it was an existential one: We must act, and act now or face annihilation.

“It was a rallying cry, to be honest,” Thrun told TechCrunch. “When I wrote this email, I really wanted to wake up people to the fact that our trajectory was not long-term tenable.”

“I can tell you that I woke up the troops, that is absolutely sure,” he said later. “Whether my strategy is sound, only time can tell.”

Udacity founder Sebastian Thrun speaks onstage during TechCrunch Disrupt SF 2017 at Pier 48 on September 19, 2017 in San Francisco, California. (Photo by Steve Jennings/Getty Images for TechCrunch)

Thrun said the past month has been transformative for the company. “It was a tough moment when I had to look at the business, look at the financials, look at the people in the company,” Thrun said, adding, “And the people in the company are amazing. I really believe in them, and I believe that they’re all behind the mission.”

A tough year

Part of Udacity’s struggles were borne out of its last funding round in 2015, when it raised $105 million and became a unicorn. That round and the valuation set high expectations for growth and revenue.

But the company started hitting those targets and 2017 became a breakout year.

After a booming 2017 — with revenue growing 100 percent year-over-year thanks to some popular programs like its self-driving car and deep learning nanodegrees and the culmination of a previous turnaround plan architected by former CMO Shernaz Daver — the following year fizzled. Its consumer business began to shrink, and while the production quality of its educational videos increased, the volume slowed.

“In 2018, we didn’t have a single a blockbuster,” Thrun said. “There’s nothing you can point to and say, ‘Wow, Udacity had a blockbuster.’ “

By comparison, the self-driving car engineering nanodegree not only was a hit, it produced a successful new company. Udacity vice president Oliver Cameron spun out an autonomous vehicle company called Voyage.

Udacity CEO Vishal Makhijani left in October and Thrun stepped in. He took over as chief executive and the head of content on an interim basis. Thrun, who founded X, Google’s moonshot factory, is also CEO of Kitty Hawk Corp., a flying-car startup.

His first impression upon his return was a company that had grown too quickly and was burdened by its own self-inflicted red tape. Staff reductions soon followed. About 130 people were laid off and other open positions were left vacant, Thrun said.

Udacity now has 350 full-time employees and another 200 full-time contractors. The company also has about 1,000 people contracted as graders or reviewers.

An emphasis, when I rejoined, was to cut complexity and focus the company on the things that are working,” he said. 

One area where Udacity seemed to excel had also created an impediment. The quality of Udacity’s video production resulted in Hollywood-quality programming, Thrun said. But that created a bottleneck in the amount of educational content Udacity could produce.

Udacity’s content makers — a staff of about 140 people — released nearly 10 nanodegrees in 2018. Today, as a result of cuts, only 40 content creators remain. That smaller team completed about five nanodegrees in the first quarter of 2019, Thrun said.

Last year, it took between 10 to 12 people, and more than $1 million, to build one nanodegree, Thrun said. “Now it’s less than 10 percent of that.”

The company was able to accomplish this, he said, by changing its whole approach to video with taping, edits and student assessments happening in real time.

Udacity, under Thrun’s direction, has also doubled down on a technical mentorship program that will now match every new student with a mentor. Udacity has hired about 278 mentors who will work between 15 and 20 hours a week on a contract basis. The company is targeting about 349 mentors in all.

Students are also assigned a cohort that is required to meet (virtually) once a week.

Thrun described the new mentor program as the biggest change in service in the entire history of Udacity. “And we literally did this in two weeks,” he said. 

The strategy has met with some resistance. Some employees wanted to test the mentorship program on one cohort, or group of students, and expand from there. Even since these recent changes, some employees have expressed doubts that it will be enough, according to unnamed sources connected to or within the company.

Even Thrun admits that the “fruit remains to be seen,” although he’s confident that they’ve landed on the right approach, and one that will boost student graduation rates and eventually make the company profitable.

“If you give any student a personalized mentor that fights for them, and that’s the language I usually use, then we can bring our graduation rate, which is at about 34 percent to 60 percent or so,” he said. “And for online institutions 34 percent is high. But we have programs in that graduate more than 90 percent of our students.”

Udacity doesn’t share exact numbers on post-graduation hiring rates. But the company did say thousands of Udacity alumni have been hired by companies like Google, AT&T, Nvidia and others in the U.S., Europe, India and China.

In the U.S. and Canada, graduates with new jobs reported an annual salary increase of 38 percent, a Udacity spokesperson shared.

Indeed, Udacity has had some successes despite its many challenges.

Bright spots

Udacity has continued to increase revenue, although at a slower rate than the previous year-over-year time period. Udacity said it generated $90 million in revenue in 2018, a 25 percent year-over-year increase from 2017.

Udacity had informally offered enterprise programs to clients like AT&T. But in September, the company made enterprise a dedicated product and hired a VP of sales to bring in new customers.

Udacity has added 20 new enterprise clients from the banking, insurance, telecom and retail sectors, according to the company. There are now 70 enterprise customers globally that send employees through Udacity programs to gain new skills.

