South African online education provider, Getsmarter, has been acquired by 2U Inc. in all-cash transaction for approximately $130 million. The acquisition is expected to strengthen 2U’s position in the approximately $1.9 trillion global higher education market which is expected to grow approximately 8% in 2017, while accelerating two of the company’s key strategic growth initiatives – expanding internationally and into non-degree alternatives.
The Cape Town-based company, which was launched in 2008 by two brothers Sam and Rob Paddock, has been largely bootstrapped, only taking in $5 million in funding from Digital Growth Africa Middle East (DiGAME), a subsidiary of Zouk Capital in 2016.
GetSmarter powers engaging online short courses in partnership with some of the world’s most renowned higher education institutions, including the University of Cambridge, Harvard University’s strategic online learning initiative, HarvardX, Massachusetts Institute of Technology (MIT), and Africa’s top three universities, University of Cape Town, University of the Witwatersrand and University of Stellenbosch Business School. It is a high growth business that has served more than 50,000 students since inception with course completion rates that average 88%. GetSmarter’s portfolio includes over 70 short courses offered with its university partners, including Business Sustainability Management from the University of Cambridge’s Institute for Sustainability Leadership, Global Health Delivery from HarvardX, and Healthcare Informatics from the University of Chicago. GetSmarter operates under a revenue share model with its university clients.
“GetSmarter’s pursuit of quality in online education, demonstrated by a uniquely high student course completion rate that averages 88% is truly remarkable and mirrors 2U’s mission to offer the world’s best digital education as defined by our partner students’ outcomes and satisfaction.” said Christopher “Chip” Paucek, CEO and co-founder of 2U. “With GetSmarter, 2U expects to strengthen its position as a leader in digital education. We also expect to accelerate our growth, extend our global footprint and provide a broader suite of services by matching up more students to the right programs at the right time as they further their professional and personal development.”
“In 2U we have found a partner who makes us stronger. They bring deep experience and access to capital that allows us to pursue stellar growth and stand out student outcomes at scale.” said Sam Paddock, CEO and co-founder of GetSmarter. “We look forward to better serving our University partners and their students across the globe.”
2U intends to continue to grow its core business of powering online domestic graduate degree programs, a market that continues to provide strong and attractive growth opportunities. Following the closing of the acquisition, GetSmarter will be an independently operating, wholly-owned subsidiary of 2U, based in Cape Town, South Africa. GetSmarter will continue to be operated by its current management team, including its founders, Sam Paddock and Rob Paddock, with GetSmarter co-Founder & CEO, Sam Paddock, remaining as its CEO and reporting to Chip Paucek.
Expected Strategic Benefits of the Transaction
- Builds on 2U’s mission to deliver high-quality, high-touch, digital education focused on student outcomes. With student course completion rates averaging 88%, GetSmarter mirrors 2U’s high standards for student outcomes and retention.
- Accelerates 2U’s growth through increased new client acquisition activities during 2016 and early 2017, leading us to expect a substantial increase in the number of courses offered, the number of students taking courses and therefore an acceleration in the business.
- Ensures sustainability for GetSmarter’s partners through the strength, stability and resources associated with 2U’s overall business. We expect this to ensure even more sustainability and growth for their university partners in the future.
- Expands 2U’s total addressable market opportunity
- Short Courses: With this acquisition, 2U can now provide high quality short courses to students not currently seeking a full graduate degree.
- International: With GetSmarter, 2U immediately adds world class universities from three continents, a global base of students, and provides a better product-market fit for international audiences.
- Creates marketing leverage as 2U brings world class marketing analytics and optimization to GetSmarter, creating even greater access to high-quality digital education for students and working professionals.
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