Instacart IPO Valuation

According to The Wall Street Journal, the core of Instacart’s business, its grocery delivery service, has slowed down considerably with gross transaction volumes increasing by only 4% to $14.9 billion. Transaction revenue has risen by 34% to $1 billion. The company’s attention, now centered on advertising and other technological services, witnessed a 24% growth to $406 million.

Instacart has already secured a deal with PepsiCo prior to the IPO, with a promised $175 Series A preferred stock sale. Many have wondered at PepsiCo’s decision as Instacart works more as a platform for retailers than brands, but the company’s support could be a big boost for the grocery delivery platform. Cornerstone investors such as Norges Bank and other entities have also expressed interest in up to $400 million from the company, as per Bloomberg.

The grocery delivery company has offered up 22 million shares in total, with 14.1 million being shares that are to be newly issued by the company and another 7.9 million shares from selling stockholders. Instacart’s IPO is likely to be set at an offer price between $26 – $28, with a hope to raise approximately $616 million.

Instacart: Bridging the Gap between E-commerce and Grocery Delivery

Founded in 2012 by entrepreneur Apoorva Mehta, the humble San Francisco-based startup has grown by leaps since its inception. With Fidji Simo currently at the reins as CEO, the company has made several acquisitions during its time, starting with Unata and going on to more recent ones like Rosie and Eversight, which have additionally marked the company’s journey toward AI. Instacart has also partnered with more than 1400 companies such as Aldi, Kroger, Lowes, etc. in order to take on Amazon, especially after the company’s acquisition of retail giant Whole Foods.

Instacart confidentially submitted its IPO filings to the U.S. Securities and Exchange Commission (SEC) in May 2022 but halted proceedings due to market complications. Its IPO filing in August 2023 indicates that the company is now ready to go through with the proceedings this time, soon to be listed under the “CART” ticker on the Nasdaq exchange. 

“Our GTV, representing the online sales we power for all of our retail partners, grew at a compound annual growth rate of 80% between 2018 and 2022, compared to 50% for the overall online grocery market and 1% for offline grocery. We have demonstrated our ability to help our retail partners drive strong growth and stay competitive in a complex and increasingly digital industry.”

– CEO Fidji Simo

Introducing Instacart in the prospectus, Simo explains that only 12% of grocery sales currently take place online.

In 2022, McKinsey reported that while the e-commerce boom during the pandemic was due to safety and convenience—factors that were no longer as pressing post-pandemic—consumers also enjoyed unique features that online platforms offered, such as product comparisons and personalized promotions. The research also indicated that 55% of surveyed retailers felt they were not equipped to attract the talent necessary to make the shift to digital commerce, with many worried about losing their market share during the online transition. This is where companies like Instacart are able to shine, and such factors are likely to help in Instacart’s valuation.

IPO Filings 2023

Stock Analysis reports that only 106 IPOs have entered the US stock market in 2023, a 31.17% drop from the 154 IPOs by this time in 2022. The IPO market has been largely latent since 2021. Following Instacart’s IPO filing, there is talk of whether the company will be able to perform better than its competitors like Lyft and Uber, which are still taking hits in regard to profitability. Hopes are higher for the gig economy company as it enters the market backed by multiple quarters of profitability. 

Another company to look out for is British chip designer ARM Holdings, which is owned by Japan’s Softbank Group. It is believed that the company could see a valuation of up to $52 billion and has already found major cornerstone investors like Apple, Intel, Nvidia, Advanced Micro Devices, and Samsung Electronics. Word of  Klaviyo and its $6.8 billion valuation is also of note as the marketing automation platform gets set to launch its roadshow.

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After evading rumors for a long time, in May 2022, the company announced that it had submitted a draft registration statement to the US Securities and Exchange Commission (SEC).  As the company has slashed the Instacart valuation, investors might be able to buy shares at a lower price and see gains later if usage grows, when the economy picks up.

Growing the Cart: the Instacart IPO

According to PYMNTS’ ConnectedEconomy Monthly Report one in six consumers said that they purchase groceries online. They surveyed more than 2,600 customers across the US and found that 15.8% get groceries home-delivered every week.

