Blue Apron is eCommerce & Public Company Valuation

I read an article making the rounds online where Matt Levine theorized that Blue Apron is a “virtual reality” company. Selling the “experience of cooking” as a virtual experience where it is not real cooking because they give you everything you need already done up for you. Blue Apron positions itself as a tech company to maximize valuation, not because they are actually a tech company. Positioning is a totally different thing.

Bob Ross teaches valuation

He then reasons that this is why Blue Apron is valued like a tech company. Here is the truth: Blue Apron wants desperately to be valued like a tech company and so far, so good! That is why they are valued like a tech company. It is the CEOs fiduciary responsibility to maximize the value of a company. The easiest way to do that is to be a different kind, a more valuable kind, of company. Now, this is just a random data point, but if you look at this data set from NYU January 2017, it gives you PE ratio by industry for publicly traded companies. Grocers are valued at around 30x PE ratio. Internet companies? 230. So if you want to be 200x more valuable, the easiest way to do that is to change yourself from a grocery company to an Internet company. Because the only thing you do differently is tell everyone that this is what you are. For every person that believes you, your valuation notionally goes up because they believe buying your stock at any price lower than 230x PE is a bargain.

When I was at AnswerThink, I remember listening to an earnings call during the bubble where I heard our CEO make a factually incorrect statement. This was probably a Trump-ian truth in that he really wanted it to be true. I turned to my boss and said, “OMG!” and his response was, “It is about time our CEO started to talk like the CEOs of Scient and Viant.” If living in your own Trump-ian world makes you a better CEO, defined as better fulfilling your fiduciary duty to shareholders, then you kind of have an obligation to go there. And this can all be part of having a vision, steering an elephant, and other cliches. So it is not necessarily bad CEO-ing. I have seen the exact same thing in VC markets where an entrepreneur tries to lean into more fundable markets with an idea that is somewhat immobile. It is just what you do.

So is Blue Apron a VR company? Nah. I don’t think they are implying they are VR company either. I would say they are more of an Art Supply eCommerce company. My Blue Apron experience – and everyone knows, an N of 1 is a beautiful thing – was that I wanted more meal diversity with less meal planning. In other words, I wanted paint by numbers food. I wanted to create something beautiful, but have it be easy. My wife was tired of eating the same go-to dishes night in and night out. She wanted more vegetables and diversity and I wanted to deliver to her that delightful experience. She wants me to make more beautiful sculptures and faster than prior sculptures, so I ordered sculpt-by-numbers.

Paint by numbers driving valuation

Blue Apron is Art eCommerce because .I go to a web site each week, I pick the art project I wish to make, and they send me everything I need to make it. If Amazon (the original Amazon) is not valued like Barnes & Noble, you would not value Blue Apron like my local grocery store. So if you are the CEO of Blue Apron, you have to lean on that story: “Blue Apron: All the upside of Amazon”. Why would you not? He is simply selling investors an experience with the stock price that maximizes valuation, a boon for all concerned. And as always, with stocks, belief drives valuation, a self-fulfilling prophecy for some period of time. Is this VR? Nah, man. Only a real artist would tell me that my paint by numbers is not real art. Hence Matt, a restauranteur, cannot wrap his head around how inventing new dishes and then getting the ingredients for them is incredibly difficult for the average person. He specializes in making real art (food). I want to rip him off so I roll paint-by-numbers! That is real to me. He may say I am deluding myself and this is a demonstration of the virtual nature of my food, but that is not living in a false reality. If I make art I am happy with, it is real. That is the true nature of art.

My kids draw stick figures. Jackson Pollock splashes paint on canvas. He would not say that what my kids do is not real art.

There you go.

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