It continues to expand its career services and launched 12 free courses, built in collaboration with Google, with nearly 100,000 enrollments. It has also funded more than 1.1 million new partial and full scholarships to its programs for students across North America, Europe, the Middle East and Asia. About 21% of all Udacity Nanodegree students in the Grow with Google program in Europe have received job offers, according to Google.

The company also has a new initiative in the Middle East, where it teaches almost a million young Arab people how to code, Thrun said, an accomplishment he says is core to his mission.

Udacity isn’t profitable yet on an EBITDA basis, Thrun shared, but the “unit economics per students, and on a gross margin basis, are good.”

Now, it comes down to whether Thrun’s push to become faster, more efficient and nimble, all while investing in student services and its enterprise product, will be enough to right the ship.

“I really believe if you can get to the point that students come to us and we bend over backwards to ensure their success, we will be a company that has a really good chance of lasting for a lifetime,” he said. 

And if it doesn’t work, then we’ll adjust, like any other company. We can always shift.”

Sebastian Thrun initiates aggressive plan to transform Udacity

“I’m a fighter. I believe in our people, I believe in our mission, and I believe that it should exist and must exist.”

Sebastian Thrun is talking animatedly about Udacity, the $1 billion online education startup that he co-founded nearly eight years ago. His tone is buoyant and hopeful. He’s encouraged, he says over an occasionally crackly phone call, about the progress the company has made in such a short time. There’s even a new interim COO, former HP and GE executive Lalit Singh, who joined just days ago to help Thrun execute this newly formed strategy.

That wasn’t the case four weeks ago.

In a lengthy email, obtained by TechCrunch, Thrun lobbed an impassioned missive to the entire company, which specializes in “nanodegrees” on a range of technical subjects that include AI, deep learning, digital marketing, VR and computer vision.

It was, at times, raw, personal and heartfelt, with Thrun accepting blame for missteps or admitting he was sleeping less than four hours a night; in other spots the email felt like a pep talk delivered by a coach, encouraging his team by noting their spirit and tenacity. There were moments when he exhibited frustration for the company’s timidness, declaring “our plans are ridden of fear, of trepidation, we truly suck!” And moments just as conciliatory, where he noted that “I know every one of you wants to double down on student success. I love this about us.”

Thrun has sent spirited emails before. Insiders say it’s not uncommon and that as a mission-driven guy he often calls on employees to take risks and be creative. But this one stood out for its underlying message.

If there was a theme in the email, it was an existential one: We must act, and act now or face annihilation.

“It was a rallying cry, to be honest,” Thrun told TechCrunch. “When I wrote this email, I really wanted to wake up people to the fact that our trajectory was not long-term tenable.”

“I can tell you that I woke up the troops, that is absolutely sure,” he said later. “Whether my strategy is sound, only time can tell.”

Udacity founder Sebastian Thrun speaks onstage during TechCrunch Disrupt SF 2017 at Pier 48 on September 19, 2017 in San Francisco, California. (Photo by Steve Jennings/Getty Images for TechCrunch)

Thrun said the past month has been transformative for the company. “It was a tough moment when I had to look at the business, look at the financials, look at the people in the company,” Thrun said, adding, “And the people in the company are amazing. I really believe in them, and I believe that they’re all behind the mission.”

A tough year

Part of Udacity’s struggles were borne out of its last funding round in 2015, when it raised $105 million and became a unicorn. That round and the valuation set high expectations for growth and revenue.

But the company started hitting those targets and 2017 became a breakout year.

After a booming 2017 — with revenue growing 100 percent year-over-year thanks to some popular programs like its self-driving car and deep learning nanodegrees and the culmination of a previous turnaround plan architected by former CMO Shernaz Daver — the following year fizzled. Its consumer business began to shrink, and while the production quality of its educational videos increased, the volume slowed.

“In 2018, we didn’t have a single a blockbuster,” Thrun said. “There’s nothing you can point to and say, ‘Wow, Udacity had a blockbuster.’ “

By comparison, the self-driving car engineering nanodegree not only was a hit, it produced a successful new company. Udacity vice president Oliver Cameron spun out an autonomous vehicle company called Voyage.

Udacity CEO Vishal Makhijani left in October and Thrun stepped in. He took over as chief executive and the head of content on an interim basis. Thrun, who founded X, Google’s moonshot factory, is also CEO of Kitty Hawk Corp., a flying-car startup.

His first impression upon his return was a company that had grown too quickly and was burdened by its own self-inflicted red tape. Staff reductions soon followed. About 130 people were laid off and other open positions were left vacant, Thrun said.

Udacity now has 350 full-time employees and another 200 full-time contractors. The company also has about 1,000 people contracted as graders or reviewers.

An emphasis, when I rejoined, was to cut complexity and focus the company on the things that are working,” he said. 

One area where Udacity seemed to excel had also created an impediment. The quality of Udacity’s video production resulted in Hollywood-quality programming, Thrun said. But that created a bottleneck in the amount of educational content Udacity could produce.

