2U: The biggest ed-tech IPO you’ve never heard of

Fast-growing education company 2U will debut on the public markets.

According to a news release, the company plans to list its common stock on the NASDAQ Global Market under the ticker symbol “TWOU.” 2U is hoping to raise up to $100 million through its initial public offering.

[aditude-amp id="flyingcarpet" targeting='{"env":"staging","page_type":"article","post_id":951615,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,","session":"B"}']

2U partners with top universities and colleges to craft online degree programs. 2U doesn’t touch the actual content or grant the degrees, but it offers tools for universities to develop the curriculum. The company has stayed under the radar, but recently hit the headlines for helping UC Berkeley build a virtual classroom for its new online data science program.

For its university partners, 2U is responsible for vetting the first round of applicants, designing and conveying interactive content, and providing the learning management system (LMS). 2U is works with universities to help market their new online degree programs.

Each contract with a university usually has long initial terms of 10 to 15 years. The company currently has eight colleges and universities aboard for 10 graduate programs. Later this year, four more 2U programs will start.

I recently met with chief executive and founder Chip Paucek to discuss his reasons for starting the company with cofounder Jeremy Johnson. Paucek is a serial entrepreneur with a strong background in education. In addition to the day to day operations of the company, Paucek is a student. He is enrolled in an online MBA at one of 2U’s partner universities, UNC Kenan-Flagler Business School.

In our interview, we touched on a number of 2U’s closest rivals, including Deltak. Paucek said 2U stands out from the pack as it doesn’t dabble in content but specializes in providing technology alone. In addition, 2U doesn’t make money unless the online program is a success. The company splits the revenue from the program with its university partner.

At first blush, the finances aren’t all rosy. From the filing: “We incurred net losses of $24.9 million, $23.1 million and $28.0 million in 2011, 2012, and 2013, respectively, and we had an accumulated deficit of $99.8 million as of December 31, 2013.”

And if those numbers are going to turn around, 2U is going to have to get a lot more buy-in from grad schools. “The success of our business depends in large part on our ability to enter into agreements with additional nonprofit colleges and universities for their offering of graduate programs online,” the filing reads.

The company will need to demonstrate to Wall Street that it won’t falter in a similar manner to Chegg. Shares of Chegg dramatically fell after the ed-tech company priced its initial public offering well above the expected range.

[aditude-amp id="medium1" targeting='{"env":"staging","page_type":"article","post_id":951615,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,","session":"B"}']

In anticipation of its IPO, the company recently announced a new advisory board. Advisors hail from a variety of industries, including politics and education. They include former DC mayor Adrian Fenty and Alec Ross, who previously served as senior advisor of innovation to Secretary of State Hillary Clinton.

The deal is underwritten by Goldman Sachs, Credit Suisse, Needham, Oppenheimer, and Pacific Crest Securities. The lucky VCs set to profit from the deal include Bessemer Venture Partners, Redpoint Ventures, Novak Biddle Venture Partners, Highland Captial Partners, and Triumph Capital.

To date, the company has raised approximately $95.9 million in four rounds of venture financing.