Instacart S-1
sec.govCool to see a IPO with profitable unit economics
> Gross profit grew from $1,226 million in 2021 to $1,831 million in 2022, an increase of 49%, and from $769 million for the six months ended June 30, 2022 to $1,109 million for the six months ended June 30, 2023, an increase of 44%;
Unless I missed something
Gross profit is what most people think of as revenue. What they start with after goods and shoppers less COGS.
It's crazy to me how much of large business revenue comes from ads. Just under one third of their revenue is from advertising!
Is this a recent shift, or one that I'm just now noticing? Other large tech companies have had substantial increases in ad revenue as well: notably amazon and uber. Is advertising shifting away from Google, or is this just a normal part of large businesses (like paying for placement in retail stores)?
Marketplaces are very keenly positioned for advertising as there is deep buyer intent. Amazon[0] looks to have a pretty sizable ad business. I have anecdotally observed that this is a recent trend related to the downturn. Of course, ads have always been very prevalent but as companies saw contraction they scrambled to plug revenue with ads. Netflix being an example that recanted its long held "no ads" policy. Apple's advertising business has grown substantially as well. For marketplaces, ads are a logical (if annoying) way to make money and that trend is unlikely to reverse.
[0]https://www.cnbc.com/2022/02/03/amazon-has-a-31-billion-a-ye...
There's always been tons of money in marketing and advertising. Top brand companies have huge marketing budgets. Think coca cola, all super bowl ads etc.
it's just you had to settle for inferior means of attribution. it got better with tech via e-commerce and tracking. then it got worse with tech via bots, abuse, arms race, etc.
instacart can reach customers at the point of sale and track conversions in a first class manner. so it's a no-brainer for brands to pay for performance.
Is there a monetary advantage filing for IPO in the current downturn? I know the owners will get less money per share but is there a long term advantage?
It's possible the downtown will get worse, not better. S&P500 near all-time highs. Unclear if things actually get better in a year or two.
Perhaps the owners think the valuation is reasonable, and want liquidity. Selling at $10b+ is still a great achievement for a company founded in 2012.
It also seems like they don't have a lot of competition yet. Maybe the owners want to get their money while they own the market for shopping apps because they see writing on the wall..
I personally think that their UX is so terrible that they'd be eaten alive by anybody with a decent app.
> their UX is so terrible that they'd be eaten alive by anybody with a decent app
LastPass, Amazon, Prime Video, Quora, Zoom, Facebook, WhatsApp, Apple Music, Outlook, Steam... that can be said of a dozen other popular apps, but unfortunately it's not that simple.
You'd expect more of these platforms would be all-too-eager to go into the API business.
Their value is what exists on the server side-- the networks, the content, the connections. The app is realistically more of a cost centre for them, and potentially an opportunity for friction or underserved use cases.
Opening the door for third parties would give them opportunities to expand their market for no additional cost.
For example, I could see Instacart integrations into smart-appliance platforms, thus fulfilling the long-wibbled-about premise of "what if your refrigerator knew you were out of eggs and would order more."
According to the S-1: They are paying out about $400m/yr to preferred shared holders, which will be wiped clean on IPO (preferred shares convert to common), allowing the company to retain these earnings.
Under "Undistributed earnings attributable to preferred stockholders"
Isn't that unusual for normal venture backed companies? I know preferred shares with high dividends as debt-like instruments for financial companies, but ... are there venture investments that expect dividend payments?
New to this stuff, but why are they paying anything to these preferred shareholders?
Likely the investors negotiated the terms in return for funding.
There was a pretty interesting discussion on e141 of the All In Podcast regarding the IPO climate. I'm not an expert on this so worth consulting the podcast, but essentially they made some interesting points. Basically an IPO will fix the cap table for companies with very convoluted warrants and pref stacks. So while some investors will take write-downs the company was structured in such a way that it basically couldn't raise money. Not sure if this applies to instacart but according to the podcast an IPO event in some cases converts everyone to common which might be a necessary thing.
This isn't because of a "downturn" per se, but it advantages some investors and the company as a whole.
it’s a solid, profitable & growing business & owners don’t have to sell; the folks that have been waiting a decade for liquidity can
It doesn't look growing to me, order volume has been flat for the last 6 quarters. I'm not sure how much more they can grow per order profit.
yeah, order volume is flat but ad business is growing significantly, and it seems that their primary competitor (doordash) is growing at the expense of shipt and/or amazon, not instacart; and, a lot of the YoY flatness is explained away in the S-1 (up to you if you agree with their logic).
agreed that it seems unlikely they can grow their per order profit but you never know, I guess.
Grocery business tends to outperform the market during downturns.
And grocery delivery is very good during pandemic waves, like the upcoming COVID wave.
> Is there a monetary advantage filing for IPO in the current downturn?
I don't think so. Their business is more or less a Deliveroo clone, which doesn't seem to be a good business model in the long term especially as a public company.
But it looks like they are attempting to use the ARM IPO as an opportunity to restart a new wave of IPOs. So they getting in on this new window of opportunity.
So expect yet another wave of unprofitable startups heading for the IPO exit. At least one profitable startup, Stripe could be going public next year. But who knows.
ah yes famously unprofitable instacart! and somehow instacart is a clone of a company founded a year afterwards?
truly HN is a vast repository of wise commenters!
Perhaps time is up and private equity won’t offer better terms.
What’s this $358 million tax benefit? If it wasn't for that they’d still have made a ~$70m loss. Is that a one-off?