Amid a pandemic that helped most online learning companies grow, Treehouse layoffs denote leadership issues.

“2020 has just been like a rocket ship” and “we’re 10s of millions in revenue” said Ryan Carson, CEO and co-founder of online coding school Treehouse, in a podcast interview in April of last year.

In August 2021, Ryan told its employees that the company had enough cash to run till November 2022. But last month, Treehouse laid off a majority of its staff. Most notably, the staff were laid off without any severance.

This is surprising, since the COVID-19 pandemic has prompted an exodus to online learning, allowing online education companies to raise record amounts of funds and go public — for instance, Coursera. This led me to call 2020 “The Second Year of the MOOC”.

What’s all the more surprising is that Treehouse is one of the oldest companies in online coding. If my memory serves me right, it’s second only to Lynda.com. Two of Class Central’s self-taught engineers used Treehouse in its early days to learn coding; one used it back when it was still called Think Vitamin.

(Lynda.com was acquired by LinkedIn for $1.5 billion in 2015 and recently shut it down in favor of LinkedIn Learning.)

According to BusinessInsider, B2B company Skillsoft was looking to acquire Treehouse, and the cuts came after the acquisition talks fell through. This wasn’t the first time an acquisition of Treehouse failed.

Earlier Acquisition Attempt

In an interview I found on YouTube published in August 2018, Ryan mentioned turning down an acquisition offer in early January 2017. If I had to guess, the acquiring company was likely Pluralsight (and I’d say there’s an outside chance it was Udacity).

In Ryan’s version of events, at the time, the CEO of the acquiring company told him “We will crush you”. After that, “everything changed” for Ryan, and Treehouse started to pivot to enterprise.

BusinessInsider also spoke to eight Treehouse employees, and they attribute the layoffs to the CEO’s “impulsive management style”. I suspect Treehouse’s pivot to B2B is an example of said management style.

Unsuccessful B2B Pivot

In another interview around the same time, Ryan mentions “The idea is not focusing on B2C business and focusing on B2B business and cross that in 2019 or 2020.”

According to Ryan, Treehouse was growing faster than ever, was cash flow positive, and B2B was generating ~$4 million in ARR (Annual Recurring Revenue).

The B2B business in question was TalentPath, supposedly a “scalable system for creating and retaining diverse talent for your team”. Its early clients included companies such as Mailchimp, Nike, and InVision.

TalentPath was shut down in 2020 “due to the Covid-19 pandemic and changes in hiring for client companies”.

Recently, companies like Coursera and Udemy have been moving towards a catalog subscription model. Treehouse already had this model for a long time: the company charged $25 per month to access its catalog.

I think Treehouse’s catalog hasn’t changed enough over the years. Treehouse’s quality isn’t in question, but their catalog doesn’t provide the diversity of content that other online education companies offer.

The website doesn’t make it easy to find and browse courses. This lack of focus on B2C meant Treehouse blew the huge lead it had on its competitors.

In late 2015, Treehouse launched Techdegrees, in response to Udacity’s Nanodegrees. As of 2021, it has 5 active programs. By contrast, Udacity launched 17 Nanodegrees in 2020 alone.

At its peak, Treehouse was generating $2 million per month. But “overall revenue was down 59% from June 2017 to May 2021 and that the number of new users had declined 79% from a peak in 2018”.

My sense of Ryan’s management style is that Ryan gets ideas, the company pivots to those ideas, Ryan goes on a PR blitz evangelising them — and eventually, when those ideas fail, layoffs occur. Some of these ideas had nothing to do with online education itself.

We’ve seen this dynamic before. At its peak, Treehouse had 100+ employees. But back in 2016, the company let go 22 employees and rolled back its 32-hour work week and flat-management style with no bosses. Another round of layoffs followed in mid 2019. And after the newly announced layoffs, Treehouse is left with 18 employees, 8 of them contractors.

An anonymous Treehouse Insider has been documenting What Happened at Treehouse, if you want to have a glimpse at how the layoffs unfolded internally.