Jake Schwartz | Crain's Washington D.C.

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

Jake Schwartz

Background:  

Founded in 2011, General Assembly provides online courses in app building, basic coding skills, business development, data science, front-end development, technology and web design through in-person or online workshops and intensives. General Assembly has 15 campuses worldwide. In North America, that includes locations in Atlanta, Austin, Boston, Denver, Los Angeles, San Francisco, Seattle and Washington, D.C.

The Mistake:

In 2013, we expanded to Berlin. It was the first time where we had gone into a new city and things didn’t immediately start to work.  

It was early on in our evolution. We were growing a mile a minute and jumped in and did it. We had this mission to be global. Berlin is one of the best cities in the world to work in. It has a vibrant startup community. We had a big corporation (Deutsche Telekom) that really encouraged us to come with a big financial incentive. I think that check was for $500,000. It seemed like a no-lose proposition.

We hadn’t really done our homework on what the market was like, what were the attitudes about education in Germany and what were some of the attitudes around paying for education?

First, nobody in Germany really pays for higher education. We had a massive amount of price sensitivity surrounding that. In that first year, we were hoping to have four courses running with about 100 students. And then run a bunch of classes and weekend workshops with maybe another 200 or 300 students on top of that.  There was tons of interest and people thought it was cool. Then people would call up and say they wanted to enroll and say, “Oh, I thought this was free!”

Second, the salaries of developers and tech workers in Berlin is about half of what it is in other major cities. The entire premise of our company is return on investment for your education. You invest time and money up front, and you get a salary increase and a better job on the other end of it. So the problem with Berlin was if their salaries were cut in half that meant that our pricing was cut in half. If the price is cut in half that meant we had to double our volume just to make it worth it. 

On top of that, Germany is not an English-speaking market. It’s funny to talk about it now but at the time we really didn’t think about it.  Managing in a different country, in a different language, is very challenging.

Opportunity cost is the biggest cost you have in a fast-growing company. What you choose not to do and what you choose to do are as important as what’s on your profit and loss lines.

That $500,000 check was the most expensive $500,000 we had received up until that point. We eventually had to pull out. We basically stopped doing international for a while after that.

The order of your growth moves matter.

The Lesson:

Growing adjacently is a lot smarter and safer than trying to conquer the world all at once. You have to be smart about your growth. The order of your growth moves matter. 

After [Berlin], we built an entire framework in a spreadsheet of many different factors for each city we were thinking about. We looked at population size, average developer salaries, amount of venture capital deals, presence of Fortune 500 companies, and presence of universities. We built a scoring framework against it. What that allowed us to do was get a giant list of all the places we could go, rank the ones most likely to succeed and go after those first. It also gave us a more disciplined way to say no.

[The Berlin experience] shook us a little bit on international. I think Singapore was our next country. We’re now actively looking at other international markets again. We’re expanding in Australia., where we’ve gone from Sydney to Melbourne to several others.

Follow Jake Schwartz on Twitter at @jakeschwartz

Photo courtesy of Jake Schwartz.