Instacart slashes its valuation by nearly 40% to $24 billion

(Bloomberg) — Instacart Inc., a pandemic darling now facing slowing growth, cut its valuation by nearly 40% to about $24 billion, a move it says will help the company attract talent and adjust to market conditions.

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

Instacart hopes the move will boost talent recruitment and retention efforts by aligning new equity awards with the updated valuation that could have more long-term earnings potential if the company regains an edge in the markets. Recently, investors have had reservations about public and private technology companies.

“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. “Markets go up and down, but we are focused on the long-term opportunity for Instacart.”

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Voluntarily lowering its valuation is an unusual move for a startup and a rare admission that a company was rash. There have been a few instances where companies raised more capital at a lower valuation, known as the dreaded “bear round.” Two years ago, Rent the Runway Inc. raised new funding that valued the fashion startup at less than its $1 billion valuation at the time, during the early days of the pandemic.

But in the case of Instacart, the revaluation was carried out voluntarily without investors forcing the measure. According to Instacart, the company has more than $1 billion in cash and marketable securities and does not need to raise more capital.

Best known for an app that allows consumers to order groceries online from a range of stores, San Francisco-based Instacart became an essential service at the height of the Covid-19 pandemic. But like Uber Technologies Inc. and DoorDash Inc., the company’s growth began to stall as the pandemic began to wind down.

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The prospect of higher interest rates, inflation and a possible recession have also influenced its valuation. Still, Instacart increased its revenue by 20% to $1.8 billion in 2021, according to a person familiar with the matter.

Instacart has expanded beyond grocery delivery since its founding in 2012. Earlier this week, the company launched a supermarket retail services platform in a bid to boost its enterprise business. The company adds another source of revenue on top of its core market, which controlled 52% of the US grocery delivery market in December, according to YipitData.

Instacart’s rise during the pandemic helped turn the grocery startup into one of Silicon Valley’s most valuable private companies, fueling speculation of an initial public offering.

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Instacart Slashes Its Valuation by Almost 40% to $24 Billion (2)

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