2U

Prospectus Summary

PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, especially our consolidated financial statements and the related notes thereto and the information set forth under the sections "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," in each case included in this prospectus. Unless the context otherwise requires, we use the terms "2U", "company", "we", "us" and "our" in this prospectus to refer to 2U, Inc. and, where appropriate, our consolidated subsidiary.

Our Mission

2U enables great colleges and universities to bring their programs online, allowing them to transform the way higher education is delivered. We believe that our cloud-based software-as-a-service platform allows our clients to reach students globally, enabling the education they provide to reach its highest potential so students can reach theirs.

Company Overview

We are a leading provider of cloud-based software-as-a-service solutions that enable leading nonprofit colleges and universities to deliver their high quality education to qualified students anywhere. Our innovative online learning platform and bundled technology-enabled services provide the comprehensive operating infrastructure colleges and universities need to attract, enroll, educate, support and graduate their students. By leveraging our solutions, we believe our clients are able to expand their addressable markets while providing educational engagement, experiences and outcomes to their online students that match or exceed those of their on-campus offerings.

Our clients deploy our platform to offer high quality educational content, instructor-led classes averaging ten students per session in a live, intimate and engaging setting, and a rich social networking experience, all accessible through proprietary web-based and mobile applications. This technology challenges every student to learn from the front row and every faculty member to engage students in new and innovative ways. We believe that our platform is flexible, easy to use, highly scalable and characterized by a high level of availability and security. Full course equivalent enrollments in our clients' programs grew from 14,099 during the twelve months ended December 31, 2011 to 31,338 during the twelve months ended December 31, 2013, representing a compound annual growth rate of 49%. We measure full course equivalent enrollments in our clients' programs by determining, for each of the courses offered during a particular period, the number of students enrolled in that course multiplied by the percentage of the course completed during that period. Any individual student may be enrolled in more than one course during a period. From our inception through December 31, 2013, a total of 8,540 unique individuals have enrolled as students in our clients' programs. By the time the last of these individuals graduate or leave our clients' programs, we estimate that they will have generated more than $475 million in total program tuition and fees for our clients.

Our clients are leading nonprofit colleges and universities, and eight of our nine clients with whom we have contracted to offer 2U-enabled graduate programs were ranked by U.S. News and World Report among the top 75 undergraduate institutions in its 2014 National University Rankings. Our clients use our platform to offer full graduate degree programs online. Currently, eight well-recognized nonprofit colleges and universities offer graduate degrees through our platform, including the University of Southern California, Georgetown University, the University of North Carolina at Chapel Hill and the University of California, Berkeley, and we have contracted with a ninth university to enable a new graduate degree program that we expect to launch in 2015. We believe we have additional opportunities to extend our reach into the international, undergraduate and doctoral higher education markets.

We believe that by delivering high quality degree programs and courses online using our platform, our clients can improve educational outcomes and career opportunities for a larger number of students, and by doing so, broaden the global reach of their brands while maintaining their academic rigor and admissions standards. By deploying our platform, clients give their students, who receive the same degree or credit as their on-campus counterparts and generally pay equivalent tuition, the option of pursuing their educations without potentially incurring the burden of moving, leaving existing employment or giving up family and community support networks. This can substantially reduce the total cost of obtaining a degree and lower a student's total debt burden. It can also allow students for whom relocating is not an option to obtain a higher quality education than they might be able to access in their local communities.

We provide a suite of technology-enabled services, bundled with our platform, that are designed to promote adoption and usage of our software-as-a-service, or SaaS, solutions by clients and improve enrollment and retention of their students. We have primary responsibility for identifying qualified students for our clients' programs, generating potential student interest in the programs and driving applications to the programs. We have developed sophisticated digital program marketing and student acquisition capabilities, and we work closely with our clients to help them create highly engaging multimedia instructional content. We also include other services that support the complete lifecycle of a higher education program or course, including facilitating in-program field placements and providing technical support. In addition, our platform provides clients with real-time data and deep analytical insight related to student performance and engagement, student and faculty satisfaction, and enrollment.

Our compensation from our clients consists primarily of a specified share of the tuition and fees paid to our clients by students in the programs we enable, which we believe aligns our interests with those of our clients. This revenue model, combined with long contractual terms, enables us to make the investment in technology, integration, content production, program marketing, student and faculty support and other services necessary to create large, successful programs. Our client contracts generally have initial terms between 10 and 15 years in length, and, since our inception, all of the clients that have engaged us remain active.

For the years ended December 31, 2011, 2012 and 2013, our revenue was $29.7 million, $55.9 million and $83.1 million, respectively. For the years ended December 31, 2011, 2012 and 2013, our net losses were $24.9 million, $23.1 million and $28.0 million, respectively, and our Adjusted EBITDA loss, a non-GAAP measure, was $22.5 million, $18.8 million and $21.2 million, respectively. For a reconciliation of Adjusted EBITDA loss to net loss, see "Selected Consolidated Financial Data —Adjusted EBITDA."

