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.
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 the companies that get in early in IPO process are losing money off IPOs these days.
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