US-based online grocery delivery service Instacart, which is backed by corporates American Express, Comcast and Amazon, is cutting its valuation from $39bn to $24bn, Bloomberg reported on Friday.
Instacart’s online platform allows users to select groceries from a range of local shops that are collected by the company and delivered to their home at a time of their choosing.
The company was one of the most visible winners during the covid-19 pandemic, as social distancing measures in its home country led to an influx of new customers. It has raised over $2.6bn in funding altogether, $790m of which came after the start of the pandemic.
The most recent round involved investment and financial services group Fidelity co-leading a $265m round in March 2021 with Andreessen Horowitz, D1 Capital Partners, Sequoia Capital and T Rowe Price valuing Instacart at $39bn post-money, more than double that of its previous round, five months earlier.
However, growth has tailed off in recent months and Instacart has elected to slash its valuation in order to offer potential hires equity awards which would have greater potential to yield profit in the long run, helping it to strengthen its recruitment efforts.
The move is symptomatic of a realignment in the startup scene, as companies with business models which thrived with social distancing are forced to dial back expectations while heightened inflation causes luxury offerings to become less readily affordable.
Such changes have been more visible in the public markets where the likes of home fitness equipment brand Peloton and video communication platform developer Zoom have experienced significant drops in their share price over the past six months.
Instacart’s new valuation still represents a big paper profit for its corporate investors, however. Whole Foods, the grocery chain subsequently bought by e-commerce firm Amazon, provided $36m for the company in 2016 at a $2bn valuation.
Mass media group Comcast invested in Instacart’s $220m series C round the previous year through its Comcast Ventures unit at the same valuation, alongside Kleiner Perkins Caufield & Byers, Dragoneer Investment Group, Thrive Capital, Valiant Capital, Andreessen Horowitz, Khosla Ventures, Sequoia, Aaron Levie and Sam Altman.
American Express Ventures, the venture capital arm of payment services firm American Express, had been among the participants in a $44m series B round the previous year that valued the company at just $400m.
Image courtesy of Instacart.
