Blue Apron IPO to test Wall Street’s appetite for lazy people’s favorite tech startups

Blue Apron Inc., the subscription-based meal-kit delivery company, will test Wall Street’s appetite for unicorn companies that offer monthly services designed for lazy consumers.

New York-based Blue Apron

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  was valued at about $2 billion as a private company and filed its preliminary documents on Thursday to go public, seeking to raise at least $100 million. Blue Apron is a market leader in a very competitive, costly and perishable market: fresh food offered in kits that are prepared by consumers who want to spend less time cooking and shopping.

Blue Apron will be the first company in this overcrowded, on-demand subset of tech startups to go public. It is the best known company of its kind in the U.S., with the biggest share of the market, but its private valuation is slightly below its nearest rival, Hello Fresh, a Berlin-based meal-kit company that withdrew a planned IPO last year. Other rivals include Munchery, Gobble and at least 25 others, according to CB Insights of New York, which tracks private companies.

Its IPO documents show just how expensive its service is, with heavy marketing costs among its top expenses, and a customer base that in the past year is spending less per order.

Other segments designed to make life easier for those who want to order everything from their phones include companies offering delivery of clothing, vitamins, diapers and underwear. Some are brave enough to compete with Inc.

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Blue Apron, and potentially clothing-delivery subscription service Stitch Fix Inc., will be an interesting test for tech IPOs, not just because of their popular but untested business models. While Snap Inc.

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 made a lot from its IPO earlier this year, it has suffered since, while enterprise-tech names like Mulesoft Inc.

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 , Twilio Inc.

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 and Nutanix Inc.

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 have largely performed better.

A big reason for that is the difficulties and cost in obtaining customers. In the first quarter of 2017, Blue Apron said its total customer base topped 1 million, but those customers are spending less on average than they previously were, in part due to promotions from the company.

“The primary driver for the decline in cumulative net revenue per customer for the six months after such customer’s first paid order from $402 to $387 from 2014 to 2016 was the increased use of promotional discounts to attract new customers,” the company said in its regulatory filing.

That is just part of Blue Apron’s huge marketing costs. In 2016, the company tripled its marketing spending in offline venues, such as outdoor billboards and transit stations, to increase brand awareness. In 2016, its marketing expenses totaled $144 million, up from $51 million in 2015, as its revenue growth exploded to $795 million in 2016, up from $341 million in 2015. Net losses also grew.

Most of these on-demand businesses are designed to answer first-world problems of the lazy and entitled, and may not be sustainable during economic downturns. Wall Street, though, could still order up Blue Apron shares, which could produce a rush of similar companies looking to cash in.