Byju’s has no answer for its growing list of missing deadlines

It took Byju’s 10 years to become India’s most valuable startup, expanding its empire of online learning apps to many markets including the U.S. The firm, founded by a teacher, largely avoided controversies even as its sales operations are anything but ideal (though not extreme by Indian standards.) Now merely a few quarters – or who knows in this market, a few years? – away from becoming a public company, Byju’s is finding it increasingly difficult to hold its narrative straight.

The company has missed its own deadlines to file its audited financial for the year ending March 2021 by nearly 18 months. The startup — backed by scores of high-profile investors including Blackrock, Tiger Global, UBS, Prosus Ventures, Sequoia India and Lightspeed Venture Partners — said in early July that it will file the results within 10 days.

It’s so rare for a late-stage startup to miss the deadline – let alone by so many months – that Byju’s lapse has attracted the attention of India’s Ministry of Corporate Affairs. Even a lawmaker has chimed in: In July, Karti Chidambaram called for an investigation into the finances of the firm for not submitting its statements.

But as Ashish Mishra, editor of The Morning Context, an Indian news outlet that has outlined many lapses by Byju’s in recent months, reminded this week: Filing of the delayed financial results is just one of the issues with which Byju’s is grappling.

Byju’s announced in March that it had raised $800 million in a round led by its founder Byju Raveendran. Little known venture firms Sumeru Ventures and Oxshott were to provide $250 million in that round, a commitment that they are yet to honor. Byju’s said in July that it’s on track to receive the funding by the end of August.

The company, which has spent $2.5 billion acquiring smaller firms in the past two years, last year agreed to pay nearly $1 billion to acquire Blackstone-backed Aakash Educational Services, a 34-year-old chain of physical coaching centres. Byju’s is yet to pay Blackstone about $180 million for the deal, missing its own August deadline.

Byju’s was also reportedly looking to raise about $1 billion loan from Morgan Stanley to finance the acquisition of U.S.-based edtech 2U. That deal is also stuck. The firm was also prepping to go public via the SPAC route this year, but has delayed the plans as the market downturn continues, according to three people familiar with the matter.

In the meantime, Byju’s has been in the market for over three months to raise a new round, but so far has had no luck, according to a source familiar with the matter. The source added that secondary shares of Byju’s are beginning to go on sale at a valuation lower than $22 billion.

Byju’s said it has no official comments to offer.

Byju’s has no answer for its growing list of missing deadlines by Manish Singh originally published on TechCrunch

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.

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.

As public investors reprice edtech bets, what’s ahead for the hot startup sector?

Reports on November 9 that a COVID-19 vaccine looks incredibly effective moved the market. Software stocks sold off and long-suffering industries hammered by the pandemic saw their fortunes rise. It was odd to see airlines soaring and 2020 high-fliers like Zoom taking blows.

But amidst all that noise, another sector that has great import for startups was also taking lumps: edtech.

Looking at how a number of edtech companies traded in the aftermath of the vaccine news helps us understand how public investors view the companies and assess their long-term growth prospects.

Simply put, selling edtech on the vaccine news — as investors did — was a bet that growth in the sector would be constrained by a return to normalcy, something a solid vaccine could hasten. This is a related concept to what TechCrunch discussed regarding software’s own November 9 selloff — that investors were betting that future growth for those companies, boosted in 2020 by the pandemic shaking up how and where people worked, would be limited by a quick return to regular life.

The vaccine’s reported efficacy changed how investors see the future. But how much did it change investor expectations for the future of edtech? Let’s examine the public market results before asking our own edtech expert Natasha Mascarenhas on what she’s seeing in the numbers and hearing from investors.

Edtech companies in the public markets

There aren’t many public edtech companies, but TechCrunch surveyed those that we knew about. Here’s where three stood after the closing bell rang on Friday, November 3:

  • 2U closed at $39.55 per share. It closed Monday after the vaccine news at $31.46. That price decline was worth about 20%. The company’s equity has been roughly flat since.
  • Chegg closed Friday the 6th at $77.23 per share. It closed Monday, after the vaccine news, at $69.51. That price decline was worth around 10%. The company’s equity has fallen further since.
  • Kahoot closed Friday the 6th at 64.60 Norwegian kroner (kr) per share. It closed Monday, after the vaccine news, at 59.00 kr. That price decline was worth around 9%. The company’s equity has fallen further since.

Netflix launches a virtual HBCU boot camp with Norfolk State to increase exposure to the tech industry

Netflix is going back to school.

Working with Norfolk State University, the alma mater of one of the company’s senior software engineers, and the online education platform, 2U, Netflix is developing a virtual boot camp for students to gain exposure to the tech industry.

Starting today Netflix will open enrollment for 130 students to participate in a 16-week training program beginning in January.

That program will be divided into three tracks — Java Engineering, UX/UI Design and Data Science. Experts from Netflix will work with 2U to design each track and all courses will be led by faculty from Norfolk State University and feature guest lecturers from the tech industry, the company said.

Members from the company’s data science, engineering, and design teams will serve as mentors — including Norfolk State alumnus Michael Chase.

Netflix will foot the bill for students accepted into the program, and they’ll get course credit for completing the boot camp, the company said.

“The goal is for participants to come away better equipped with industry-relevant skills to enter today’s workforce and with valuable, long-lasting relationships,” Kabi Gishuru, the company’s director of Inclusion Recruiting Programs wrote in a statement. “As we continue to invest in building the best service for our members, we want to invest in the best team to support it. Creating space in the industry for all voices will only make it stronger.”

