Blue Apron’s Winding Road To An IPO

From almost the first moment smartphones hit the market, using them to get food delivered was an almost instant application of the technology. Restaurants takeout, home-cooked meals to order, groceries — if you can eat it and you live in a major metropolitan area, you can probably get it delivered to you.

And when Blue Apron’s founders, Matt Wadiak (a professional chef), Matt Salzberg (a former VC and now CEO) and Ilia Papas (computer engineer and now CTO), first started developing the idea of the service that would become Blue Apron, they wanted to do something a little different and a little more in line with “teach a man to fish,” as opposed to merely delivering fish and chips freshly fried up.

“Our goal is to empower people and give them the tools to prepare good meals on their own,” Wadiak noted of the early days of Blue Apron’s founding and the vision that drove it. The cofounders also thought that, apart from boosting home cooking, Blue Apron also had the side benefit of lowering food waste since it only sends consumers the ingredients they need — pre-measured — to prepare their three weekly meals, thus saving the large collections of on-off ingredients that tend to populate consumers’ pantries over time.

But while Blue Apron is simple in concept, execution is a whole other matter since food subscription services — particularly ones like Blue Apron that rely on raw ingredients — have rather delicate shipping needs. Blue Apron operates its own fulfillment centers and outsources delivery trucks. The ingredients it chooses last one week before cooking, and boxes are guaranteed to be delivered within two days of creation.

“The way most consumer food works is it gets sent from a farm to a broker or distribution center, then rotated to a storage room, then rotated onto a shelf,” said Wadiak. “What we do is buy the food and send it right to the customer. There are two points of rotation that we eliminate just by doing that.”

And though Blue Apron has not had some of the more explosive growth seen in other parts of the food game — or the subscription game, for that matter — it now stands on the verge of going where no dish delivery startup has gone before…

To the public markets.

Signs Of Strength Pre-IPO 

First and foremost, Blue Apron ships a lot of meals to a lot of users nationwide. Those users have some things in common: They are largely urban, they are mostly young and they tend to be couples more often than they are families. One user writing for The Washington Post noted that the ingredients come pre-measured, not pre-prepped, meaning the various dicing, slicing and zesting may be fun for a “couples night” but will not be fully appreciated by children waiting for dinner.

Still, the service is undeniably popular, as several sources familiar with the internal structure of the firm note that it is on track to surpass $1 billion in revenue over the next 12 months. That annualized run rate is not the firm’s revenue projection — which could, in fact, be much higher or lower depending on its specific internal tea leaves — it is a count of what revenue would net out at over the next 12 months if its performance were the same as the last 12 months.

And apart from strong sales and reasonable revenue, Blue Apron claims to have something that many other subscription delivery services do not — profitability. Blue Apron has raised nearly $200 million in venture capital from investors, including Fidelity, First Round Capital, Box Group and Bessemer Venture Partners, where CEO Matt Salzberg once worked. It was valued mostly recently at $2 billion when it raised $135 million last year.

Going into the much-rumored IPO next year, Blue Apron has certainly leveled up its marketing efforts and direct mailing campaigns. Regular podcast listeners may have also noticed they can’t get through the first five minutes of much of anything mainstream these days without hearing a five-minute pitch for Blue Apron.

Clearly, it is prepping for a strong public showing (if it really happens).

Lingering Questions

Blue Apron has a lot of competition in the space — Plated and HelloFresh, most notably — and a lot of semi-competitors, like The New York Times, that have partnered their way into food delivery as a sideline business to boost their content.

And there are some big unknowns about Blue Apron — most notably about its churn rate and just how many customers are continuing to pay $60 a week to have pre-measured ingredients sent to their home over a period of time. Most Blue Apron customers who ditched the service (or churned out) reported that the meals were too hard and involved or that they just didn’t have time to cook them and they were essentially going to waste.

There are also lingering concerns over worker safety issues in Blue Apron locations.

But for the devoted, Blue Apron is part of their weekly grocery routine. And if it can prove to investors that it is a part of the routine that can stand the test of time, it could be a pretty perky IPO.