Mutual fund giant Fidelity is in talks with Blue Apron about the possibility of a buy-in during the startup’s current funding round. The meal-kit delivery service is trying to raise $100 million during this round – on a valuation of around $2 billion, according to The Wall Street Journal.
This current round, if successful, would represent a major value jump for the service – a year ago Blue Apron raised $50 million on a valuation of $500 million. It also could represent a somewhat riskier bet than the average food delivery startup, as Blue Apron is not selling a meal so much as a DIY cooking experience.
Blue Apron users receive a weekly “meal in a box” with the exact proportion of ingredients needed to prepare three meals as well as the required recipes to make it happen. Blue Apron is a subscription service, which investors are particularly fond of, since Blue Apron can make relatively stable predictions about how much food it needs to buy from suppliers, among other logistical details.
As of last June, Blue Apron was looking at a $100 million revenue annual run rate. With the big jump in valuation, some are speculating that the company’s top line may be well above the $100 million milestone by now. However, those big revenues are necessary to keep up with the startup’s big expenses. Blue Apron’s ingredients are stored in two giant warehouses – a big source of overhead – and the firm also faces shipping charges for all those boxes (that must be shipped quickly to preserve freshness). This all means that while Blue Apron’s revenue is strong – it may not actually be profitable as of yet.
Profitable or not, however – if this deal goes through, Blue Apron will be one of New York City’s most valuable startups, which makes its appeal to Fidelity clear. In recent memory, Fidelity has also bought into Uber, Pinterest and, most recently, Zenefits.