Udacity’s content makers — a staff of about 140 people — released nearly 10 nanodegrees in 2018. Today, as a result of cuts, only 40 content creators remain. That smaller team completed about five nanodegrees in the first quarter of 2019, Thrun said.

Last year, it took between 10 to 12 people, and more than $1 million, to build one nanodegree, Thrun said. “Now it’s less than 10 percent of that.”

The company was able to accomplish this, he said, by changing its whole approach to video with taping, edits and student assessments happening in real time.

Udacity, under Thrun’s direction, has also doubled down on a technical mentorship program that will now match every new student with a mentor. Udacity has hired about 278 mentors who will work between 15 and 20 hours a week on a contract basis. The company is targeting about 349 mentors in all.

Students are also assigned a cohort that is required to meet (virtually) once a week.

Thrun described the new mentor program as the biggest change in service in the entire history of Udacity. “And we literally did this in two weeks,” he said. 

The strategy has met with some resistance. Some employees wanted to test the mentorship program on one cohort, or group of students, and expand from there. Even since these recent changes, some employees have expressed doubts that it will be enough, according to unnamed sources connected to or within the company.

Even Thrun admits that the “fruit remains to be seen,” although he’s confident that they’ve landed on the right approach, and one that will boost student graduation rates and eventually make the company profitable.

“If you give any student a personalized mentor that fights for them, and that’s the language I usually use, then we can bring our graduation rate, which is at about 34 percent to 60 percent or so,” he said. “And for online institutions 34 percent is high. But we have programs in that graduate more than 90 percent of our students.”

Udacity doesn’t share exact numbers on post-graduation hiring rates. But the company did say thousands of Udacity alumni have been hired by companies like Google, AT&T, Nvidia and others in the U.S., Europe, India and China.

In the U.S. and Canada, graduates with new jobs reported an annual salary increase of 38 percent, a Udacity spokesperson shared.

Indeed, Udacity has had some successes despite its many challenges.

Bright spots

Udacity has continued to increase revenue, although at a slower rate than the previous year-over-year time period. Udacity said it generated $90 million in revenue in 2018, a 25 percent year-over-year increase from 2017.

Udacity had informally offered enterprise programs to clients like AT&T. But in September, the company made enterprise a dedicated product and hired a VP of sales to bring in new customers.

Udacity has added 20 new enterprise clients from the banking, insurance, telecom and retail sectors, according to the company. There are now 70 enterprise customers globally that send employees through Udacity programs to gain new skills.

It continues to expand its career services and launched 12 free courses, built in collaboration with Google, with nearly 100,000 enrollments. It has also funded more than 1.1 million new partial and full scholarships to its programs for students across North America, Europe, the Middle East and Asia. About 21% of all Udacity Nanodegree students in the Grow with Google program in Europe have received job offers, according to Google.

The company also has a new initiative in the Middle East, where it teaches almost a million young Arab people how to code, Thrun said, an accomplishment he says is core to his mission.

Udacity isn’t profitable yet on an EBITDA basis, Thrun shared, but the “unit economics per students, and on a gross margin basis, are good.”

Now, it comes down to whether Thrun’s push to become faster, more efficient and nimble, all while investing in student services and its enterprise product, will be enough to right the ship.

“I really believe if you can get to the point that students come to us and we bend over backwards to ensure their success, we will be a company that has a really good chance of lasting for a lifetime,” he said. 

And if it doesn’t work, then we’ll adjust, like any other company. We can always shift.”

Sebastian Thrun initiates aggressive plan to transform Udacity

“I’m a fighter. I believe in our people, I believe in our mission, and I believe that it should exist and must exist.”

Sebastian Thrun is talking animatedly about Udacity, the $1 billion online education startup that he co-founded nearly eight years ago. His tone is buoyant and hopeful. He’s encouraged, he says over an occasionally crackly phone call, about the progress the company has made in such a short time. There’s even a new interim COO, former HP and GE executive Lalit Singh, who joined just days ago to help Thrun execute this newly formed strategy.

That wasn’t the case four weeks ago.

In a lengthy email, obtained by TechCrunch, Thrun lobbed an impassioned missive to the entire company, which specializes in “nanodegrees” on a range of technical subjects that include AI, deep learning, digital marketing, VR and computer vision.

It was, at times, raw, personal and heartfelt, with Thrun accepting blame for missteps or admitting he was sleeping less than four hours a night; in other spots the email felt like a pep talk delivered by a coach, encouraging his team by noting their spirit and tenacity. There were moments when he exhibited frustration for the company’s timidness, declaring “our plans are ridden of fear, of trepidation, we truly suck!” And moments just as conciliatory, where he noted that “I know every one of you wants to double down on student success. I love this about us.”

Thrun has sent spirited emails before. Insiders say it’s not uncommon and that as a mission-driven guy he often calls on employees to take risks and be creative. But this one stood out for its underlying message.

If there was a theme in the email, it was an existential one: We must act, and act now or face annihilation.

“It was a rallying cry, to be honest,” Thrun told TechCrunch. “When I wrote this email, I really wanted to wake up people to the fact that our trajectory was not long-term tenable.”

