So a funny M&A operation happened…
In a deal totaling $800 million USD, Online Program Manager (OPM) 2U will become the owner of MOOC platform edX, competitor to familar Coursera and developer of the Open edX platform, understood by some to be an LMS. The purchase, however, does not include the technology, but “the brand, website and marketplace” according to a presentation for investors. The all-cash funds of the transacion will go to former edX owners, the universiities MIT and Harvard, who will create a non-profit organization “focused on transforming educational outcomes” and “tackling learning inequities.” A press release at MIT specifies the non-profit’s goal to “explore the next generation of online education.”
edX will be part of 2U’s portfolio as a Public Benefit Company, the likes of Patagonia and Ben and Jerry’s.
With the merge, 7 offerings are listed.
- MOOCs (Offered by 2U)
- Short Courses (2U) — Professional Certificates (edX)
- Bootcamps (2U)
- “MicroBachelors” and “MicroMasters” (edX)
- Undergraduate degrees (2U)
- Master’s degrees (2U and edX)
- Doctorate degrees (2U)
Corporate training under the “edX for Business” name is mentioned but not pictured.
The stated idea of the “free-to-degree” is to provide users access to the whole educational offering, in revenue-seeking ways. The deal expects to improve 2U’s marketing performance by 10 to 15%. For 2020, edX was reporting operating losses of $17.4 million USD on a $84.7 million revenue.
Ensuring the funding took 2U to take on a $475 million USD loan payable in 3.5 years, estimated to generate around $42 million of annual interest expenses, or 1% annual amortization, if current interest rates of reference remain.
While it is clear that edX donors will not receive any compensation, it is all but settled that the “Friends of edX” program will no longer continue.
- edX founder, Anant Agarwal, who implicitly confirms to remain part of 2U’s team, states that the “Audit” mode where students can access the content of courses and some of the activities for free, will remain. Even thought Audit mode does not allow participants to become certified or earn a defree, allowing it to exist, in Agarwal’s view, “guarantess affordability.” Later on it conditions that the Audit mode will continue “for at least 5 years.”
- Agarwal repeats “Affordable” a couple more times referring to Master’s, Bachelor’s and “MicroBachelors” degrees, which are ideas in the works.
- A “complementary set of programs and services” that will amount to a “full ecosystem of offerings that truly address lifelong learning from free to degree.”
- A “set of core mission principles” to which they will commit contractually. These remain undisclosed.
- Other promises include privacy, accessibility, non-English offerings.
Regarding Open edX
With the transaction, the technological platform edX runs on, Open edX, will now be the responsibility of a non-profit which appears will keep the name “Open edX.” Trademark issues aside, the non-profit will be owned be MIT and Harvard, which will close open lines of credit to the amount of $15 million each and devote the remaining ~$770 million to the new entity.
With the new funding, the entity becomes a provider of open source technology with enviable resources, if with a user base at a fraction of longstanding players like Moodle. Early statements on the vision and purpose of this new non-profit sound compatible with Moodle or even Canvas, whose recent news of parent company Instructure returning to the public market also bring again the question on open source as a business asset
Agarwal claims that edX will commit to use Open edX, promote the platform and “participate actively in improving” it, as opposed to the lead development role it held before. There is also no contractual commitment known for edX to continue using the platform. The presumption of Agarwal joining 2U also raises the question about the leadership in charge of the platform.
The openness and interoperability of Open edX was starting to spark a business ecosystem of sorts, with an extensions directory, a growing list of providers of business and technology development services, integrations (Open edX recently announced its LTI Advantage certification) and a couple of providers whose core operations were running on the platform. This is not, however, an endorsement on the technological competitiveness of Open edX in the “LMS\LXP Space Race.”
Under the 0.01% conversion rate assumption made to 2U’s investors, the 120 million annual “marketplace visitors” to the edX website will bring 12,000 new enrollments to 2U’s portfolios at a 10% reduction of the company’s average cost-per-enrollment.
edX boasts 39 million “learners.” It does not specify to levels of completion, activity or revenue for them.
It does indicate 115 million “all time” course enrollments.
160 institutions are edX partners.
With 2U’s the combination totals 50 million “learners,” 230 university and industry partners, and 3,500 plus “offerings.”
Nowhere in any statements information on completion rates was disclosed.
The deal is expected to be complete within 120 days.