Jun 5, 2017 ยท 6 minutes

The tech IPO market was expected to reignite this year.

It hasn't really, largely because of Snap, which investors still aren't sure is another Facebook – stumbling into the market only to become a hot long-term investment -- or another Twitter – a popular enough technology that may not find a reliable way to make profits.

Last year, 21 technology companies raised $3 billion, down from the 56 tech companies that raised $32.5 billion in 2014. While the overall IPO market is seeing something of a revival – 62 IPOs in all industries raising $17.2 billion, both figures up markedly from last year, according to Renaissance Capital – relatively few tech companies have gone public.

And most of the tech companies that are going public aren't in the higher-profile consumer-tech sector that draws in the everyday retail investor. They're in the boring old enterprise-tech sector that glosses the eyes of many lay investors who try to understand them. Retail investors are the lifeblood of any rally that can endure for longer than a few months after an IPO. Institutional investors who want in are usually allowed in before the public trading begins.

Sure, MuleSoft, which went public two weeks after Snap, is up 55% from its offering price; while Cloudera is up 53%. But one of these companies is a “integration platform for SOA, SaaS, and APIs” while the other is a “modern platform for data management, machine learning and advanced analytics.” And both, like Twilio last year, lack the brand-name panache that can generate a long-term interest in tech IPOs, like Netscape and Google did years ago.

Snap was the best hope to change that. Snap's IPO was expected to fan the dim embers of the tech IPO market, especially among consumer-oriented companies. Which it did, for a while. Snap was priced at $17 a share in early March and quickly shot up as high as $29 a share, before falling back as low as $18 a share after it reported its first quarterly earnings. The stock has since recovered to around $21 a share, but Snap has managed to fan the embers while also dampening the fire it helped start.

At best, it's going to take longer than many Snap investors were expecting for the company to show it can deliver strong and steady profit growth. So that means the tech IPO market needs another successful, well-known consumer-tech company to wow Wall Street and inspire confidence that there are more of these hot IPOs heading toward the pipeline.

What company is that going to be? It's not going to be Spotify, partly because Spotify is still losing so much money, but mostly because if Spotify goes public later this year, it plans to shun the IPO process, listing shares directly on the NYSE. That's a no-win situation for tech IPOs: If it works, other tech unicorns may bypass IPOs for direct listings. If it doesn't, it still makes tech IPOs look unattractive.

So what name-brand consumer-tech company has the best shot of winning back confidence for tech IPOs? Right now, it's Blue Apron, the what's-for-dinner company that filed on Thursday an S-1 with the SEC, effectively tossing its hat into the IPO ring.

A look at Blue Apron's prospectus shows a mixed bag. Like Snap, revenue is growing quickly, rising 133% last year and another 42% in the first quarter. And like Snap, Blue Apron is not only unprofitable, it's still spending in hopes of spurring future growth. The company posted a net loss of $55 million in 2016 and a net loss of $52 million in the first three months of this year alone (against a net profit of $3 million in same quarter a year earlier.)

The reason for the heavy loss isn't surprising. Blue Apron is spending aggressively to hire new workers and to market aggressively (supporting all those podcasts we love, so thanks for that, Blue Apron) to consolidate its lead in a cutthroat market that relies on fickle consumers. Back in December, Blue Apron reportedly delayed its IPO plans to focus on improving its financials. Judging from the first quarter, it isn't showing much improvement.

That said, Blue Apron has a few things going for it that could offer an edge against rivals. One is that Blue Apron has a head start in terms of name recognition among those fickle consumers. As Sarah Lacy wrote last fall,

Blue Apron is the best of them and most importantly the best known. It was the first unicorn in the space, and likely has one of the biggest ad budgets. It hasn’t raised the most capital, but it has raised more than most of its rivals at nearly $200 million. As such, it has the biggest market share. And that market share is dominant because none of these services are differentiated at all. When I’ve asked people at these companies how they are differentiated they’ve even given me the same answers: PEOPLE LIKE OUR RECIPES MORE!

Food is the ultimate commodity product, and these services are commodities too because they look just alike. Hence, the best known, second best funded of them, with the best execution and marginally better quality wins...

This also explains why Blue Apron thinks it can go public, even though HelloFresh couldn’t: The entire category might be limited and the churn might be high but it dominates the category and has more brand loyalty.

Another is that Blue Apron isn't just blindly trying to compete in food delivery, it may have a shrewd and targeted strategy. Again, as Sarah spelled it out last month,

“There is a reason working mothers do more housework, and it’s the same reason that mothers who make even a dollar more than their husbands overcompensate in doing even more extra housework. Guilt. Guilt at not being “a good mother” and guilt at emasculating their husbands.

So, yeah, Blue fucking Apron might actually be the one who makes it, because they have wisely honed in on the core advertising message of: This is how you easily, organically, and nutritiously cook meals for your family even if you don’t get home until 6 pm.”

Blue Apron spent $66 million on marketing last quarter alone. It had $61 million in cash left at the end of March, so the IPO – which the filing estimated would raise $100 million, although the actual amount could be well above that – could help strengthen its market share and draw in enough new customers.

After all, Blue Apron is in the competitive market of on-demand food, which has a high casualty rate because of the fickle loyalties of customers. The big question the company faces is, can it bring in new customers while limiting churn on the old? Blue Apron had 1 million customers who placed 4.3 million orders last quarter. That's up 60% from a year ago. Meanwhile, orders per customer has fallen (down 9% to 4.1) as had its average revenue per customer (down 11% to 236).

If investors become warmer to Blue Apron than they have been to Snap in the three months since its IPO, a larger problem remains. According to Reuters, the total valuation of late-stage, venture-backed private companies in the US and Europe has risen to a collective $490 billion from $40 billion in 2010. That's a lot of pent-up money sitting in venture funds in search of an exit.

Should the tech IPO market stay cold – or worse, should the stock market tumble from record highs – exits may grow tougher to find. The spark needed to heat up the tech IPO market is out there somewhere. It has to be. Blue Apron, the tech IPO market turns its weary eyes to you.