“I can tell you that I woke up the troops, that is absolutely sure,” he said later. “Whether my strategy is sound, only time can tell.”

Udacity founder Sebastian Thrun speaks onstage during TechCrunch Disrupt SF 2017 at Pier 48 on September 19, 2017 in San Francisco, California. (Photo by Steve Jennings/Getty Images for TechCrunch)

Thrun said the past month has been transformative for the company. “It was a tough moment when I had to look at the business, look at the financials, look at the people in the company,” Thrun said, adding, “And the people in the company are amazing. I really believe in them, and I believe that they’re all behind the mission.”

A tough year

Part of Udacity’s struggles were borne out of its last funding round in 2015, when it raised $105 million and became a unicorn. That round and the valuation set high expectations for growth and revenue.

But the company started hitting those targets and 2017 became a breakout year.

After a booming 2017 — with revenue growing 100 percent year-over-year thanks to some popular programs like its self-driving car and deep learning nanodegrees and the culmination of a previous turnaround plan architected by former CMO Shernaz Daver — the following year fizzled. Its consumer business began to shrink, and while the production quality of its educational videos increased, the volume slowed.

“In 2018, we didn’t have a single a blockbuster,” Thrun said. “There’s nothing you can point to and say, ‘Wow, Udacity had a blockbuster.’ “

By comparison, the self-driving car engineering nanodegree not only was a hit, it produced a successful new company. Udacity vice president Oliver Cameron spun out an autonomous vehicle company called Voyage.

Udacity CEO Vishal Makhijani left in October and Thrun stepped in. He took over as chief executive and the head of content on an interim basis. Thrun, who founded X, Google’s moonshot factory, is also CEO of Kitty Hawk Corp., a flying-car startup.

His first impression upon his return was a company that had grown too quickly and was burdened by its own self-inflicted red tape. Staff reductions soon followed. About 130 people were laid off and other open positions were left vacant, Thrun said.

Udacity now has 350 full-time employees and another 200 full-time contractors. The company also has about 1,000 people contracted as graders or reviewers.

An emphasis, when I rejoined, was to cut complexity and focus the company on the things that are working,” he said. 

One area where Udacity seemed to excel had also created an impediment. The quality of Udacity’s video production resulted in Hollywood-quality programming, Thrun said. But that created a bottleneck in the amount of educational content Udacity could produce.

Udacity’s content makers — a staff of about 140 people — released nearly 10 nanodegrees in 2018. Today, as a result of cuts, only 40 content creators remain. That smaller team completed about five nanodegrees in the first quarter of 2019, Thrun said.

Last year, it took between 10 to 12 people, and more than $1 million, to build one nanodegree, Thrun said. “Now it’s less than 10 percent of that.”

The company was able to accomplish this, he said, by changing its whole approach to video with taping, edits and student assessments happening in real time.

Udacity, under Thrun’s direction, has also doubled down on a technical mentorship program that will now match every new student with a mentor. Udacity has hired about 278 mentors who will work between 15 and 20 hours a week on a contract basis. The company is targeting about 349 mentors in all.

Students are also assigned a cohort that is required to meet (virtually) once a week.

Thrun described the new mentor program as the biggest change in service in the entire history of Udacity. “And we literally did this in two weeks,” he said. 

The strategy has met with some resistance. Some employees wanted to test the mentorship program on one cohort, or group of students, and expand from there. Even since these recent changes, some employees have expressed doubts that it will be enough, according to unnamed sources connected to or within the company.

Even Thrun admits that the “fruit remains to be seen,” although he’s confident that they’ve landed on the right approach, and one that will boost student graduation rates and eventually make the company profitable.

“If you give any student a personalized mentor that fights for them, and that’s the language I usually use, then we can bring our graduation rate, which is at about 34 percent to 60 percent or so,” he said. “And for online institutions 34 percent is high. But we have programs in that graduate more than 90 percent of our students.”

Udacity doesn’t share exact numbers on post-graduation hiring rates. But the company did say thousands of Udacity alumni have been hired by companies like Google, AT&T, Nvidia and others in the U.S., Europe, India and China.

In the U.S. and Canada, graduates with new jobs reported an annual salary increase of 38 percent, a Udacity spokesperson shared.

Indeed, Udacity has had some successes despite its many challenges.

Bright spots

Udacity has continued to increase revenue, although at a slower rate than the previous year-over-year time period. Udacity said it generated $90 million in revenue in 2018, a 25 percent year-over-year increase from 2017.

Udacity had informally offered enterprise programs to clients like AT&T. But in September, the company made enterprise a dedicated product and hired a VP of sales to bring in new customers.

Udacity has added 20 new enterprise clients from the banking, insurance, telecom and retail sectors, according to the company. There are now 70 enterprise customers globally that send employees through Udacity programs to gain new skills.

It continues to expand its career services and launched 12 free courses, built in collaboration with Google, with nearly 100,000 enrollments. It has also funded more than 1.1 million new partial and full scholarships to its programs for students across North America, Europe, the Middle East and Asia. About 21% of all Udacity Nanodegree students in the Grow with Google program in Europe have received job offers, according to Google.