Online grocery shopping skyrocketed during the pandemic as people were forced to explore online deliveries. Instacart slowly became the digital convenience store that offered good produce and timely deliveries.

People would be interested in the Instacart IPO as it is not only an established player, but also works with over 500 retailers across the country.  The company has been consistently readjusting its goal posts and making changes to stay relevant and trending.

The company launched a “The World is Your Cart” campaign in August, featuring Lizzo as it reinvented itself as a one-stop-shop destination, transforming the Instacart shopping experience.

In their quest for continued improvement, Instacart has also acquired Caper, a company that focuses on smart cart artificial intelligence technology. The Instacart Marketplace has advanced search technology that points customers to products they want and related things. For example, if a customer is shopping for a salad, it would automatically recommend salad dressings.

In the past, CEO Fidji Simo has mentioned that Instacart will continue to evolve to support retailers and customers. “I want to attract investors that understand this long-term vision and understand what we’re trying to do, and so, there’s no rush,” said Simo in March.

Instacart Valuation: A Moving Target 

In preparation for the Instacart IPO, the delivery company has adjusted its valuation for the third time this year. In March, Instacart valuation was shifted from $39 billion to $24 billion. According to Barrons, it quietly readjusted its valuation to $15 billion in July. Insiders told The Information that the company has slashed its internal valuation to about $13 billion ahead of the public offering.

Bloomberg revealed that the third cut in Instacart valuation came about as a result of volatile market conditions. The company plans to sell mostly employee shares during the IPO.

According to The Information and Bloomberg, Instacart’s common stock is now valued at $38 a share. Public delivery stocks have continued to lose value as worried investors are hesitant to part with funds in this economy.

A Risky Business

While grocery adoption rose in the two years of the pandemic, high inflation has squeezed household budgets. A recent Bricks Meet Clicks/Mercatus Shopping Survey found that online grocery spending was up by 6% year-over-year in June, rising to $7.2 billion. The $7.2 billion represents a drop from the $8.7 billion in total e-grocery spend found in the Mercatus Shopping Survey covering the numbers for March. Experts speculate that customers might be going back to in-store shopping to avoid the added cost of delivery.

Due to high inflation and a shifting economic landscape, many IPOs have underperformed in the market. In recent times, many stocks have performed exceptionally well during their debut, and lost their valuations over time.

As predictions of a recession loom large, the post-Instacart IPO price drop could shave off a chunk of your savings. The Instacart IPO date is yet to be announced but experts estimate the time is near. However, there is no real data on what the potential price of the shares will be. The grocery delivery is one of the most awaited upcoming IPOs of 2022.

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In a brief statement, the company informed stakeholders that it had confidentially submitted the draft and awaited the agency’s review process. The grocery-delivery company, however, did not mention an Instacart IPO date or any financial targets.

Instacart IPO

The retail company based in California has been in the news for various reasons. In March, Instacart valuation dropped from $39 billion to about $24 billion. The company hoped to attract more talent and adapt to post-Covid market conditions with this move.

An Instacart IPO has been one of the most awaited IPOs of the year. However, the online-retailer has never shared a definitive timeline or mentioned how they are preparing for it.

The California-based unicorn had seen sales climb through the roof during the height of the pandemic. Instacart almost became synonymous with grocery delivery across the US. But the company saw its sales fall as the pandemic was brought under control and people found themselves with many more home delivery options. Companies that boomed during the pandemic have experienced slower times. Zoom and Peloton are two such companies that have struggled to adapt to post-Covid times.

In 2019, Instacart’s grocery sales stood at $9 billion, but with the onset of the pandemic in 2020, it grew to over $23 billion, tripling in value. This resulted in the company generating a revenue of almost $1.5 billion.

Over the past decade, Instacart has continued to steadily carve a space for itself in the delivery segment. But the pandemic accelerated its growth like no other. Instacart CEO Fidji Simo has spoken about the startup’s long-term vision that includes much more than grocery delivery.

