The Lanham, Md., education company 2U, which partners with major universities to bring their courses online, took its first steps last week in a long-held plan to expand outside the United States, agreeing to pay about $103 million to buy a South African competitor.
The company, called GetSmarter, will be eligible for an additional $20 million if it meets certain financial milestones, and it will continue to operate as a wholly owned subsidiary. The acquisition comes at a time when universities are increasingly seeing a demand for programs that do not require students to physically travel to campus — a need that could grow if the international students who have traditionally flocked to U.S. universities suddenly find travel more difficult as nations tighten their borders.
“Our core business has been domestic graduate programs, but we believe that there is a global opportunity to take really exceptional high-quality, high-touch digital education to learners looking to have an impact on their lives all over the world,” said 2U’s chief operating officer, Susan Cates.
GetSmarter’s own growth story tracks with South African universities’ efforts to expand online. In 2008, founders Sam and Rob Paddock started making online supplements to courses taught by their father, a property lawyer who was an adjunct professor at the University of Cape Town. The courses received more attention than they expected, and they started offering their services to other niche programs that were of interest to people who aren’t full-time students. The university took notice and the Paddocks soon locked down partnerships with the country’s other two top colleges, the University of the Witwatersrand and University of Stellenbosch Business School.
They chalked their early success up to a mismatch in South Africa’s education system. The country has a growing middle class willing to pay for education, but its top universities have struggled to keep up with demand.
In South Africa, “you have these three top institutions that can accept only a fraction of the students that apply every year,” Rob Paddock said.
The company first stepped outside sub-Saharan Africa a few years ago through a partnership with MIT, and later hooked into other universities around the United States and Britain.
In the past few years, GetSmarter had early success in taking traditional universities’ offerings and marketing them to students on opposite sides of the world. Rob Paddock says the company has found a lot of demand from places such as Brazil, where a degree from a high-powered U.S. university has traditionally been open only to a privileged few. Singapore has been another hot spot, he says, where citizens get government-funded stipends for professional development.
“These are working professionals who almost exclusively are not what you refer to as full-time students,” he said.
It’s been a time of aggressive change for the D.C. area’s education technology scene. Graham Holdings, the Arlington, Va.-based holding company that once owned The Washington Post, sold Kaplan University to Purdue University in a deal announced April 27 that would put the institution under Purdue control and essentially be run for a fee by Kaplan. And D.C.-based EverFi, which sells shorter course modules geared more toward financial literacy, compliance issues and prevention programs, recently took in a $190 million private-equity investment for a proposed expansion.
2U’s acquisition of GetSmarter is scheduled to close in the fall.
An earlier version of this report misspelled the last name of GetSmarter founders Sam and Rob Paddock. This story has been updated.