Market Opportunity

The global higher education industry is undergoing a significant transition. Due primarily to macroeconomic conditions, public higher education institutions in the United States and other countries in recent years have faced decreased governmental financial support and increased volatility in graduate enrollment rates. At the same time, we believe the long-term growth prospects of the global higher education industry are strong, as governments, corporations and individuals around the world are increasingly recognizing the importance of education in a knowledge-based economy.

In addition, technology, and online learning in particular, is reshaping how institutions deliver and individuals access education. Rising rates of internet penetration, the rapid proliferation of mobile devices and the growth in cloud-based services are broadening the accessibility of educational content and services as well as the potential reach of educational institutions. As a result, colleges and universities are rethinking their operational and business models, determining how to incorporate technology-enabled offerings into their long-term growth strategies and seeking cost-effective ways to expand their academic reach.

Rising Global Demand for Postsecondary Education

Higher education is a large and well-established market, both in the United States and worldwide. In the United States alone, total revenue for all degree-granting postsecondary institutions was over $550 billion for the 2010-2011 academic year, according to a May 2013 report by the U.S. National Center for Education Statistics. The decade between 2000 and 2010 saw a 37% increase in enrollment in postsecondary degree granting institutions in the United States, from 15.3 million to 21.0 million, according to the U.S. Department of Education, and that number is expected to rise to 23.8 million by 2021, a further increase of 13%.

Rapid Growth in Online Education

The market for online postsecondary education has grown more rapidly than the overall postsecondary market, driven by the increased acceptance of online programs among students, academic institutions and employers, and the greater flexibility and convenience of many online programs. To date, the primary users of online education have been students enrolled in for-profit institutions, which we do not view as our competitors or part of the same industry given our focus on enabling leading nonprofit colleges and universities to deliver their high quality degree programs and courses online.

We believe that in the past many nonprofit institutions lacked confidence that online programs could offer sufficient quality to align with their brands, market reputations and academic standards. However, recent academic research, as well as our own experience, has shown that academic outcomes in online environments are generally equivalent to or better than those in traditional face-to-face environments. We also believe nonprofit institutions have been hesitant to adopt new initiatives given that they lacked the capital, technological expertise and marketing capabilities necessary to build significant online operations. However, as technology has improved and online education initiatives have become more prominent, nonprofit colleges and universities are considering online education as a means to increase enrollments cost-effectively.

Challenges Faced by Providers of Postsecondary Education

During this period of transition, providers of higher education are facing three fundamental challenges:

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The internet is allowing new forms of instructional content and courses to proliferate, and education service providers who are unable to navigate the online environment and offer a compelling value proposition to students may cede market share to their competitors.


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Many institutions recognize that they do not possess the human or technological resources necessary to implement a successful online learning strategy.


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Many institutions face increasing financial challenges that prevent them from investing more heavily in developing technology-based solutions. Given this environment, institutions of higher education are actively looking for ways to increase revenue, such as by raising tuition or increasing enrollment.

Our Opportunity

We believe that an increasing number of institutions of higher education globally will implement online learning strategies to extend their reach and remain relevant to the needs of students. We believe we have a significant opportunity to help leading nonprofit colleges and universities implement and scale high quality online degree programs, as well as protect and deliver on the promise of their brands. We believe that the transition of the higher education market to cloud-based online delivery is just beginning, and that we are uniquely positioned to capture market share by delivering compelling, value-producing services to these institutions. Our cloud- based SaaS solutions provide nonprofit colleges and universities with the ability to capitalize on the disruptive forces of online education while extending the academic reach of their programs. By doing so, our clients are able not only to fulfill their missions but also to develop significant new sources of revenue through meaningful additional enrollments.

Our Approach

We provide a cloud-based SaaS platform and bundled technology-enabled services that enable leading nonprofit colleges and universities to deliver high quality online degree programs and courses. Our platform supports a wide range of university functions, such as enabling high quality educational content, instructor-led classes averaging ten students per session in a live, intimate and engaging setting, and a rich social networking experience, all accessible through proprietary web-based and mobile applications. Our platform also serves as a hub for student and faculty interaction, and incorporates a live, or synchronous, learning experience, with pre-produced, or asynchronous, educational content and dynamic social networking. Furthermore, we offer services that support the complete lifecycle of a higher education program or course, including attracting students, facilitating in-program field placements and providing technical support. Our clients retain control of, and responsibility for, admissions, financial aid, faculty, curriculum and the direct delivery of academic services such as teaching, grading and assessment.

