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

Have you ever? Have you eaten at Kava? In: they don’t havebut fans of the fast-casual restaurant chain rushed to explain the company on Twitter after it recently filed an S-1 form for its IPO.

“It’s chipotle for 30+ people who think they need to eat more fiber.” joked Neeraj Agrawal, resident crypto-focused think tank. At TechCrunch, opinion was more divided with space reporter Ariya Alamalhoda naming it “one [her] favs”, and the transport reporter Rebecca Bella described it as “fake Israeli food”.

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Regardless of who is right, many people have eaten at Kawa. That’s because the company has rapidly expanded its U.S. footprint from 22 locations in 2016 to 263 by the first quarter of 2023. Part of that growth came from the 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, TechCrunch reported; Sweetgreen went public in late 2021 after setting an impressive fundraising record.

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

What matters for our purposes is that Cava is a venture-backed company that goes public at a unicorn valuation.

Oh how I missed the IPO filings! Like a glass of cold water to someone in the desert, IPOs present a wealth of hard data that can help us better understand emerging 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 comparable for tech startups looking to go public.

But this IPO could take most of the invested capital and return it to Cava’s backers and founders. Recycling capital through large exits is a key tenet of the venture model, and if exit volume is 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 get within Cava’s working valuation range. That will allow us to gauge how good his supporters are at getting out. And, we can consider the impact a company’s IPO might have on other startups looking to go public.

does it sound good? Come to Cava-ort and have fun!

Much ado about lunch

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