The Wall Street Journal recently featured a special report on 2U, an online course management platform known for offering full-length degree programs from various universities. Originally valued at a staggering $5 billion, the company’s worth has now plummeted to $30 million.
Founded in 2008, 2U emerged as a prominent player in the EdTech industry, with Christopher Paucek, the then CEO, and John Katzman, a Princeton Review alum, at its helm. The company’s business model revolves around designing, recruiting students, and providing online courses from prestigious universities, with the universities overseeing student selection and utilizing online resources. 2U receives a 60% share of the tuition fees as per the agreement.
University of Southern California was the first university to launch courses on 2U, followed by Georgetown University and University of North Carolina at Chapel Hill.
In 2014, 2U went public on the NASDAQ stock exchange, witnessing a continuous rise in stock prices. However, a challenge arose in the form of exorbitant course fees, leading to a decline in enrolment. To counteract this, 2U embarked on high marketing and public relations spending to attract students, with some facing legal action due to discrepancies in advertised and actual costs.
With a significant decline in course enrollments in 2019, partners and student loan packages started withdrawing. In 2020, 2U expanded into the corporate market by acquiring edX, an online learning platform from MIT and Harvard, but faced financial risks by borrowing $475 million to complete the $800 million deal in 2021.
The post-COVID era posed further challenges for 2U, as universities discovered their ability to independently manage online learning systems, diminishing the need for platforms like 2U. Additionally, the diminishing returns on high course fees and lesser post-education opportunities led to universities canceling contracts and incurring penalties, diminishing 2U’s appeal.
The company faced a setback when they postponed debt payments for two years, resulting in CEO Paucek’s resignation and a decreased valuation to $30 million, causing a removal from the NASDAQ stock exchange and amplifying risks for the company.
TLDR: The Wall Street Journal highlighted the downfall of 2U, an online course platform, from a $5 billion valuation to $30 million due to financial missteps and decreasing demand for their services.
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