On Friday, Instacart reduced its valuation to $24 billion from $39 billion. The move comes amid a market sell-off in technology companies. With a reduced valuation, Instacart can provide better stock rewards to new and existing employees.
This year’s selloff in technology companies has lowered Instacart’s worth by nearly 40% to over $24 billion.
In March 2021, the business raised $265 million at a $39 billion valuation. That made Instacart one of the most valued US startups.
Instacart is informing employees and potential recruits that subsequent stock awards would be awarded at a lower price, making equity packages more appealing and in line with market realities.
A representative for Instacart said, “Markets fluctuate, but we remain focused on our long-term opportunity to power the future of grocery with our partners.”
The last few years have been turbulent for Instacart. Confronted with a challenging business strategy in 2020, the company received a huge boost during the Covid-19 outbreak as many consumers opted for online food orders.
Instacart recruited ex-Facebook executive Fidji Simo as CEO in July, succeeding founder Apoorva Mehta.
Due to the success of DoorDash’s IPO in late 2020 and the recent surge in new tech stocks, Instacart was seen as a potential 2022 IPO candidate. Then came rising inflation and rising interest rates, sending riskier assets into a spiral starting in November.
The selloff accelerated after Russia attacked Ukraine last month, adding to global volatility and rising energy prices. Since mid-November, DoorDash’s value has dropped by half.
Although the valuation decrease helps, Instacart must now show it can maintain its growth pace as the pandemic fades and the labour market tightens. Employees who received stock grants at higher prices need a rebound to recoup their investment.
Instacart said its business outlook remains positive and it has over $1 billion in cash. This week, the startup announced a software package for supermarkets and a fulfilment service called Carrot Warehouses to assist merchants offer 15-minute delivery.