The company also has a new initiative in the Middle East, where it teaches almost a million young Arab people how to code, Thrun said, an accomplishment he says is core to his mission.

Udacity isn’t profitable yet on an EBITDA basis, Thrun shared, but the “unit economics per students, and on a gross margin basis, are good.”

Now, it comes down to whether Thrun’s push to become faster, more efficient and nimble, all while investing in student services and its enterprise product, will be enough to right the ship.

“I really believe if you can get to the point that students come to us and we bend over backwards to ensure their success, we will be a company that has a really good chance of lasting for a lifetime,” he said. 

And if it doesn’t work, then we’ll adjust, like any other company. We can always shift.”

Hola Code tackles the real migration crisis

After spending eight months in an immigration facility in the United States, Abimael Hernandez made the tough decision to return to Mexico.

He had spent 14 years in Florida and was leaving behind his wife and three children to return to Mexico so he could go through the process of returning to the United States legally.

Hernandez didn’t want to live in fear of being pulled over by police; he longed to own a car in his name and he didn’t want his immigration status to be illegal any longer.  

Upon his return to Mexico, Hernandez had worked in construction, call centers and sold CDs before finally being given an opportunity that made a return to the United States less appealing. Hernandez now works as a software developer at Ignite Commerce in Mexico and has integrated well into the country that he at first struggled to identify as home.

Hernandez’s struggle to adjust and adapt to life in a new country mirrors that of other migrants who are returning to Mexico. And ongoing U.S. government attempts to put an end to the DACA program instituted under President Barack Obama, an initiative which protected as many as 800,000 unauthorized migrants that had come to the United States as children, are pushing many others along the same path.

For the people facing an increasingly hostile environment for migrants who choose — or are forced — to return to Latin America, little support awaits.

What tends to lie in store for these deportees and returnees in Mexico is usually low-paying service employment. For those with an undocumented status especially, no collateral in Mexico leads to problems in accessing finances, whilst having spent the majority of their lives in the United States, barriers in the Spanish language mean some returnees fail to be accepted into the Mexican education system. 

Though there are some government initiatives aimed at supporting deportees by providing shelter and food, this usually bilingual cohort is prone to unemployment, as well as the mental struggle assigned to the frustrations of reintegrating into a country with which many can’t identify.

It is the hardship of reintegration that inspired the foundation of Hola Code, the only Mexican startup of its kind that currently runs in the country. Founded by CEO Marcela Torres just last year, Hola Code is coined as hackers without borders and is a startup that offers a coding bootcamp for migrants, ensuring that this young generation, new to Mexico, does not slip under the radar.

Geared at supporting the integration of deportees, the startup is prepping Mexicans to enter into a high-demand sector through an intensive five-month software development training program that gives the students qualification, even though many have started from scratch.

‘‘We don’t know of any social enterprises or even regular startups that are actually tackling migration in Mexico,’’ Torres recently told TechCrunch. Although migration and deportations continue to make headlines, it appears that Hola Code might be the only Mexican startup trying to do anything about it.

Backed by San Francisco-based Hack Reactor, the Mexican organization costs nothing until graduates have secured a full-time job, and pays their students a monthly stipend without any bureaucratic red tape.

Collectively venturing into Mexican society with peers in a similar position, most Hola Code students also don’t plan to return to the United States and want to use their skill set in the ever-growing Mexican tech ecosystems. For former student Hernandez, he remains grateful for the support network that Hola Code became for him.

‘‘If Mexico had more opportunities like Hola Code I think returnees would definitely think about not going back to the United States and other countries,’’ he said.

The question now remains as to how international policies will continue to affect Latin American families in the future.

‘‘You create the program in the hopes that one day that you will run out of work,’’ CEO and co-founder Marcela Torres ambitiously explained.

MISSION, TX – JUNE 12: A Central American immigrant stands at the U.S.-Mexico border fence after crossing into Texas on June 12, 2018 near Mission, Texas. U.S. Customs and Border Protection (CBP) is executing the Trump administration’s zero tolerance policy towards undocumented immigrants. U.S. Attorney General Jeff Sessions also said that domestic and gang violence in immigrants’ country of origin would no longer qualify them for political-asylum status. (Photo by John Moore/Getty Images)

The bittersweet reality is that Hola Code has, in fact, blossomed within the past year, with now more than 400 monthly applications from Mexicans and Central American migrants that are seeking refuge in the country. Although the organization celebrates the achievements of their alumni, who tend to quickly ascend into well-paid tech jobs across Mexico, the coding bootcamp is never short of work, and is now looking to open an office in Tijuana to be closer to the border.

The journey for the startup’s female founder, one of a small number of women in Mexican tech leadership, has also not been an easy feat.

‘‘It’s very difficult for a woman that has designed a business plan and has ideas to be taken seriously,’’ Torres explains. ‘‘It took me a long time to find the original investors that would believe in my idea and in my capacity, as well, to run the organization because this is the first startup that I have executed.’’

