Instacart Aims for Nasdaq IPO to Revive Tech Offering Market in 2023.
Instacart, the grocery delivery company that adjusted its valuation amid last year’s market downturn, has filed its initial public offering (IPO) paperwork. This move is set to mark the first significant tech IPO backed by venture capital since December 2021.
The company’s shares will trade on the Nasdaq stock exchange under the “CART.” According to the prospectus, Instacart reported a net income of $114 million, while its revenue for the latest quarter reached $716 million, signifying a 15% rise from the same period the previous year.
Notably, the company has achieved profitability for five consecutive quarters. PepsiCo has also committed to a private placement of $175 million of Instacart’s stock.
Instacart’s plans include integrating artificial intelligence (AI) and machine learning features into its platform. The company envisions leveraging AI and machine learning solutions to propel its future business growth.
In this regard, Instacart recently introduced “Ask Instacart,” a generative AI-based search tool designed to address customers’ inquiries related to grocery shopping.
CEO Fidji Simo emphasized the company’s vision for an omnichannel experience that seamlessly blends online shopping with in-store visits.
She stated, “We believe the future of grocery won’t be about choosing between shopping online and in-store… we want to create a truly omnichannel experience that brings the best of the online shopping experience to physical stores and vice versa.”
Instacart’s IPO aims to break open the market, which has seen limited activity since late 2021. The last significant venture-backed tech IPOs were HashiCorp and Samsara in December.
Since then, no notable tech IPOs with venture capital backing have been absent. Arm, a chip designer owned by Japan’s SoftBank, has also filed for a Nasdaq listing.
Having been established in 2012 and initially incorporated as Maplebear Inc., Instacart will join the ranks of gig economy companies that have gone public.
This includes companies like Airbnb and DoorDash, which debuted in 2020, and Uber and Lyft, which went public a year earlier. However, these companies have yet to prove lucrative investments for shareholders, with only Airbnb currently trading above its IPO price.
Instacart’s services encompass grocery deliveries in over 5,500 cities from over 40,000 stores. The company experienced a surge in demand during the COVID-19 pandemic as consumers turned to online shopping.
Nonetheless, profitability remains a challenge, consistent with the broader gig economy, due to high costs linked to contractor payments.
Instacart noted a peak in employee headcount in Q2 2022, followed by subsequent reductions, which helped trim fixed operating costs. As of June, the company had 3,486 full-time employees.
Last year, Instacart revised its valuation from $39 billion to $24 billion as public stocks declined. Reports indicate that its valuation further dropped by 50% by late 2022. Notable competitors for Instacart include Amazon, Target, Walmart, and DoorDash.
One of the main areas where Instacart has achieved cost reductions is in general and administrative expenses. These costs decreased to $51 million in the most recent quarter, down from $77 million the previous year and a peak of $102 million in the last quarter of 2021.
Fidji Simo took over as CEO in August 2021 and assumed the role of chair of the board in July 2022. Before this, she headed Facebook’s app at Meta and reported directly to CEO Mark Zuckerberg.
After the IPO, Instacart’s founder and executive chairman, Apoorva Mehta, plans to step down from the board.
Instacart’s board comprises prominent figures such as Peloton CEO Barry McCarthy, Snowflake CEO Frank Slootman, and Jeff Jordan from Andreessen Horowitz.
In becoming a public entity, Instacart distinguishes itself as one of the few independent grocery delivery companies. Unlike Instacart, Amazon Fresh, Walmart Grocery, and Google Express operate as units within more giant corporations.
Shipt was acquired by Target in 2017, and Fresh Direct was purchased by global food retailer Ahold Delhaize in 2021.
Notable shareholders owning at least 5% of Instacart’s stock include Sequoia Capital and D1 Capital Partners. Norges Bank Investment Management, TCV-affiliated entities, and Valiant Capital Management have expressed interest in purchasing up to $400 million of shares in the IPO.
Acquisitions have primarily driven Instacart’s foray into AI over the past two years. These acquisitions include e-commerce startup Rosie, AI-powered pricing firm Eversight, checkout solutions provider Caper, and FoodStorm, a software startup specializing in in-store self-serve kiosks.
The company highlighted its use of machine learning in predicting grocery availability for retailers and enhancing consumer sales. Instacart’s algorithms forecast availability for most of its 1.4 billion grocery items every two hours. Moreover, over 70% of customer purchases in Q2 2023 were influenced by Instacart’s recommendation algorithm.
Goldman Sachs is leading Instacart’s IPO, notable since Instacart’s finance chief, Nick Giovanni, previously worked as the global head of the tech, media, and telecom group at the investment bank.
