Unpacking Instacart’s new valuation

Instacart delivered a new valuation last week, cutting it by nearly 40% to $24 billion.

• The company reached its former valuation ($39 billion) after a $265 million round in March 2021. It said it now has $1+ billion in cash and isn’t looking to raise funding.

Flat out: While e-commerce startups like Rent the Runway and even competitor DoorDash have had their valuations lowered through down rounds, a voluntary valuation slash is less common. CEO Fidji Simo told employees in a staff meeting last week that it’s meant to reflect how the company would be seen in the public market, and won’t impact its plans for an IPO, per the Wall Street Journal.

The company said the move would help bring in new talent with the promise of better stock options. However, Jackie Tubbs, intelligence analyst at CBInsights, noted the struggles the grocery-delivery space has been facing recently “might have more to do with it.” (Instacart said that isn’t the case, as it receives independent valuation assessments quarterly, and it hit an all-time revenue high last year.)

Often referred to as “pandemic darlings,” Instacart’s peers DoorDash and Uber have seen their stocks “take a tumble” as e-commerce sales have flattened, Tubbs said.

• Plus, she noted that funding is lagging: As Q1 ends, these players have so far raised $1.9 billion, compared to $4.6 billion during the same period last year, per CBInsights data.

“There’s a lot of noise and competition all around for a space that is meeting its full potential and has stayed stagnant in a way,” Tubbs said.

Eating away: That fight is even fiercer for Instacart than others, Tubbs added, as it’s facing competition both from grocery stores establishing their own delivery solutions, as well as restaurant-delivery players like UberEats and DoorDash pushing into grocery.

• Startups “filling up all the spaces”—from e-commerce enablement to micro-fulfillment—are also putting pressure on Instacart, she noted, and it’s working to keep up. Earlier last week, the company unveiled a suite of services for retailers, including 15-minute delivery.

+1: While voluntarily lowering a valuation has thus far been a rare move, a “more realistic” valuation could potentially benefit companies in this space, Tubbs noted.

“They have an opportunity to outperform now rather than trying to meet a valuation that maybe wouldn’t have held, given how e-commerce has flatlined.”