By Alice Seeley
Grocery delivery service Instacart announced on March 23 that it would cut its valuation from $39 billion to $24 billion. Instacart cut its 409a valuation, an internal accounting measure used to price employee stock. This move does not affect the company’s plan to go public.
In March 2021, Instacart was one of the most valuable venture-backed American companies. Instacart raised $265 million from investors such as Andreessen Horowitz, Sequoia Capital, D1 Capital Partners, Fidelity Management & Research Co., and T. Rowe Price Associates. By cutting its valuation, Instacart can offer its employees stock-based compensation, which could benefit them long-term.
“Our team built Instacart into the market leader it is today, and we believe investing in them is the right thing to do. 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 said in a statement.
Voluntarily cutting valuation is an unusual move for a private company but can allow a company to raise more capital at a lower valuation. However, cutting valuation is not an instant saver for Instacart. The company is still facing pressure to prove that it can sustain its business momentum as the pandemic ends and the labor market tightens.
Business still looks strong for Instacart with more than $1 billion in cash in the bank and is attempting to expand its business. Earlier this week, Instacart announced a partnership with Carrot Warehouses to help grocers offer 15-minute delivery.