Instacart slashes its valuation by almost 40% to US$24b

[NEW YORK] Instacart, a pandemic darling that's now facing decelerating growth, is slashing its valuation by almost 40 per cent to about US$24 billion, a move it says will help the company attract talent and adapt to market conditions.

The food-delivery startup had been valued at US$39 billion in its most recent fundraising round, when it snagged US$265 million last year from investors such as Andreessen Horowitz, Sequoia Capital and D1 Capital Partners, as well as Fidelity Management & Research Co and T Rowe Price Associates.

Instacart hopes the move will boost recruiting and retention efforts by aligning new equity awards with the updated valuation. The decision comes as the company navigates souring investor sentiment in technology companies across private and public markets.

"Our team built Instacart into the market leader it is today, and we believe investing in them is the right thing to do," Instacart said in a statement Thursday (Mar 24). "Markets go up and down, but we are focused on Instacart's long-term opportunity to power the future of grocery with our partners."

Instacart, best known for an app that lets consumers order groceries online from a range of stores, became a designated essential service at the height of the pandemic. But like Uber Technologies and DoorDash, the company saw its growth stall as the pandemic began to wane.

The prospect of higher interest rates, inflation and a potential recession also has weighed on its valuation. Still, Instacart boosted its revenue by 20 per cent to US$1.8 billion in 2021, according to a person familiar with the matter.

BT in your inbox

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign Up

Sign Up

Instacart has expanded past grocery delivery since its founding in 2012. Earlier this week, the company launched a platform of services to sell to supermarkets in a bid to bolster its enterprise business. The venture adds another revenue stream in addition to its core marketplace, which commands 52 per cent of the US grocery delivery market as of December, according to YipitData.

Fidji Simo, a Facebook veteran who oversaw the social media giant's flagship networking app, took over as Instacart's chief executive officer in August. She has focused on bolstering the company's advertising business and sees that higher-margin revenue stream as a "critical part of our future".

Instacart's pandemic boom helped turn the grocery startup into one of the most valuable private companies in Silicon Valley. And that has fuelled speculation of an initial public offering (IPO).

An IPO could still be in the offing, but the timing isn't clear. Simo declined to provide a timeline on IPO plans in a "Studio 1.0" conversation with Emily Chang earlier this month.

"At some point, of course, but I really want to make sure that the company that we do take public is a company that's reflective of this new, bolder vision," she said. BLOOMBERG