The cultural burdens that still exist in Mexico is a reality that deters many women from entering into the entrepreneurial scene within the country. From finding investors to promoting an idea, it is the issue of being taken seriously that is most effective at stalling Mexico’s female entrepreneurs.

‘‘I think that it’s important for younger women to start seeing us out there trying to take risks and thinking that they can do it as well. Even if they’re not successful, that it’s something that is available and achievable for them.’’

Confronted by her own hurdles in becoming the tech leader of Hola Code today, however, her organization does much more than just in-depth coding. From encouraging young Mexican women to leap into business and tech, to helping each student find a job, Torres speaks of the hope, security and routine that every Hola Coder gathers as they become immersed in Mexican life through this community.

‘‘Helping them navigate the expectations of how to start a career in tech is one of the things that we work on and therefore it means that they develop the right skill set, and once they finish the program, to be able to successfully jump into big areas such as banking.’’

MCALLEN, TX – JUNE 12: Central American asylum seekers wait for transport while being detained by U.S. Border Patrol agents near the U.S.-Mexico border on June 12, 2018 in McAllen, Texas. The group of women and children had rafted across the Rio Grande from Mexico and were detained before being sent to a processing center for possible separation. Customs and Border Protection (CBP) is executing the Trump administration’s “zero tolerance” policy towards undocumented immigrants. U.S. Attorney General Jeff Sessions also said that domestic and gang violence in immigrants’ country of origin would no longer qualify them for political asylum status. (Photo by John Moore/Getty Images)

Former student Miriam Alvarez is now a software engineer for SegundaMano. Growing up in the United States, Mexican Universities did not accept her U.S. documents and she too began working in a call center before hearing about the project, applying just days before the application deadline. ‘‘It’s OK to not know everything, but you should always be open to trying new things and learning something new,’’ Alvarez said, speaking of the broader messages that Hola Code delivers.

The overwhelming lessons that all Hola Code’s alumni praise is how the bootcamp delivers more than just coding, but also important life skills that allow for the transition to Mexico to be easier. Through reasoning and problem solving, many are grateful for the structure and direction that Hola Code provides Mexicans new to the country.

Though many of their students had joined Hola Code feeling “American,” the values that the group provides adds to the larger picture of Mexico’s growing tech scenes.

‘‘The biggest challenge for the tech sector in the country is access to human capital and the second one is retaining the talent.’’ By fine-tuning the country’s coding talent pools with bicultural young developers that speak English, Spanish and also JavaScript, the organization contributes to growing tech hubs such as Tijuana, Guadalajara and Mexico City, which are increasingly gaining global attention.

Hola Code is one of just a few life-changing organizations filling the gap in an immigration story that is seldom covered by the media.

Providing social mobility to people that have been forced to return through education, employment and exposure to tech pioneers, Hola Code’s alumni are spreading the message of integration through education far and wide across the globe.

As long as the fragility of migration continues to be tested, however, Torres and her team have work to do in their mission to produce Mexico’s next pioneering coding generation.

Robinhood said to not be properly insured to offer checking & savings

Robinhood’s new high-interest, zero-fee checking and savings feature seems to be too good to be true. Users’ money may not be fully protected. The CEO of the Securities Investor Protection Corporation, a non-profit membership corporation that insures stock brokerages, tells TechCrunch its insurance would not apply to checking and savings accounts the way Robinhood claims. “Robinhood would be buying securities for its account and sharing a portion of the proceeds with their customers, and that’s not what we cover” says SIPC CEO Stephen Harbeck. “I’ve never seen a single document on this. I haven’t been consulted on this.”

That info directly conflicts with comments from Robinhood’s comms team, which told me yesterday users would be protected because the SIPC insures brokerages and the checking/savings feature is offered via Robinhood’s brokerage that is a member of the SIPC.

If Robinhood checking and savings is indeed ineligible for insurance coverage from the SIPC, and since it doesn’t qualify for FDIC protection like a standard bank, users’ funds could be at risk. Robinhood co-CEO Baiju Bhatt told me that “Robinhood invests users’ checking and savings money into government-grade assets like US treasuries and we collect yield from those assets and pay that back to customers in the form of 3 percent interest.” But Harbeck tells me that means users would effectively be loaning Robinhood their money, and the SIPC doesn’t cover loans. If a market downturn caused the values of those securities to decline and Robinhood couldn’t cover the losses, the SIPC wouldn’t necessarily help users get their money back. 

Robinhood’s team insisted yesterday that customers would not lose their money in the event that the treasuries it invests in decline, and that only what users gamble on the stock market would be unprotected as is standard. But now it appears that because Robinhood is misusing its brokerage classification to operate checking and savings accounts where it says users don’t have to invest in stocks and other securities, SIPC insurance wouldn’t apply. “I have an issue with some of the things on their website about whether these checking and savings accounts would be protected. I refered the issue to the SEC” Harbeck tells me. TechCrunch has reached out to the SEC and will update if we hear back about its perspective on the issue.

