Blue Apron tumbles again in its second day as its IPO settles for a down round

Blue Apron is now down from its IPO price during trading today, falling around 4% and down to around $9.60 — a bit south of its original price.

Early in the planning process, Blue Apron was shooting for a price range of between $15 and $17, which would have helped it raise even more money and value the company at around $3 billion. Instead, it had to settle for a valuation below $2 billion and and a lot of questions about the company’s future on Wall Street.

On the one hand, IPOs are supposed to be fundraising rounds, and Blue Apron’s debut yesterday pretty much confirmed that it was able to raise as much money as possible. But the stock went nowhere on its first day, and now it’s dipped below that initial pricing, effectively meaning the IPO was the equivalent of a down round — and the company has a whole different set of standard to which it’ll be held accountable.

There are a couple reasons for why this is probably happening. It’s easy to point to the shadow of Amazon making a huge $13.7 billion bid for Whole Foods and the massive looming threat that poses. After all, Amazon specializes in logistics and delivery and it just purchased hundreds of stores that have access to fresh food and ingredients.

It would seem like a small effort to build a kind of product like Blue Apron within the Amazon empire, and that may even be attractive given that the company shot to $800 million in revenue in a short period of time. Amazon, too, has shown a willingness to bulldoze into areas that may seem semi-unrelated to its core business of selling products online — like buying Twitch and running servers.

Still, Blue Apron is certainly spending a ton of money acquiring customers — and it’s not clear if those customers are sticking around. The company burned through more than $52 million and it added around 160,000 customers. The company’s customer base is growing, but that’s a huge investment in acquiring new customers and hoping they order food on a regular basis. Either the company is having trouble getting them on board, or they are churning a lot and just trying the product as an experiment or using it once or twice a month.

The company has to create a super-sticky product in order to get a return on that investment. In the long run, it may show that it’s built up a core audience for its product and achieves the lifetime value it wants from that investment. But the aggressive burn and what seems like a slow ramp up may be hindering the optimism for the company in the short term. It also likely doesn’t help that a huge portion of the company’s customers are a younger audience, which may be more fickle or not have the buying power of an older set of customers.

It has to diversify its user base beyond just metropolitan areas where young people experiment with cooking nice meals periodically. That means it has to take a different approach to marketing — and maybe hit more traditional methods like billboards, TV spots and others aside from Facebook ads. There’s also a lot of competition, so it has to fight for mindshare and awareness before it even gets to the point that it can convert people to paying customers. There’s definitely a lot of overhead given how fast the business has grown, but it carries a lot of questions as well.

Blue Apron was able to post a small profit earlier in its life, but it needs to figure out a way to sustain that and grow it into a real sustainable business. Until then, it’s stock will likely suffer, which may lead to problems with keeping and hiring talent — as companies can lock up a lot of compensation in stock.

Blue Apron is definitely still a growth story, but it may be that Wall Street just isn’t giving that a pass any more. Snap went public with a bang and likely made a lot of people a lot of money, but its stock has cratered since its first earnings report. It missed what Wall Street was looking for, possibly flipping the switch on the kinds of metrics that investors are looking for in new IPOs.

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