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yieldcrv

> In 2021, the unprofitable 2U bought edX, an unprofitable non-profit, for a staggering $800 million

How do you sell a non-profit?

Or, more specifically, how do you purchase to gain control?

Board members aren't supposed to sell board seats or do anything for self enrichment

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The original non-profit edX sold its brand and most assets to 2U. The remaining non-profit entity was temporarily renamed “The Center for Reimagining Learning.” Last year, this organization was officially named Axim Collaborative and appointed a new CEO. ... Axim appears to have become primarily a grant-giving organization. Besides supporting Open edX, there’s little evidence of using its “substantial resources” for innovation as initially promised. ... Axim’s current assets exceed the total amount edX spent during its entire non-profit phase.

A nonprofit built something, sold it for a lot more than it cost to create it, and now has the cash which it is legally required to spend furthering its mission. This seems generally reasonable to me, though of course Axim may end up spending its millions poorly.

A good summary, although The Crimson is not happy with the results of the deal:

https://www.thecrimson.com/article/2024/2/23/climaco-harvard...

Now they have the opportunity to buy it back from the for-profit in bankruptcy proceedings

Honestly? It would be a hilarious turn of events. I hope they do it and use the remaining money to revitalize their offerings and infrastructure.

Isn't that kinda what happened with gumroad?

Thanks! That’s pretty cool and practical

I could have thought of selling some assets, I didn’t think of selling even the name of the non profit and just renaming the old one

It is funny that the original one now has cash that it doesnt spend after years of high churn, I’ll check out its non profit tax filings

Harvard and MIT sold the assets to 2U; the money was rolled over into a new nonprofit:

https://www.insidehighered.com/news/tech-innovation/digital-... - They put $80M into edX and got back $800M.

Yep, definitely 2U's $800M mistake, not Harvard and MIT. They made off like bandits.

Many universities like to claim that their mission is to educate the next generation of citizens and leaders, rather than to make off like bandits.

Some would call it a failure to uphold that mission, even if it was good for their bank balance.

I don’t know how this transaction went down, but it’s very likely they didn’t purchase the organization itself, but rather its assets. The surviving organization would then dispose of the resulting cash in a mission-oriented fashion and shutdown thereafter.

Yeah, the article’s phrasing makes it ambiguous

I like that non profits can be asset stripped, I just wouldn’t call the thing sold to be a non-profit

I gather that non-profit board membership doesn't pay very well.

Consequently, when the non-profit in question has something valuable (like market share or branding), there are some misaligned incentives.

Board members at a non-profit cannot profit from sales of corporate assets. if that's what you mean.

There's direct payments, and then there's the infinite number of ways to receive indirect compensation.

I suppose it's possible a non-profit board member is taking illegal/fraudulent kickbacks. Quite an accusation though. i guess there are "misaligned incentives" if a board member is willing to act illegally or fraudulently.

thats not what’s necessary at all

non profit salaries of board members can be extremely high, the aggregate reporting on this is poor despite the public filings, as the filings say the same things in wildly different ways

I think the weirdest meme in the non profit world is how many act poor, or actually are undercompensated, but the answer to why is “its a non profit soo….” as opposed to “the board chooses to underpay me soo…”

additionally, many things can be done with assets. even if a non profit does not directly buy a board member’s investments, it can use its funds to pump that investment. for example, buy 2 houses on the board member’s block at inflated prices, so the board member can sell their own house at a huge profit. can do the same with anything especially illiquid things like art with small float. can do it with small stocks that are easy to pump too. can do it with crypto that wont be scrutinized for pumping. as long as the transactions aren't directly to the restricted party it meets all regulations.

It's not quite an accusation but mainstream practice. Agarwal, in the early days, earned more than everyone else combined, and took credit for the work of others. After the sale, he was offered a coushy job at 2U.

Funneling nonprofit money into private pockets is like an art at MIT. How many professors are millionaires? How many would be without MIT?

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