Blue Apron set out to transform the way people eat. HQ Trivia wanted to build the future of TV. Both companies financed their dreams by raising a lot of money from some of venture capital’s biggest names. And for a while, both companies seemed on the brink of breaking through.
But startup life can be fickle. Gradually, the early success gave way not to failure, but to what’s in some ways worse: irrelevance. And when the next-big-thing buzz wore off, both Blue Apron and HQ Trivia were confronted with the realization that their original plans for supremacy might need a major adjustment.
Blue Apron is publicly seeking a buyer, and HQ Trivia has apparently risen from the dead after a raucous, live-streamed funeral. The existential angst emanating from a pair of former Silicon Valley darlings is one of 10 things you need to know from the past week:
1. Cooks and questions
I’ve written before in some length about the turbulent times at Blue Apron, a company that encapsulates the venture capital world’s brief infatuation with meal-kit delivery startups. This week, along with its Q4 earnings, the company announced it is evaluating strategic options, including a potential merger or outright sale.
Once valued at $2 billion by VCs, life has gotten much tougher for Blue Apron since a 2017 IPO. The company has never turned an annual profit—although it did cut its losses by nearly half from 2018 to 2019, dropping from $122.1 million to $61.1 million—and revenue has been steadily shrinking.
In addition to revealing new financial numbers and plans to sniff around a sale, Blue Apron also announced the closure of a fulfillment center this week. The combination was enough to send the company’s stock price plummeting even further. It closed Friday with a market cap of less than $40 million, meaning its valuation has declined by more than 98% from its VC-backed high point.
If Blue Apron is able to find a buyer, two obvious options might be an established grocery chain or a larger food-delivery company. Those were the routes taken by some of Blue Apron’s former rivals in recent years: Fellow meal-kit startup Plated sold itself to Albertsons, while Home Chef was acquired by Kroger and Maple was gobbled up by Deliveroo.
Talks of an acquisition were also at the root of HQ Trivia’s recent drama.
The startup burst onto the scene in 2017 with its joke-filled, live-streamed trivia games, where users could win money by correctly answering an increasingly difficult slate of questions. The next year, it raised $15 million in a round reportedly led by Founders Fund, valuing the company at $100 million, according to PitchBook data.
Co-founder Rus Yusupov, who previously co-founded Vine, took to the pages of The New York Times to proclaim HQ Trivia’s “ambitions to essentially build the future of TV.” But instead, viewers slowly began to drift away, and funding dried up.
On Valentine’s Day, Yusupov reportedly sent a memo to workers announcing that a planned acquisition had fallen through and that HQ Trivia would cease operations that day. That night, HQ Trivia broadcast what was purportedly its last episode ever, replete with f-bombs, spraying champagne, complaints about high-priced dog food, and statements from host Matt Richards like, “Why are we shutting down? I don’t know. Ask our investors.”
But Monday morning brought a twist. Yusupov tweeted that after a “busy weekend,” he’d found a new buyer for HQ Trivia that wanted to keep the company up and running. Employees and fans are surely trying not to dwell on a succeeding tweet from Yusupov admitting that it’s "[n]ot a done deal yet.”
No matter what happens, we haven’t heard the last of the story. The Hollywood Reporter indicated Friday that The Ringer is planning a new podcast charting the trivia company’s rise and fall.
Today, neither Blue Apron nor HQ Trivia is where they hoped they would be back in 2017. One could go so far as to say recent events at the companies have been disastrous. But the fact remains that both have been more successful than, I don’t know, 97% of all startups that get up and running. Creating a sustainable company is really hard. Almost everyone fails. And almost everyone fails long before the point of making national headlines or reaching a unicorn valuation.
And who knows: Maybe new ownership is all Blue Apron and HQ Trivia need to mount wholesale turnarounds. The past week, though, brought plenty of reason for pessimism.
Grocery shopping may very well be transformed in the coming years, and a new future of TV may be built. But I don’t think Blue Apron and HQ Trivia will be the ones doing it.
