Cava’s listing won’t bring back IPOs, but it could provide welcome investor liquidity

Have you ever eaten at Cava? i have notbut fans of the fast-casual restaurant chain that serves Mediterranean cuisine were quick to explain the company on Twitter after it recently filed a Form S-1 for its IPO.

“It’s chipotle for 30+ people who feel they should eat more fiber,” joked Neeraj Agrawal, a resident of a crypto-focused think tank. Opinion here at was more divided, with space reporter Aria Alamalhodaei call it “one of the [her] favs,” while transportation reporter Rebecca Bellan described it as “fake Israeli food.”

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Regardless of who is right, many people have eaten at Cava. That’s thanks to the company rapidly expanding its footprint in the United States from 22 locations in 2016 to 263 in the first quarter of 2023. Part of that growth came from a 2018 purchase of rival fast-casual chain Zo√ęs. Kitchen for about $300 million.

Cava isn’t the first venture-backed fast-casual restaurant chain to go public that has written about: Sweetgreen went public in late 2021 after an impressive fundraising track record.

Cava’s investor base includes a mix of venture companies (Revolution, Riverbend Capital) and other capital such as private equity firm Act 3 Holdings and Kitchen Fund. The restaurant chain’s most recent funding round, a $190 million deal led by T. Rowe Price Group, valued it between $1.3 billion and $1.5 billion, depending on which source you look at (PitchBook says that deal was $230 million).

What is important for our purposes is that Cava is a venture backed company going public at a unicorn valuation.

Oh how I’ve missed IPO filings! Similar to a cup of cold water to someone in a desert, public offerings provide a wealth of hard data that can help us better understand startup markets and the potential value of companies at exit. Unfortunately, because Cava is a fast-casual chain and not, say, a web3 company or a software startup, it doesn’t serve well as a comparison for tech startups looking to go public.

But this IPO could take away much of the invested capital and return it to Cava’s backers and founders. Capital recycling through large exits is a key tenet of the venture model, and with exit volume in the gutter, any liquidity is good liquidity right now.

With Sweetgreen’s own IPO in the rearview mirror and Q1 2023 results in hand, we can try to land on a working valuation margin for Cava. That will let us estimate how well the lenders will do on exit. And we can consider what impact the company’s IPO could have on other startups looking to go public.

Sounds good? Let’s cava ort and have fun!

Much ado about lunch

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