Tutoring business-in-a-box service Clark has been acquired by edtech startup Noodle

Clark, the tutor management business-in-a-box service, has been acquired by the New York-based education startup Noodle for an undisclosed amount, TechCrunch has learned.

Founded by John Katzman, the serial entrepreneur behind education technology giants including The Princeton Review and 2U, Noodle offers education search services to help people apply to the right programs that meet their needs.

Megan O’Connor, the co-founder and chief executive of Clark, actually met Katzman two weeks after she launched the company, which is backed by investors including Lightspeed Venture Partners, Winklevoss Capital, Rethink Education, Flat World Partners and Human Ventures (where O’Connor worked as the chief growth officer).

It’s not a stretch to call Katzman the godfather of tutoring, and, from the beginning, the seasoned executive took an interest in what Clark was doing, according to O’Connor.

With the acquisition, Clark’s shareholders will receive an equity stake in Noodle and O’Connor and her co-founder, Sam Gimbel, will take roles within Noodle to build out a tutoring service within the company, O’Connor says.

Going forward, Gimbel and O’Connor will build up the tutoring component of Noodle’s business as a complement to the company’s higher education and elementary and secondary school divisions.

One of the core components of the new tutoring platform within Noodle will be a focus on the individualization and personalization of tutoring sessions, buoyed by a community of tutors who share information on the most effective teaching strategies for different kinds of students.

What the tutoring practice won’t do, O’Connor says, is teach to a standardized curriculum. “If we can give them the software of shared services, then they can be more hands-on with the student,” O’Connor says.

Online university degree provider 2U acquires Trilogy for $750M to expand into tech bootcamps and training

As more universities turn to offering online degrees to expand their student bodies by way of cyberspace, one of the pioneers in enabling that trend has made an acquisition to expand into new territory around skills training and continuing education. 2U, which helps build online degree programs for a number of top universities, is paying $750 million to acquire Trilogy Education, which creates online and in-person “boot camps” — continuing education programs — in collaboration with universities to train those already in the workforce with tech skills in areas like coding, data analytics, UX/UI, and cybersecurity.

The deal, which is expected to close in the next 60 days, is coming in a combination of cash and shares — $400 million in cash and $350 million in newly issued shares of 2U common stock — the company said. It’s a decent exit for Trilogy, which was valued at $545 million (according to Pitchbook) when it raised $50 million in June 2018. Its investors include Highland Capital, Macquarie and Exceed, among others.

2U, meanwhile, has a market cap of $3.85 billion an is publicly traded on Nasdaq.

The acquisition helps 2U consolidate its university footprint, which will get bumped up to 68 from its previous 36. And it presents an obvious opportunity to up-sell and cross-sell: those who are already jumping into building degree programs can diversify into more skills training, while those who have yet to build full degree services but have created skills training programs now might consider how to parlay that experience into degrees — all from one provider, 2U. This also opens more generally a bigger window for 2U to expand into the continuing education market, which it estimates is worth some $366 billion.

It also helps it better compete with other companies that have already built a dual-track approach to online education, building degrees as well as short courses, like Coursera (Udacity and Udemy are among those that have focused on further education).

“[Trilogy Education] is a natural strategic fit and growth driver for 2U that will extend our reach across the career curriculum continuum, deepen our relationships with new and existing partners, drive marketing efficiencies, and open a more direct corporate training and enterprise sales channel for the company. We expect the addition of Trilogy to accelerate our path to $1 billion in revenue by one year from 2022 to 2021,” 2U Co-Founder and CEO Christopher “Chip” Paucek said in a statement. ​“Increasingly, universities are attempting to add practical, technical skills to their degrees. We simply future-proof the degree by adding this type of technical competency.”

The presence of commercial companies building educational courses for non-profit universities, and taking a cut in the process, has seen more than a little controversy. The business spin that is put on education through these programs not only calls into question how and what schools (and their partners) prioritise in the curriculum, but they raise issues around how higher education is priced, and who profits from these degrees — which sometimes can still cost over $60,000, despite no physical time in classrooms. (There is an excellent dive into the issue here in the Huffington Post, featuring an interview with the co-founder of 2U, John Katzman, who also founded the Princeton Review.)

To be fair, some of the issues around higher education — such as the exorbitantly high cost in some countries, and the fact that it still feels like a largely elitist endeavor with the odds of students gaining acceptance and achieving in top universities still in favor of too-small a privileged subset of families — cannot be completely tied to the development of online learning courses powered by for-profit companies.

And you could also argue that this was bound to be the next step, given how technology has evolved across all of education, and the fact that ed tech is not a core competency for many institutions.

One of the potential positives that comes out of online degree programs is that it gives opportunities to a much wider group of would-be students, and mass market is something that Trilogy knows: it has to date already provided courses for 20,000 people and 1,200 instructors across 120 programs, it says, with an emphasis on practical skills to bring up local workforces, and working with universities to build these courses and connecting with big companies — customers include Google, Microsoft, and Bank of America — to deliver them.

“By joining forces with 2U, Trilogy Education can empower universities to reach more students, in more places, throughout more of their lives, while driving positive economic ​impact in their local regions,” Trilogy Education CEO and Founder Dan Sommer said in a statement. “Trilogy and 2U share a belief that universities are critical to lifelong learning and to meeting the workforce development needs of local economies both domestically and internationally, and we’re proud to further our mission and continue this important work as part of the 2U family.