Using our solutions, our clients can:

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Extend Institutional Mission and Reach. Our solutions enable clients to extend their brands and fulfill their missions by delivering high quality education programs online to students anywhere in the world while maintaining their academic rigor and admissions standards.


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Increase Revenue. Our solutions enable clients to increase their overall enrollments significantly, thereby growing their tuition revenue.


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Increase Scalability. Our solutions allow clients to extend beyond their physical boundaries and capacity constraints to scale programs without the investment typically required to acquire, educate and service incremental on-campus students.


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Deliver a Differentiated, Engaging Learning Environment. Our platform leverages advanced software technology to enable highly interactive learning experiences, accessible using proprietary web-based and mobile applications.


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Utilize Ongoing Data and Analytical Insight. Our solutions enable clients to track the engagement and learning outcomes of students on our platform to a significantly greater degree than for their on-campus students.


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Increase Speed to Market. We bring technology and other capabilities that enable institutions to implement and scale an online degree program faster than they could on their own.

Our Strengths

We believe the following to be our key strengths:

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Robust, Differentiated Software and Services Platform. Our platform offers extensive features, high configurability, an intuitive user interface and the ability to support synchronous and asynchronous learning at scale, combined with a suite of technology-enabled services that together provide a broad set of capabilities that would otherwise require the purchase of multiple, disparate point solutions.

THIS IS THE END OF A COMPOSITION COMPONENT

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Proven Track Record Delivering SaaS Solutions for Leading Higher Education Institutions. We believe our track record of successful implementations for leading nonprofit colleges and universities, together with the trust we have built with clients, create a significant competitive advantage. Additionally, we regularly conduct Net Promoter Score® surveys with the faculty and students in each of our client programs. Net Promoter Score is a commonly used measure of customer loyalty and satisfaction. We believe that the favorable scores received from both groups demonstrate that we deliver our solutions in an effective and user-friendly manner.


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Proprietary, Data-Driven Approach to Growth. Through our experience launching and operating programs with leading nonprofit colleges and universities, we have developed a proprietary program-selection algorithm to drive the process for identifying new programs and clients, which enables us to systematically identify degrees at colleges and universities that we believe have the highest probability of success.


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Dedicated Focus on Quality. We prioritize quality by employing a "white glove" service model designed to enable academic programs that align with our clients' brands and produce positive student outcomes, not only in educational achievement but also in terms of student satisfaction, graduation rates and other key measures of success.


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Attractive Financial Model with Significant Predictability and Visibility. Given the long-term nature of our contracts, with initial terms generally ranging from 10 to 15 years in duration, we are able to benefit from increasing enrollments in clients' programs as those programs mature, leading to both revenue growth and expanding operating margins. In addition, we believe the significant portion of our revenue that is typically attributable to returning students contributes to the predictability and recurring nature of our business.

Our Growth Strategy

We intend to continue our industry leadership as a provider of cloud-based SaaS solutions that enable leading nonprofit colleges and universities to deliver education online. Our approach to growth is disciplined and focused on long-term success. The principal elements of our strategy are to:

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Grow Our Client Base. We intend to expand beyond our existing client base through two focused approaches:


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Add Programs in New Academic Disciplines. We believe there is a substantial opportunity for us to increase the size of our client base by adding graduate programs in new academic disciplines within our core market of selective nonprofit colleges and universities. According to the U.S. Department of Education, during the 2011-2012 academic year, U.S. institutions of higher education offered graduate degrees in 1,000 separate disciplines. Of these disciplines, 140 had more than 1,000 graduates in that year.


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Expand Within Existing Academic Disciplines. We are also actively targeting new graduate-level clients in academic disciplines where we have existing programs. We believe this approach will enable us to leverage our program marketing investments across multiple client programs within specific academic disciplines, expanding the number of students who can access high quality educations and significantly decreasing student acquisition costs within those disciplines.


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Increase Enrollment and Add Programs with Existing Clients. We intend to continue to increase student enrollments within the existing programs we enable for our clients. We also have been able to expand our relationships with clients by adding degree programs at the

same university, as we have at the University of Southern California, the University of North Carolina at Chapel Hill and The George Washington University.

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Grow International, Undergraduate and Doctoral Presence. We believe that there is significant market demand for our solutions as colleges and universities worldwide seek to extend their brands by accessing the growing global market for higher education. Our existing client programs serve students in over 50 countries. In addition, we believe there is a meaningful opportunity to provide high quality online education experiences to undergraduate students and to expand our graduate offerings into doctoral programs.


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Continue to Innovate and Extend our Technological Leadership. Our ability to deliver innovative technology for our clients has been central to our growth and success. We intend to increase the functionality of our platform and continue our investment in the development of new applications that extend our technological leadership.

Our Solutions

Our solutions consist of our cloud-based SaaS platform and bundled technology-enabled services.