Best Tech News Site: 2U set to acquire non-profit edX for deal north of $600M

Tuesday, June 29, 2021

2U set to acquire non-profit edX for deal north of $600M

2U, a SaaS platform that helps non-profits and colleges run online universities, plans to acquire all the assets of Harvard and MIT-founded edX for a deal north of $600 million, according to multiple sources. 2U did not immediately respond to requests for comment, and its unclear if this is an all-cash deal. The combined forces of edX and 2U could reach over 50 million learners.

Update: 2U confirmed the deal, expected to close within 120 days subject to regulatory and governmental approvals, in a press release post-publication. It also confirmed that the price of the acquisition which will be an $800 million all-cash deal.

The deal gives 2U, a company that filed to go public in 2014 and continues to be one of the rare U.S. edtech companies listed on the stock market, a new wave of collaboratively-built content to its software. Plus, 2U just acquired with stronger name recognition thanks to its Ivy League backers, which some see as a branding move that could help the public company with its own chunk of the market. The company’s last big acquisition was in 2019, when it paid $750 million to acquire Trilogy education, a company that builds in-person and online bootcamps in collaboration with universities.

EdX was founded in 2012 amid a crop of massive open online course (MOOC) offerings, including Udacity and Coursera. The company, set up as a non-profit, had an alluring promise upon launch: it would help anyone in the world take a Harvard or MIT class, for free. The institutions, of course, have thrown in a cumulative $80 million in donations into edX to keep the operation free. Its own launch came weeks after Coursera announced that Princeton, Stanford, UPenn, and the University of Michigan would host courses on its own online learning platform. Now, edX’s acquisition comes months after Coursera went public.

A first look at Coursera’s S-1 filing

Today, edX, led by president and professor Anant Agarwal, hosts over 3,000 courses led by 15,000 instructors and used by 35 million users. Open edX, the platform’s open source platform, is used by 2,400 learning sites worldwide, according to the organization’s website.

EdX will turn into a public benefit corporation as part of this transaction. Per sources, proceeds from the transaction will go into another non-profit managed by Harvard and MIT, and the institutions will not profit off of the transaction. That said, an MIT statement reveals. that edX took a line of credit from MIT and Harvard, and those funds will be returned to both institutions.

“Because edX is a public charity, the proceeds from its sale can only be distributed for a purpose consistent with edX’s mission, not to compensate those who contributed to the nonprofit,” the statement reads.

Part of this transaction, which has been in the works since February 2021, is colored by the fact that edX has been transparent with its own financial woes and journey to becoming a self-sustaining business. Then MIT Provost Rafael Reif, now the president of the school, had hinted at eventual revenue generation the program first launched, saying in 2012 that “the drive is not to make money..that said, we intend to find a way to support those activities. There are several approaches we are considering, and we don’t want this project to become a drain on the budgets of MIT or Harvard.”

In 2018, the same fiscal year it had $37 million in revenue, edX introduced a support fee, alongside its ongoing offering that asks students to pay for a verified certification upon course completion. In announcement, the company wrote that “we believe that we need to move toward a financial model that allows edX and our partners to achieve sustainability and we acknowledge that means moving away from our current model of offering virtually everything for free.” The edX board also considered other options, MIT. said, but decided those were “not as beneficial to edX, its learners, or its partner institutions as the transaction with 2U.”

The new transaction and edX’s choice to turn into a public benefit corporation might become the financial model that it itself was looking for, indicating just how. hard it may be to monetize a MOOC. While 2U has committed to continuing edX’s free coursework for at least five years, as well as seeding a new non-profit, edX as it currently stands – a massive education non-profit – will no longer function as it currently does in the future.