edX Staked Its Reputation on Its Nonprofit Status. What Will It Mean To...


edX Staked Its Reputation on Its Nonprofit Status. What Will It Mean To Be Part of For-Profit 2U?

By Jeffrey R. Young     Sep 16, 2021

edX Staked Its Reputation on Its Nonprofit Status. What Will It Mean To Be Part of For-Profit 2U?

This summer yielded a surprising announcement in the world of online education: that edX, founded by Harvard University and MIT a decade ago as a nonprofit alternative to for-profit online education providers, had agreed to sell its operations to a for-profit company, 2U.

Though the deal must still be approved by regulators, officials hope to make it final by the end of the year. So what will the arrangement mean for the more than 150 university partners that helped build edX over the years, and to the larger world of online higher education?

As for what the for-profit version of edX will look like, EdSurge recently sat down with the leaders of the two entities: edX CEO and co-founder Anant Agarwal, and 2U CEO and co-founder Chip Paucek.

Agarwal stressed that the initial reaction from university officials was one of “surprise,” and included lots of tough questions. But he says that the vast majority of college presidents, provosts and professors he’s spoken with have been reassured by the details of the arrangement. He listed those details: that 2U has committed to continue the key mission of edX, including continuing to offer free versions of courses; that the sale price of $800 million will all go to a new nonprofit entity that will advance equity in education; that “not a single penny of the $800 million will [go] to either me or MIT or Harvard or the employees”; and that the open-source platform that edX courses run on, Open Edx, will be maintained by the new nonprofit rather than by 2U.

But there are many critics of the deal. And the positive message of Agarwal and Paucek doesn’t square with some vocal protests of the arrangement. A dean of digital learning at MIT, Krishna Rajagopal, resigned in protest, telling colleagues in an email that he had “serious continuing reservations” about the proposed direction.

Michael Feldstein, a longtime edtech consultant and blogger, highlighted what he saw as the “hypocrisy” of the deal in a blog post last week.

“The creation of EdX was positioned as a direct response to those dirty, grubby capitalists from Stanford who were going to privatize higher education with Coursera,” he wrote, referring to the venture-backed competitor that went public this year. “EdX, in contrast, was to be a non-profit. It was a public good. Universities that paid into Coursera were paying fees to a vendor. Those that paid into edX were donating to the cause of keeping education pure.”

Among Feldstein’s key questions: If in the end edX acted like a for-profit startup that sold itself to a bigger company, why didn’t colleges who paid dues to edX over the years get a cut? And how can whatever this new nonprofit does make up for the abandoned role of running a major online-learning platform that was actively offering low-cost options for students around the world?

A So-Far Nameless Nonprofit

Just today, MIT’s provost, Martin A. Schmidt, sent an email to the MIT community noting some next steps in helping plan the new nonprofit. Specifically, he announced a new “Nonprofit Entity Working Group” of MIT faculty and community members to “develop recommendations on how best to advance the nonprofit entity’s founding goals of stewarding the Open edX platform and tackling challenges in online learning. This group is charged with delivering these recommendations to the faculty and the president, who will present them to the new entity.” The email said representatives from Harvard and others in the edX network will also advise the leaders of the new nonprofit once they are selected.

The university also announced that the issue of the new nonprofit will be discussed at MIT’s September 22 faculty meeting.

Feldstein did note that 2U could end up providing some positives for partner colleges because the company has an incentive to try to make them happy or risk having them walk away, especially since most of the contracts between colleges and edX had been short-term arrangements.

2U is one of the largest of the so-called OPMs, or Online Program Managers. It helped pioneer the approach of having a company that not only provides services to colleges—like marketing their online programs—but also serves as an investor, fronting millions of dollars to each college the company works with so the academic institutions have the capital to develop an online program. In exchange, the colleges give up a large portion of the revenue from those online programs for a set number of years.

Since 2U started in 2008, it has fronted more than $1 billion to colleges and university partners. Over that time 2U has purchased two other companies, a bootcamp provider called Trilogy Education, and a provider of short online courses for professionals called GetSmarter.

The plan from 2U’s perspective is to push edX to the forefront of its public identity after the acquisition, said Paucek.

“Part of the thing that's so attractive about edX is they did an incredible job building a great worldwide brand,” he said. “Our brand is more akin to Alphabet than it is to Google. People know our corporate name because we are a public company, but people don’t associate our brand with the learning. Whereas with edX, the brand is just incredible.” He noted that it is one of the top 1,000 most-visited websites in the world.

For Paucek, there are other immediate ways that the edX’s large base of learners can lead to more business for 2U, though he stressed that such work cannot begin until the deal is approved.

One immediate idea, he said, is to incorporate 2U’s job-placement tool, called the Career Engagement Network, within edX courses. The service was developed by the Trilogy bootcamp to match its students with prospective employers, and it is free to employers, colleges and students.

“We will roll it out to all of the edX paid customers,” said Puacek. edX’s Agarwal said the career-services tool answers a request that some partner colleges have long wanted but that edX had not had the time or resources to develop.

Puacek noted that some edX partners may want to buy other services from 2U as well.

But couldn’t a college have just worked with 2U and edX separately? Both leaders made the case that being part of the same company would be a win for colleges.

“A lot of universities work with one key platform partner or one key services partner,” said Agarwal. “Between a university and a partner you have to build a highway. Once you've laid down the tracks and have this amazing freeway, now you can send different kinds of goods back and forth readily. It's harder for universities to build a second freeway. It's just hard.”

Many observers have noted that in the end, 2U bought a giant source of leads for students that it can upsell graduate degrees to from its partner colleges. But turning edX into a marketing vehicle is a far cry from the high-minded language used when the nonprofit was founded to bring education to underserved students around the world.

For Paucek, he is convinced that the existing edX partners seem willing to give the company a shot.

“And that's all we need,” he told EdSurge. “All we need is an opportunity to prove that the future of edX will grow. The brand will grow. You will see us begin to advertise edX outright and grow the learner base. And I think that'll be good for everybody.”

Correction: This article originally stated incorrectly that employers pay to support 2U's Career Engagement Network. The company says the service is free to employers, colleges and students.

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