Robinhood planned to start shipping its Mastercard debit cards to customers on December 18th with users being added off the waitlist in January. That might need to be delayed due to the insurance problem. We’ve repeatedly asked Bhatt and Robinhood’s team for a formal statement and clarification this morning, but have not heard back.

Robinhood touted how its checking and savings features have no minimum account balance, overdraft fees, foreign transaction fees, or card replacement fees. It also has 75,000 free-to-use ATMs in its network, which Bhatt claims is more than the top five US banks combined. And its 3 percent interest rate users earn is much higher than the 0.09% average interest rate for traditional savings, and beats  most name brand banks outside of some credit unions.

But for those perks, users must sacrifice brick-and-mortar bank branches that can help them with troubles, and instead rely on a 24/7 live chat customer support feature from Robinhood. The debit card has Mastercard’s zero-liability protection against fraud, and Robinhood partners with Sutton Bank to issue the card. But it’s unclear how the checking and savings accounts would be protected against other types of attacks or scams.

Robinhood was likely hoping to build a larger user base on top of its existing 6 million accounts by leveraging software scalability to provide such competitive rates. It planned to be profitable from its margin on the interest from investing users’ money and a revenue sharing agreement with Mastercard on interchange fee charged to merchants when you swipe your card. But long-term, Robinhood may use checking and savings as a wedge into the larger financial services market from which it can launch more lucrative products like loans.

But that could fall apart if users are scared to move their checking and savings money to Robinhood. Startups can suddenly fold or make too risky of decisions while chasing growth. Robinhood’s valuation went from $1.3 billion last year to $5.6 billion when it raised $363 million this year. That puts intense pressure on the company to grow to justify that massive valuation. In its rush to break into banking, it may have cut corners on becoming properly insured.

[DIsclosure: The author of this article knows Robinhood co-founders Baiju Bhatt and Vlad Tenev from college 10 years ago]

One-year-old Ribbon raises $225M to remove the biggest stress of home buying

Big problems require big war chests. Ribbon wants the biggest chest of them all.

The startup, which was founded just about a year ago by ex-LendingClub head of strategic development Shaival Shah and ex-Twitter/TellApart engineer Jian Wei Gan (who, full disclosure, is married to TechCrunch columnist Joyce Yang), wants to replace the incredible stress of securing a mortgage during the home buying process with a Ribbon Offer: If a buyer can’t secure a mortgage in time for close, Ribbon will pay for the house itself and give the buyer extra time to get financing.

It’s a simple premise, but potentially revolutionary in its effect on home buying in the United States, and Ribbon’s investors have taken notice. After raising a small seed earlier this year, the company announced today that it has raised $225 million in a combination of debt and Series A equity financing. (The company refused to go on the record about the breakdown of debt and equity.) The equity portion was led by its existing seed investors Bain Capital Ventures, Greylock, NFX and NYCA.

Understanding Ribbon requires understanding the immense difficulties of consumer home buying. Home ownership remains a dream for most Americans, but actually purchasing a home in the United States remains incredibly challenging. From finding a home to negotiating with a seller and handling hundreds of pages of paperwork — all of it together can create one of the most stressful periods of anyone’s life.

And it is getting even more intense. For consumers buying homes, their competitors are often not their fellow humans, but rather large investment firms that come with all-cash offers and guarantees to close. As The Wall Street Journal noted last year in a deep dive on the practice, “All told, big investors have spent some $40 billion buying about 200,000 houses, renovating them and building rental-management businesses, estimates real-estate research firm Green Street Advisors LLC.”

That has made mortgage financing — necessary for most buyers — an increasingly common no-go for home sellers. To solve for this, Ribbon wants to give every consumer the leverage of an all-cash offer while eliminating the mortgage contingency in home buying.

Ribbon’s app allows home buyers to find houses and determine Ribbon Offer prices (Photo from Ribbon)

When purchasing a home, buyers who need mortgage financing will include a clause in the home purchase contract stating that if they are unable to get a mortgage in time for closing, they are able to walk away from a deal, generally without financial penalty. This is known as a mortgage contingency.

That clause puts sellers in a bind: move forward with such a buyer, and their creditworthiness will determine whether a transaction is completed. Yet, sellers don’t really know their buyers, and they have very little visibility into a buyer’s ability to get a mortgage. Pre-approved mortgages help here, when they are available, but are a poor substitute for cash.

Ribbon takes on home buyers as clients and assesses their likelihood of securing a mortgage using data science. If convinced that a buyer will get a mortgage, it then offers a Ribbon guarantee to the seller that if financing falls through, it will offer the cash needed to close the transaction.

“We guarantee a close and we guarantee a move in,” explained Shah, who is CEO. He emphasized that “we are not just providing a cash offer, but a guarantee to close … which creates certainty in the real estate process.”

One of Ribbon’s early purchases was this home (Photo from Ribbon)

Ribbon is free for buyers, and the company charges a 1.95 percent fee at closing from sellers. It is not uncommon for home sellers to discount their home price for all-cash offers due to the greater certainty of close, and Ribbon believes the same pattern will hold true for its Ribbon Offer. “Our view is that if discounts are going to exist because of the cash guarantee … let that discount flow through to the consumer ecosystem,” Shah explained.

