Mar 25, 2022 - Economy

Instacart delivers a lower valuation

Instacart logo in a shopping cart

Illustration: Brendan Lynch/Axios

Instacart, the on-demand grocery delivery service, announced that it's cutting its valuation down to $24 billion.

What to know: This is the 409a valuation, an internal accounting measure used to price employee stock, not equal to an outside investment valuation. According to public filings, Instacart's prior 409a valuation was around a 5% discount to its venture capital valuation, which hit $39 billion in March 2021.

Why it matters: It's highly unusual for a private company to publicly announce a 409a valuation shift, let alone conflate it with a preferred stock valuation. And it's a reminder that nosebleed prices can have a negative impact on business operations.

Details: Instacart is hoping that this move will help both with employment recruitment and retention. On that latter point, don't be surprised if recent Instacart hires get accelerated refresh grants at the lower price.

History: Instacart has raised around $2.7 billion, most recently in March 2021. Major backers include Andreessen Horowitz, D1 Capital Partners, Sequoia Capital, Fidelity and T. Rowe Price.

The bottom line: Headline valuations are a double-edged sword.

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