What's going on?

Blue Apron, the American meal-kit delivery startup, has agreed to �go public� (i.e. complete an IPO) at a lower valuation (tweet this), after initially facing tepid demand from investors.

What does this mean?

Originally, Blue Apron said it would aim to sell shares to new investors at a valuation of $3.2 billion, but revised that down on Wednesday to around $2 billion. The big reduction almost certainly reflects a lack of investor demand at the higher valuation.

Why should I care?

For markets: Investors are nervous about the meal-kit delivery business model.

Blue Apron has exhibited strong revenue growth since its inception, which is often a key determinant for investors. However, it�s also facing some issues. For one, its marketing costs as a proportion of revenue keep climbing (the opposite of what should occur as a company�s scale increases due to, among other things, greater brand awareness). Related to that point is its difficulty in keeping customers: about two-thirds stop ordering within six months. Blue Apron�s stock price could still go up substantially once the stock starts trading on Thursday, but it�s these factors, among others, that caused it to wipe one-third off of its targeted valuation.


The bigger picture: Meal-kit delivery companies are facing a challenge from� yes, Amazon.

Blue Apron also had some bad luck: just as it began marketing its IPO to prospective investors, Amazon�s acquisition of Whole Foods was announced. Blue Apron competes with grocery stores; you�re supposed to subscribe to ingredient delivery instead of heading to the store. If Amazon �disrupts� that market like it has other markets, it could be a very challenging environment.