Instacart announced plans to IPO on Nasdaq at a valuation of around $9 billion, a significant drop of almost 80% from its peak private valuation of $39 billion.
During that time, several investors urged the company to IPO, when the stock market was on fire, and the pandemic accelerated the startup’s grocery growth.
However, the company was reluctant to go public. Fast forward two years, Instacart is preparing to IPO during a challenging market, at a fraction of its peak private valuation.
So, what does this mean for investors? Despite the sharp decline in valuation, some investors are likely to make big bucks, and could have made a LOT more. On the other hand, some investors did not fare as well.
Those who invested more than a decade ago, are expected to return almost 50 times their money. However, those who invested during the hype aren’t going to do as well.
Here are some of the top estimated returns based on the IPO midpoint price of $27, according to a report by The Information:
▶ Y Combinator* - invested $75k / value at IPO $126m / multiple 1,680x
▶ Initialized Capital** - invested $150k / value at IPO $17m / multiple 113x
▶ Starling Ventures** - invested $76k / value at IPO $11m / multiple 145x
▶ Canaan Partners - invested $2.6m / value at IPO $196m / multiple 75x
▶ Khosla Ventures - invested $6m / value at IPO $277m / multiple 46x
▶ Sequoia Capital - invested $300m / value at IPO $1.4 billion / multiple 4.7x
▶ Andreessen Horowitz - invested $126m / value at IPO $254m / multiple 2x
Instacart is a classic example of a venture capital success story, where investors who participated during the seed round made an absolute killing.
However, VC funds need to deliver several successful investments to generate a significant return that outperforms average returns.
For instance, Khosla Ventures invested around $6m from its $300m seed fund, which is expected to be worth around $275m, more than 10 years later.
Despite this investment being a fund returner, the fund will still need to deliver another $625m to generate about 3x return and achieve an IRR of about 15% over a 10 year period.
Conclusion - identify seed stage startup winners, exit when the market is hot and don’t invest during periods of hype. Easier said than done!
#venturecapital #investing #startups #IPO #instacart