The company aims to improve its businesses using technology. It recently started offering software infrastructure to retailers to enable ultrafast deliveries. Its software analytics and support centers will help clients deliver goods within 15 minutes. By providing the right kind of e-commerce support, Instacart will help grocers build and manage their stores online. Previously, Simo had stated that Instacart plans to roll out several new software services for its retail partners. He also expressed his worry over rising food prices and how inflation can impact the company.

He mentioned that an Instacart IPO is their ultimate goal. In a conference he stated, “I want to attract investors that understand this long-term vision and understand what we’re trying to do, and so, there’s no rush.”

So far, the company has not mentioned any tentative Instacart IPO release dates.

Competition and Post-Covid Growth

The California-based unicorn has been working on the Instacart IPO for over a year. After the submission of the documents with the SEC, the agency helps set the initial price for the IPO with the help of backers.

Instacart is also facing stiff competition from its rivals like Amazon, DoorDash, and Uber. Companies like Amazon have the technology and know-how to accelerate their business on a large scale. Amazon is working on letting its Prime users shop at its Whole Foods stores without checking out. Money will be debited directly from their Amazon Prime account. Offering such easy solutions to meet customer needs is bound to eat into businesses of other traditional players who do not have access to this kind of funds. Instacart’s valuation in 2016, two years after its inception, stood at $2 billion. As of March 2022, it stands at around $24 billion.

Presently, the company has over 10 million active users and nearly 500,000 workers and continues to grow in the US and Canada.

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Instacart Turns to Selling Software 

In an interview with CNN Business this week, Instacart CEO Fidji Simo said the grocery delivery startup plans to roll out several new software services for its retail partners, including one called Carrot Warehouses, which aims to help grocers support 15-minute deliveries using the right tech infrastructure. 

Instacart has also  inked a deal with supermarket chain Publix to offer faster deliveries in Atlanta and Miami in the coming months. The new SaaS model will allow retailers to be in charge of inventory management and supply chain management. This comes in the form of: 

• E-commerce support: The right tools to help grocers build and manage their stores online.
• Fulfillment support: Instacart staff and new warehouses will help customers handle super-quick deliveries. 
• Advertising: The grocery startup will offer support to partner digital retail efforts, and 
• Software analytics, and in-store tech support that would allow groceries to be delivered within 15 minutes through its miniature fulfillment centers. 

With growing competition from existing unicorns such as Uber and DoorDash, Instacart is left with no choice but to dive into the software side of its operations to boost growth. With the right software infrastructure to enable ultrafast deliveries it can boost its gross margins, and create a stream of recurring revenue from large customers.

Instacart Valuation: A Show of Humility 

It’s rare to see a private unicorn adjust its valuation, especially when it is one of the few beneficiaries of the pandemic boom. Instacart’s valuation doubled twice during the pandemic to $39 billion and added 600,000 people as independent contractors under its wings. According to CNN Business, the exponential growth has since begun to stabilize.

Instacart’s valuation is seen as a way to boost the value of equity awards for new and existing employees. Employers are likely to be offered stock-based compensation that could add to their riches if the market interest in the grocery unicorn rebounds. 

Tech-enabled gig companies like Instacart, DoorDash and Uber often struggle to make profits in an increasingly tight race to shorten delivery time. Instacart’s new service could help the company create room for more profits and increase investor confidence ahead of its upcoming IPO later this year.

When asked about Instacart’s IPO plans, Simo declined to comment on timing. Although she said that the company plans to go public at some point in the future.

Instacart’s Total Funding 

According to market reports, Instacart’s revenues tripled to around $1.5 billion in 2020. The epic growth came with the onset of large capital injections. In June 2020, Instacart raised $225 million at a ballooning valuation of $13.7 billion. A month later, the grocery delivery startup added another $100 million to its cart to that round.

In October 2020, Instacart raised another $200 million pushing its valuation north of $17.7 billion. In March 2021, the company added another $265 million in private capital at a valuation of $38.7 billion. That’s a lot of money from investors, including Andreessen Horowitz, Sequoia Capital, D1 Capital Partners and others.

Other bigwigs in the advertising and delivery businesses, like DoorDash, Meta and Shopify, have also seen the value of their stock plummet in recent months.

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