Instacart announced it will list on the Nasdaq and become the first notable venture-backed tech IPO in the U.S. since December 2021. Despite the growing popularity of gig economy companies, their lack of profits have made their reception on the public market tumultuous. as appetite for tech offerings grows
Instacart, the grocery delivery company that seen its valuation dip during last year's market slide, has officially filed its paperwork to go public on Friday in what stands to be the first significant venture-backed tech IPO since December 2021. The firm's stock will be listed on the Nasdaq, with the ticker symbol "CART". In the prospectus, it was revealed that the company made a net income of $114 million, while revenue in the latest quarter reached $716 million, a 15% growth from the year-ago period. The filing also noted that Instacart has now reported five consecutive quarters of profitability. What's more, PepsiCo has agreed to purchase $175 million of the company's stock in a private placement.
Instacart reiterated its commitment to incorporating artificial intelligence (AI) and machine learning features to its platform, and intends to "rely on AIML solutions to drive future growth in our business". In May, it revealed the launch of Ask Instacart, a search tool designed to answer customers' grocery shopping questions. CEO Fidji Simo wrote in the prospectus that "we believe the future of grocery won't be about opting for online shopping or in-store. Most of us are going to do both. As such, we are aiming to create an omni-channel experience which leverages the best of both worlds."
The IPO market has largely been inactive since late 2021, with the only notable venture-backed tech IPOs being software vendor HashiCorp and cloud tech developer Samsara in December of that year. Founded in 2012 as Maplebear Inc., Instacart looks to join the ranks of gig economy companies on the stock exchange, following Airbnb and DoorDash which had their debut in 2020, Uber and Lyft in 2021, and Arm which filed for a Nasdaq listing on Monday. Despite this, only Airbnb is currently trading above its IPO price.
Instacart shoppers and drivers provide services in over 5,500 cities from more than 40,000 stores. Business surged during the pandemic as consumers avoided public places. This however, has been somewhat of a challenge as it is across much of the gig economy due to the high cost associated with paying all those contractors. Consequently, headcount peaked in the second quarter of 2022, leading to a "lower fixed operating cost base" at the end of June.
Instacart initially cut its valuation to $24 billion from $39 billion amidst the market dip in March of last year, and reportedly fell by another 50% by late 2022. Competitors were listed as Amazon, Target, Walmart and DoorDash. The biggest area for cost reductions has been in general and administrative expenses which are noted to have decreased to $51 million in the most recent quarter from $102 million in the final period of 2021.
CEO Fidji Simo took charge in August 2021, becoming chair of the board in July 2022. She previously held the position of head of Facebook's app Meta and was reporting directly to Mark Zuckerberg. Instacart founder and executive chairman Apoorva Mehta will be transitioning off the board after the company's public launch. Other board members include Peloton CEO Barry McCarthy, Snowflake CEO Frank Slootman and Andreessen Horowitz's Jeff Jordan.
Instacart is one of the first independent grocery delivery companies to offer shares to the public. Amazon Fresh, Walmart Grocery and Google Express being units of larger corporations, while Shipt and Fresh Direct have been acquired by Target and Ahold Delhaize respectively. Sequoia Capital and DJ Capital Partners own at least 5% of the stock each, and the two firms, alongside other investors, have "indicated interest" in purchasing up to $400 million of shares in the IPO.
Instacart has also acquired e-commerce startup Rosie, AI-powered pricing firm Eversight, AI shopping cart and checkout solutions provider Caper, and FoodStorm, a software startup specializing in self-serve kiosks for in-store customers in the past two years. The firm has implemented machine learning in predicting grocery availability for retailers as well as increasing customer sales, with its algorithm predicting availability every two hours for 1.4 billion grocery items, and more than 70% of customers purchasing items through Instacart's recommendation algorithm in the second quarter of 2023.
Goldman Sachs is leading the offering. Nick Giovanni, Instacart's finance chief and a former global head of the tech, media and telecom group at the investment bank, is overseeing the process.
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