Page 41 - Forbes Magazine-September 30, 2018

Strategies

Ivory Tower

in the Cloud

Long the domain of seedy
degree mills peddling debt-laden
vocational training, online education
is now a priority, and a profi t center,
at top-tier universities thanks to
innovators like 2U Inc.
BY ANTOINE GARA

n 2014, when Douglas Shackelford was named
dean of UNC’s Kenan-Flagler Business School,
his most important strategic initiative was clear.
I UNC was a top-tier public university, but its B-
school, barely in the top 20, was on a mission to great-
ly expand its enrollment on the cheap.
“Our traditional revenue sources were changing,
and not in a good direction,” says Shackelford, 60.
So UNC forged ahead with a little-known com- rolled in 2U-administered degree programs, and 2U chief Chip Paucek
pany called 2U, based in Lanham, Maryland. In ex- 2U is on track to generate as much as $412 million at the company’s
headquarters in
change for 60% of future tuition revenues, 2U would in revenue this year, a 44% increase. Th e compa- Lanham, Maryland.
invest $5 million to $10 million building out UNC’s ny isn’t yet profi table since it’s launching programs The books may be
props, but 2U’s $4.7
soft ware and marketing capabilities, scour the globe at a quickening pace and only recoups its heft y ini- billion valuation speaks
for online applicants and, importantly, leave the ad- tial investments by the fourth year of its typical ten- volumes about its
acceptance at scholarly
missions decisions and teaching to Chapel Hill. year contract. Still, 2U’s Nasdaq-listed shares have
institutions.
Th e results have been impressive: Seven years risen from their 2014 IPO price of $13 to $80, mak-
aft er it launched its program with 2U, UNC is the ing the company worth $4.7 billion. “We have a mas-
largest online M.B.A. provider, with 938 students, sive amount of market runway,” says 2U chief execu-
most of whom pay full tuition. Only half as many tive and cofounder Chip Paucek, who’s aiming for 5%
are enrolled in the full-time residential program. of the $80 billion global market for graduate degrees.
“We’ve doubled our student body without adding Master’s programs are 2U’s sweet spot, and its of-
any buildings in Chapel Hill,” says Shackelford, not- ferings to university administrators are soup to nuts.
ing that tuition for MBA@UNC costs $124,000. In Besides soft ware, the company has a small army of
fact, online revenue has nearly tripled to $14 mil- social-media-savvy marketers to assist in recruiting.
lion, while faculty head count has held steady, and It also fi nds placements for students in areas like ed-
operating income has gone from a $1.4 million loss ucation, nursing and social work. For Georgetown’s
to a $5 million profi t. midwifery program, for instance, 2U partnered
Known as an online-program manager, or OPM, with hospitals so that each online student delivers
2U is the nation’s leading provider of soft ware for uni- 20 to 40 babies by graduation. When USC’s Rossier
versities seeking to quickly expand enrollment digi- School of Education demanded that candidates have
tally. Its cloud-based content-management platform at least three semester-long teaching placements, 2U
allows students and staff ers to seamlessly connect to built relationships with elementary and high schools
universities’ existing systems, handling everything in 50 states. So far it has placed over 43,000 students.
from loading lectures and hosting intimate discussion For Cory Broussard, 37, who got his M.B.A. from
groups to troubleshooting technical glitches. UNC in 2014, it meant not having to quit his day job
In its fi rst decade, 38,000-plus students have en- as an engineer on an off shore platform for Shell in the

56 | FORBES SEPTEMBER 30, 2018