2. Mega-mergers
Wall Street got a major shakeup on Thursday, when investment banking colossus Morgan Stanley agreed to acquire plucky online trading pioneer E*Trade for $13 billion, the latest bit of high-priced fallout from a recent transition in the online brokerage sphere to fee-free trading. The software space is also readying for some significant consolidation, as Ultimate Software and Kronos agreed this week to create a new $22 billion giant in HR software. Both companies are backed by private equity investors Hellman & Friedman, Blackstone, GIC and JMI Equity.
3. Financial consolidation
Morgan Stanley and E*Trade’s combination was far from the only major merger news in the financial world this week. Asset management giant Franklin Resources agreed to buy rival Legg Mason for $4.5 billion. Ally Financial inked a $2.65 billion pact to purchase CardWorks, which offers sub-prime credit card services. And LendingClub agreed to buy Radius Bancorp for $185 million, combining a fintech pioneer with an FDIC-regulated bank.
4. A PE shopping spree
Buyout firms have conducted a few recent deals involving shopping-mall staples. Veteran retail investor Sycamore Partners agreed Thursday to acquire a 55% stake in Victoria’s Secret at a $1.1 billion valuation, a deal that will also see Bath & Body Works spin out as a standalone company. Forever 21 finalized a reported $81 million sale to Simon Property Group, Brookfield Property Partners and Authentic Brands, the last of which is backed by BlackRock. And Cole Haan, which is backed by Apax Partners, cobbled together plans for an IPO on the Nasdaq.
5. Funds from famous founders
Founders Fund, which is led in part by Peter Thiel, confirmed a new $1.5 billion growth vehicle this week, adding to $1.5 billion the firm raised for its latest flagship fund in November. Atomico, a Europe-focused firm helmed by Skype co-founder Niklas Zennström, closed its latest vehicle on $820 million. And Marcy Venture Partners—which takes its name from the public housing complex where co-founder Jay-Z grew up—revealed $85 million in commitments for its first namesake fund.
6. Special deliveries
A trio of companies active in the food-delivery space reeled in major funding this week. Singapore’s Grab, a do-everything startup that’s also active in ridehailing, payments and more, reportedly lined up more than $700 million from Mitsubishi UFJ Financial Group. India’s Swiggy collected $113 million, setting the company up to capitalize on Uber’s recent exit from the nation’s delivery market. And the delightfully named HungryPanda broke off $20 million in new funding for Chinese food deliveries.
7. Nothing Compares 2 U
Not in the world of edtech, at least, where the 21st letter of the alphabet had a very big week. First, Unacademy, an Indian startup offering various tutoring and study services, revealed $110 million in funding from, among others, General Atlantic, Sequoia India and Facebook—three very notable backers. Shortly thereafter, San Francisco-based Udemy, which offers a platform where instructors can create their own courses in any number of subjects, raised $50 million at a $2 billion valuation.
8. Ethical unicorns
OneTrust has ridden a wave of new privacy laws like Europe’s GDPR and the California Consumer Privacy Act all the way to unicorn status. The company, which makes software used by other enterprises to comply with privacy regulations, collected $210 million in VC this week at a $2.7 billion valuation. Another startup concerned with online safety reached a 10-figure valuation this week, too, as endpoint security specialist SentinelOne raised $200 million, valuing it at $1.1 billion.
9. Udder madness
A little more than two months after filing for Chapter 11 bankruptcy protection, major US milk processor Dean Foods has figured out its next step, agreeing this week to sell the bulk of its assets to the Dairy Farmers of America for $425 million. The takeover by the farmer-owned cooperative is the latest step in a dairy-industry shakeup. Borden Dairy, another major US milk company, followed Dean Foods into bankruptcy protection last month.
10. Cirque du PE
Canadian pension investor Caisse de dépôt et placement du Québec increased its stake in Cirque du Soleil this week to 20%, up from a reported 10%, while also deepening the modern circus company’s ties to private equity. Cirque du Soleil’s majority owner is still TPG Capital, which acquired a 60% stake in the business back in 2015 at a reported valuation of $1.5 billion. Could a buyout-inspired acrobatic extravaganza be coming to a stage near you?
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