The Untold Story of 2U, edX, and Axim Collaborative: A Tale of Unfulfilled Promises

In 2021, the unprofitable 2U made a bold move by acquiring edX, a struggling non-profit, for a whopping $800 million. This decision raised eyebrows and left many questioning its wisdom.

My analysis back then had warned about the financial strain this acquisition would put on 2U, especially with the additional $42 million in annual interest expenses from the loan taken to fund the purchase.

Fast forward to today, and the harsh reality is staring us in the face: 2U has filed for bankruptcy, edX’s progress seems stagnant, and Axim Collaborative, the non-profit entity that pocketed the $800 million, remains largely silent.

As someone who voiced skepticism early on, I feel compelled to dissect this triple failure and the disappointment that accompanied it.

The Rise and Fall: A Timeline

2021:

2022:

• February: 2U’s stock plummets by 50% after Q1 earnings, market cap dips below edX purchase price
• July/August: 2U announces strategic shift focusing on edX, leading to layoffs and cost-cutting measures
• Implementation of a “platform strategy” to integrate operations under the edX brand

2023:

2024:

2U’s Costly Gamble

“As we make all of these changes, I’m proud to say that by year’s end we’ll have answered the question from our IPO eight years ago. Yes, you can build a sustainable education business in higher ed at scale.”

This statement, made by former 2U CEO Chip Paucek just before a major layoff announcement, reflects the hubris that has plagued 2U since the edX acquisition. The company often operated in a reality that didn’t align with the actual circumstances.

For instance, their claim of lowering degree costs contradicted the reality of expensive programs that drained students financially. The acquisition of edX was meant to optimize costs and decrease reliance on paid advertising, but that plan didn’t pan out.

With almost 40% of expenses devoted to sales and marketing in 2021, 2U’s move to acquire edX was aimed at reducing student acquisition costs. However, the projected savings never materialized, and the debt taken on for the acquisition only exacerbated the financial strain.

Despite efforts to streamline operations, enrollments continued to decline, leading to multiple rounds of layoffs and desperate cash-generating measures, such as terminating degree partnerships for breakup fees.

The bankruptcy filing in 2024 was the final blow, proving that the edX acquisition was a catastrophic mistake that sealed 2U’s fate.

EdX’s Stagnation

While 2U saw edX as a tool to reduce user acquisition costs, edX’s purpose in the acquisition was less clear. The aim to catch up with Coursera seemed elusive, especially as Coursera surged ahead both pre and post-pandemic.

Despite rebranding efforts and attempts to leverage 2U’s marketing prowess, edX struggled to compete with Coursera, highlighting the flawed rationale behind the acquisition.

EdX’s declining SEO performance hindered 2U’s monetization efforts, while problematic bootcamps tarnished the brand’s reputation for quality education.

It became apparent that edX’s energy was focused on promoting 2U programs, ultimately hindering its own growth and progress.

Axim Collaborative’s Hollow Legacy

Axim Collaborative, the non-profit entrusted with the $800 million windfall from the 2U acquisition, has little to show for its wealth three years later.

Despite grand ambitions of innovation and equity advancement, recent tax returns paint a different picture. Axim seems to have become a grant-giving entity, with minimal progress on the promised initiatives.

While sitting on substantial assets, Axim’s impact in the edtech space remains minimal, failing to live up to its commitments to innovation and educational advancement.

The saga of 2U, edX, and Axim Collaborative serves as a cautionary tale of unfulfilled promises and misplaced ambitions in the world of online education.