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UT System: No Financial Return on $10 Million Investment

University of Texas System officials acknowledged this week that they'll see no return on their $10 million investment in MyEdu, an Austin-based education software startup.

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In 2011, the University of Texas System Board of Regents approved a $10 million investment in MyEdu, an Austin-based education software start-up. This week, after MyEdu was sold to Blackboard — a large technology company — for an undisclosed amount,  system officials acknowledged that there would be no financial return on the investment.

“Texas taxpayers would like to know where their $10 million equity investment has gone,” Gordon Appleman, a Fort Worth lawyer and prominent University of Texas at Austin alum who has been a vocal critic of the regents, told the Tribune.

When the UT System entered into its agreement with MyEdu, it was seeking services specifically tailored to its institutions, including — according to the motion the regents passed —"degree planning, degree auditing, integrated schedule, course and credit planning, student-professor online collaboration systems, student-professor online collaboration systems, student evaluation systems, financial planner, manager and college credit, and cost calculator systems with fully integrated mobile functionality."

The agreement called for the system to have access to MyEdu's tools license-free and royalty-free for five years.

The regents' motion, which carried unanimously, also authorized UT System Chancellor Francisco Cigarroa and Barry Burgdorf, the system's then-vice chancellor and general counsel, to "enter into an accompanying Investor Agreement for the purchase of equity interests in MyEdu in an amount of up to $10 million."

In 2011, following criticism of the deal, Michael Crosno, the chief executive officer of MyEdu, wrote an op-ed in the Austin American-Statesman defending the investment and saying that the UT System "should like their chances of returning a profit."

According to a press release issued by the system this week following Blackboard's purchase of MyEdu, the system, as part of the agreement, received a warrant to purchase common stock in MyEdu. That option was never exercised. Appleman argued that the system should provide taxpayers with an explanation of why not.

In an email to the Tribune, Cigarroa said the primary purpose of the investment was never to generate financial returns. Rather, he said the primary goal was to develop and offer up innovative support systems for students at UT institutions.

"The investment has been hugely successful because the majority of products and services identified in the agreement have been delivered by MyEdu, and the student buy-in to MyEdu has been outstanding," he said, noting that input from UT students had prompted the company to develop initiatives that were not mentioned in the original agreement.

According to the recent press release, more than half of the undergraduates in the system use MyEdu, including more than 80 percent of the students at its flagship campus in Austin. With a system-wide ratio of one advisor for every 341 students, the system said the software had played "a critical role" in augmenting its counseling services. They also noted that students are using MyEdu's job search functions.

Then again, there may have been a significant amount of usage without the big investment. MyEdu's services are largely free to students throughout the country, most of whom do not attend institutions that have put a significant amount of capital into the company.

The system contends that the arrangement allowed for the creation of "a meticulously customized experience for UT students."

Blackboard will honor the agreement between MyEdu and UT, which lasts through September 30, 2016. In a statement, Crosno said, "Becoming part of Blackboard will allow our Austin-based organization to tap into more resources and have an even greater impact on UT students and students around the world."

However, Cigarroa acknowledged, any hopes of "returning a profit," as Crosno put it in 2011, are in the past.

"Under the terms of the agreement with MyEdu, there was the potential for the UT System to make money from its investment," Cigarroa said. "That opportunity didn't materialize and the UT System will not be receiving any financial returns. That being said, again, this was an investment to create and provide services to students at no cost to them or their institutions, and in that regard, the returns have been tremendous."

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