A month after layoffs, Udacity's famous founder says the online school expects to do $100 million in revenue this year

Udacity Sebastian Thrun

Udacity seemed to stumble last month when it restructured and laid off about 20% of its workforce.
But founder, executive chairman and interim CEO Sebastian Thrun tells Business Insider that the business is on track to do $100 million in revenue this year, up from $88 million in 2018.
He says the layoffs were not from financial struggle, but rather from a strategic change that made a good chunk of the full-time staff unnecessary.
The change also came from his desire to make his startup profitable, he said — even though that goes against the way Silicon Valley likes to operate.
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Sebastian Thrun is a legend in Silicon Valley — but deep down, he still mostly thinks of himself as a teacher and professor, he told Business Insider.

Thrun is the godfather of the self-driving car industry, who founded Google X and Waymo with Larry Page and Sergey Brin. Plus, he's also the founding CEO of Kitty Hawk, the highly watched flying car startup funded by Larry Page.

He also helped usher in the era of online schools known as massive open online courses (MOOCs).

He founded Udacity, a for-profit MOOC, in 2011, where he serves as executive chairman and interim CEO. Udacity has raised $163 million from VCs who valued it at $1 billion back in 2015, the last time it raised money. Its former CEO, Vishal Makhijani, left in October, at which point Thrun took over as interim CEO.

Udacity seemed to stumble in April. Last month, Udacity restructured, laying off 20% of its workforce — though Thrum tells us it the layoffs wasn't a result of financial struggles, but rather a byproduct of a new strategy officially announced in early May.

"It's not the business model that didn't work. The business model works very, very nicely. We hope to hit $100 million this year. Last year, we hit $88 million," Thrum told us.

"The reason for the layoffs was that we took certain bets and it just didn't work out, and we wound up a little over-hired," he said,

The bets that didn't work out revolved around how Udacity staffed up its teachers as it grew. Not surprisingly, Udacity is known as one of the best places for engineers to get trained for the self-driving car industry, given the status of its founder in that world.

"We have trained more self-driving car engineers than all universities combined," says Thrun, the man known as the foremost expert in the industry.

But the site is also known for teaching people to code, to become data scientists, or to become AI and cloud computing engineers, among other skills. It calls its programs "nanodegrees," and characterizes them as a supplement to traditional education, not a replacement.

Earlier this month, Udacity added new programs that allows people to pay by the month and take more time to complete each course, rather than the previous six-month plans. It also raised prices from usually worked out to an average of $299 a month for a six-month program, to $399 for access to a course on the new month-to-month plan.

Along with the price increase, the online school increased the amount of personalized attention each student can get from mentors — from about 10 hours a month, up to 40 hours.

But, instead of hiring more teachers full-time and putting them on the payroll, it is now hiring mentors as contractors, mostly from the ranks of its own graduates, Thrun says. Udacity then pairs them with on-payroll teaching experts.

"And that right away, led to a major restructuring," he explained. "The number-one type of individuals departing from the company were instructors. Some of them are really great instructors. But we made the decision to be more of a publishing house, more of a platform where third-party subject-matter experts accompany experts in instruction."

While he says that the layoffs were a painful thing to do — "obviously, it's not one of the little highlights of my life" — he says Udacity is thriving.

"I'm in a sweet-spot situation. Udacity is just now becoming profitable, which has an incredibly uplifting effect on people's morale. It's very rare in the tech world to do that, but I felt it was the right step to do," he said.

The CEO job was supposed to be a temporary thing for him, as Thrun is already CEO of another highly watched startup: Kitty Hawk, the Larry Page-backed company working on flying cars.

But Thrun is in no hurry to hire a new CEO. He tells Business Insider that, just before the restructuring, he hired former HP and GE executive Lalit Singh as interim COO and just signed him onto the role in a permanent position.

"I'm much more a big picture and he's much more hands-on leader. That's what we really needed. Someone hands on. He's really running the company," Thrun says.

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