Meal-Kit Service Blue Apron was valued at $2B on the private market in 2015.
Now it is worth $57M. A 97% decline. And it is considering selling itself.
A post written in 2017 by an Assistant Professor of Marketing at Emory University had pointed out why Churn was the most important thing to consider for valuing Blue Apron (more than Revenue or AOV).
- Rising CAC over time
- And a high churn over the same period
The only way they could have survived was by dramatically reducing both which it seems they failed to do.
Blue Apron definitely had initial PM fit and a reported three million meals a month way back in 2015, and at $10/pop, had yearly revenue of $360 million.
They had also raised ~300 million over 6 rounds of funding.
But as I wrote in my Capital as a moat post last month, raising enormous capital through private markets does not always work in the long run because it lets you blitzscale without asking hard fundamental questions about your business.
And for Blue Apron, the biggest question always was:
- How would they retain customers after the initial novelty factor wore off?
- Will they find alternate channels for growth which was cheap and thereby reduce their rising CAC?
As their churn was high, the only way their business model would have worked was by acquiring customers cheaply.
I have always heard good things about Blue Apron (atleast on Twitter), and I am sure a lot of people will be disappointed if the service shuts down.
But this is another lesson on why Product - Market fit is just not enough and you need 3 more fits:
- Product - Channel fit
- Channel - Model fit
- Model - Market fit
Having just one is not enough.
P.S One of my goals for this year is to pick up on LTV and Churn modeling. You can follow this post and learn with me :)