A
shopper
prepares
fill
his
cart
at
a
Giant
supermarket
in
Washington,
DC,
April
6,
2020.
Evelyn
Hockstein/The
Washington
Post
via
Getty
Images)
Sequoia
Capital
and
Andreessen
Horowitz,
two
of
Silicon
Valley’s
most
high-profile
venture
firms,
are
poised
to
take
a
massive
hit
on
their
last
investment
in
grocery
delivery
company
Instacart,
a
deal
that
closed
in
2021
as
tech
stocks
were
soaring.
In
its
latest
IPO
prospectus
update,
filed
Friday,
Instacart
said
it
plans
to
sell
shares
at
$28
to
$30
apiece,
valuing
the
company
at
around
$10
billion
at
the
top
of
the
range.
That’s
more
than
75%
below
where
Sequoia
and
Andreessen
invested
in
early
2021.
At
that
time,
Instacart
sold
shares
at
$125
a
piece
for
a
$39
billion
valuation.
The
delivery
economy
was
booming
because
of
Covid
shutdowns,
and
Instacart’s
services
were
seeing
record
demand.
“This
past
year
ushered
in
a
new
normal,
changing
the
way
people
shop
for
groceries
and
goods,”
Instacart
finance
chief
Nick
Giovanni
said
in
a
press
release
at
the
time.
In
the
more
than
two
years
since
then,
Instacart
and
its
investors
have
learned
that
growth
during
that
period
was
anything
but
normal.
Instacart
was
closing
out
a
quarter
in
which
revenue
surged
200%.
In
the
quarter
before,
sales
jumped
almost
sevenfold.
Instacart
said
it
was
preparing
to
increase
head
count
by
50%
and
bolster
investment
in
advertising.
Sequoia’s
Mike
Moritz,
who
led
his
firm’s
investment
and
recently
announced
his
departure
after
38
years,
said
in
the
same
press
release
that
Instacart
was
“fulfilling
its
role
as
a
vital
service
for
consumers,
a
reliable
partner
for
retailers
and
an
effective
platform
for
advertisers.”
Fidelity,
T.
Rowe
Price
and
D1
Capital
Partners
also
participated
in
that
financing
round.
Then
the
economy
reopened,
inflation
spiked
and
the
Federal
Reserve
started
boosting
interest
rates,
which
hovered
near
zero
throughout
Covid.
Consumers
started
shopping
again
in
person
on
tightened
budgets,
and
with
capital
costs
jumping,
investors
began
demanding
that
cash-burning
companies
find
a
path
to
profitability.
Last
year,
the
Nasdaq
suffered
its
steepest
drop
since
the
2008
financial
crisis.
It’s
also
true
that
venture
firms
haven’t
seen
any
real
returns
from
IPOs
since
before
the
2022
market
collapse.
The
dearth
of
exits
is
particularly
stark
because
VCs
invested
record
amounts
of
capital
in
2020
and
2021,
including
deals
at
high
valuations
in
areas
such
as
crypto
and
fintech.
Even
with
the
changing
market
conditions,
Instacart
has
continued
to
grow
but
at
a
dramatically
slower
pace.
Revenue
increased
15%
in
the
latest
quarter
from
the
year
prior,
and
operating
expenses
have
come
down
over
that
time,
allowing
the
company
to
turn
profitable.
From
a
valuation
perspective,
the
bigger
issue
is
that
Instacart
raised
the
$39
billion
round
during
a
record
stretch
of
tech
IPOs,
and
just
a
couple
of
months
after
fellow
sharing-economy
companies
Airbnb
and
DoorDash
had
blockbuster
offerings.
There
hasn’t
been
a
notable
venture-backed
tech
IPO
in
the
U.S.
since
late
2021,
and
Instacart
and
Klaviyo
are
the
only
two
that
have
publicly
filed
recently.
Car-sharing
service
Turo
is
also
on
file,
but
its
initial
prospectus
came
out
in
early
2022.
Fortunately
for
Sequoia
and
Andreessen,
they
began
investing
in
Instacart
when
the
company
was
in
its
early
days
and
the
stock
price
was
much
lower
than
it
is
today.
Assuming
the
stock
price
holds
up,
there’s
still
considerable
money
to
be
made
for
limited
partners.
Because
of
the
lock-up
period,
the
firms
can’t
begin
selling
shares
until
180
days
after
the
offering.
Sequoia
is
the
largest
investor
in
Instacart,
with
a
15%
stake
on
a
fully
diluted
basis.
The
400,000
shares
it
purchased
in
2021
are
a
small
sliver
of
the
51.2
million
shares
it
owns.
In
total,
the
firm
has
invested
about
$300
million
for
a
stake
that
would
be
worth
over
$1.5
billion
at
the
top
of
the
range.
Sequoia
led
Instacart’s
$8.5
million
Series
A
round
in
2013,
when
the
price
was
just
24
cents
a
share,
according
to
the
prospectus.
Andreessen
led
the
next
round
at
$2.98,
and
Sequoia
participated.
Both
firms
were
in
the
Series
C
at
$13.31
a
share
and
the
Series
D
at
$18.52.
Because
Andreessen’s
total
ownership
is
below
5%,
its
full
stake
isn’t
disclosed
in
the
prospectus.
Representatives
from
Sequoia
and
Andreessen
declined
to
comment.
Not
until
2020
did
Instacart’s
share
price
climb
to
around
where
it
is
today,
in
a
$200
million
round
led
by
Valiant
Peregrine
Fund
and
D1.
Neither
Sequoia
nor
Andreessen
participated
in
that
round.
Even
if
Instacart’s
IPO
can’t
lift
its
valuation
anywhere
near
its
Covid-era
peak,
it’s
likely
that
Sequoia,
Andreessen
and
other
venture
firms
are
hoping
it
helps
lift
public
investor
enthusiasm
for
new
tech
stocks.
Arm,
which
was
taken
private
by
SoftBank
in
2016,
reentered
the
public
market
on
Thursday
and
jumped
25%
in
its
debut.
WATCH:
Arm
is
IPOing
profitably