If a mortgage falls through at the last minute, Ribbon will buy the home and wait for the buyer to secure a different mortgage. That process can sometimes be just a few days, which means that Ribbon doesn’t need to hold substantial housing inventory or take on macroeconomic risk, and can turn over its debt quite rapidly.

The company launched in Charlotte, North Carolina and has been in the market for about six months. Shah said that the company “tripled” transaction volume from Q2 to Q3, although demurred on deeper details of the company’s revenues. Charlotte was chosen both because home prices are cheaper than in major global cities like New York City and San Francisco, and because the percentage of cash offers locally has hovered slightly above one-third in recent years, according to company data, due to a surge in corporate buying.

Ribbon wants to be “Switzerland” according to Shah, which means working with existing realtors and existing mortgage lenders in a neutral and non-competitive way. He doesn’t see a world in which the company would offer its own mortgage products (at least, not yet), and instead wants to focus on perfecting the data models that underwrite its guarantee.

Home buying startups have been heavily financed by venture capitalists, including Opendoor, which has raised $1 billion, and others like Perch and Knock. Shah says that his competitors primarily focus on sellers rather than buyers, and Ribbon wants to do the opposite.

The company intends to expand to 10 new markets in the coming year, and has already grown organically through realtor referrals to expand to Asheville and Cary, North Carolina.

Mobile bank Chime picks up credit score improvement service Pinch in all-stock deal

Chime, the no-fees mobile bank valued at $500 million as of its last round, has put some of its funds to use with its first acquisition. The deal is for Pinch, a startup that was focused on helping millennials and other young adults build better credit. It was best known for a service called PinchRent, which allowed users to increase their credit scores over time by reporting on-time rent payments to credit bureaus.

Millennials can sometimes struggle to improve their credit, or are uneducated about what their credit scores mean, studies have shown. And like any younger demographic, they may also be afflicted with shorter credit histories, which impacts those scores, too.

Many in this age group have said that their low credit scores are holding them back, and millennials prefer debit to credit, Visa has reported.

Pinch’s focus was to provide a different way for its users to increase their scores, rather than simply using credit cards or making loan payments on time.

It did this by aggregating the information on rent payments and submitting that to the credit bureaus. (The bureaus can take rental information, but they don’t work with individual landlords. That’s where Pinch came in.)

Since its founding in 2016, more than 80% of people on its service increased their scores from 10 to 100 points.

The startup was preparing to announce a $1.8 million seed round of funding from Homebrew and Collaborative ahead of its acquisition.

Pinch had only been in beta testing prior to joining Chime, and was also planning to do a full public launch. Instead, it shut down its service by alerting users via email that its last day of business would be June 27, 2018.

At the time of the service’s closure, it was in talks with Chime. But the deal itself only closed this Tuesday, we understand.

Chime declined to share the deal terms, but noted it’s an all-stock transaction and investors were happy.

The acquisition includes Pinch’s core team (5-10 people, depending on how the offers play out) plus founders Maia Bittner and Michael Ducker, who will now help the mobile bank launch credit and lending products over the next six months.

Bittner previously co-founded subscription startup Rocksbox, and worked as a Sequoia Capital scout. Ducker, meanwhile, hailed from Microsoft and Twitter before starting Pinch.

Chime, whose user base is 90% millennials, may or may not relaunch Pinch’s rent-paying service, but it will be soon moving into credit.

“I think, particularly, post the 2008 crisis, there’s been just a general distrust of big banks. But also, people have seen how the amount of credit [they have] can create challenges in their life,” says Chime CEO Chris Britt, discussing the struggles its users face in terms of building their credit.

“And younger consumers are so saddled with with student loan debt that the last thing they want to do is get more debt on a credit card,” he adds, explaining why young people turn to debit cards.

He says Chime’s goal now is to helping serve this group’s needs around credit with a set of millennial-focused products.

“The reality is the typical debit card and checking account do nothing to build your credit score. So as we think about the future set of products that we want to roll out, we’re very focused on helping our members with that part of their life,” he adds.

Chime is now one of several millennial-focused mobile banks on the market, which do away with traditional banking fees as well as brick-and-mortar location. Others like Simple and Stash are also available, but Chime has raised over $110 million, making it the largest in terms of funding.

The company today also shared new numbers – it says it has over 1.7 million bank accounts on its platform, and is opening more than 150,000 accounts per month – in line with Wells Fargo. It expects to surpass 2 million bank accounts and $10 billion in total transaction volume by year-end.

Further down the road, Chime may venture into investing, but not until its user base is ready.

“So we’re very deliberate in how we think about helping our members along their financial journey. We start with the checking account, we make sure you’re paying all your bills, then we make sure you have a savings account balance – because you should have a savings account balance before you start day trading,” Britt says.

“It’s sort of irresponsible to be encouraging day trading if you don’t have the financial means…I think investment accounts and retirement accounts come first,” he notes.