2U to Acquire edX: A $600M+ Deal for Online Education

2U to Acquire edX in Deal Exceeding $600 Million

2U, a leading SaaS platform specializing in online learning solutions for nonprofits and higher education institutions, is set to acquire the assets of edX, the online learning platform co-founded by Harvard and MIT. Sources indicate the transaction will be valued at over $600 million.

Deal Confirmation and Financial Details

Initial requests for comment from 2U went unanswered. However, a subsequent press release confirmed the acquisition, with an expected closing date within 120 days, contingent upon regulatory and governmental approvals. The deal is structured as an all-cash transaction totaling $800 million.

Strategic Implications for 2U

This acquisition provides 2U with a substantial influx of collaboratively developed course content, enhancing its existing software capabilities. Furthermore, the association with prestigious institutions like Harvard and MIT is anticipated to bolster 2U’s brand recognition and market position.

2U’s previous significant acquisition occurred in 2019, involving the purchase of Trilogy Education for $750 million. Trilogy specializes in creating both in-person and online bootcamps in partnership with universities.

The Rise of MOOCs and edX’s Origins

Founded in 2012, edX emerged alongside other prominent massive open online course (MOOC) providers, including Udacity and Coursera. Established as a nonprofit organization, edX initially aimed to democratize access to education by offering free courses from Harvard and MIT.

The founding institutions contributed a combined $80 million in donations to sustain edX’s free course offerings. Its launch followed closely on the heels of Coursera’s announcement of partnerships with Princeton, Stanford, the University of Pennsylvania, and the University of Michigan.

edX’s Current Reach and Impact

Currently, edX, under the leadership of President and Professor Anant Agarwal, offers more than 3,000 courses, delivered by 15,000 instructors, and utilized by 35 million learners globally.

• The Open edX platform, its open-source offering, powers 2,400 learning sites worldwide.

Transition to a Public Benefit Corporation

As part of the acquisition, edX will transition into a public benefit corporation. Proceeds from the sale will be directed to a new nonprofit organization overseen by Harvard and MIT, ensuring that the institutions do not directly profit from the transaction.

However, MIT has disclosed that edX had previously secured a line of credit from both MIT and Harvard, and these funds will be reimbursed to the respective institutions.

“Given edX’s status as a public charity, any proceeds from its sale must be allocated in a manner consistent with its mission, and cannot be used to compensate those who contributed to the nonprofit,” a statement from MIT clarified.

edX’s Financial Evolution

Discussions surrounding this transaction began as early as February 2021. The move is partly influenced by edX’s acknowledged financial challenges and its pursuit of a sustainable business model.

In 2012, then-MIT Provost Rafael Reif, now the school’s president, indicated the potential for revenue generation, stating that while profit wasn’t the primary goal, a plan to support the program’s activities was essential.

Introduction of Fees and Sustainability Efforts

In 2018, the same year it reported $37 million in revenue, edX introduced a support fee, alongside its existing option for students to pay for verified course completion certificates. The company explained this shift was necessary to achieve long-term financial sustainability.

The edX board explored alternative options, as noted by MIT, but ultimately determined that the transaction with 2U offered the most benefits to edX, its learners, and its partner institutions.

Looking Ahead: The Future of MOOC Monetization

This transaction and edX’s conversion to a public benefit corporation may represent a viable financial model for MOOCs, highlighting the difficulties inherent in monetizing open educational resources. While 2U has pledged to maintain edX’s free coursework for at least five years and establish a new nonprofit, the edX as it currently exists – a large-scale education nonprofit – will undergo significant changes.