Instacart S1 Filing: IPO Hiding a Minority PepsiCo Investment?

I thought I would spend some time unpacking Instacart.

Instacart's products include its Marketplace, the Enterprise platform, and Ads.

In truth, I still wonder about the long-term future of Instacart, but there are several things I thought were interesting from the S1:

* First, this is not just an IPO. It's also a private placement of stock to a strategic partner: PepsiCo, who agreed to invest $175M in the company of their Series A stock. Previously, I thought Instacart might get acquired rather than go public, and they have split the difference! This new stock issued to PepsiCo is senior to all common stock.

If you're wondering who benefits here, it's Sequoia. Sequoia invested $8.5M in Series A in 2013, which nets 20x return on their money. Nice sum by Michael Moritz.

* Gross Transaction Volume (GTV) was $28.8B in 2022 and is growing 15.8% year over year. Notably, they are growing profit dollars much faster than transaction volume. That is about an 8.6% "attach rate" of revenue to GTV. (Shopify right now is about at 3% -- which gives you some idea of the leverage and power of advertising). This is the key to the entire business.

* Instacart has 5,734 brand partners in 2022, which grew 5.5% y/y.

* 2022 Advertising revenue was $740M, which grew 29% y/y. Ad

* Instacart charged retailers and consumers combined about 14.9% of the gross transaction value in 2022. (This is growing). How long can this grow in a low-margin industry with inflation?

* Instacart's "shoppers" earn about 8% of gross transaction value, not including tips.

* 2022 Revenue was $2.5B, growing 38% y/y (up from 24% y/y prior), 72% gross margin (up from 66% prior year)

* 2021 Operating income loss was $86M. Grew opex by 34% while growing revenue by 39% and profit dollars by 49%. The key for Instacart is to keep growing profit dollars. Their profitability so far seems tenuous.

* Their net income received a $357M boost in the last year, which boosted their net income to $424M. Seems like a one-thing thing? This did not exist in previous years, so they were unprofitable. Without this, they would have $71M in net income, about a 2.8% net margin.

* Instacart is partnered with 85% of the grocery industry, which gives them a broader selection than anyone. If you ask me (and no one did), this is perhaps Amazon's missing grocery model.

* CEO of Snowflake, Frank Slootman joined the Board in January 2021. Because Instacart uses Snowflake, they need to report their Snowflake bill to the public. In 2022, they paid $51 million to Snowflake. Interesting insight.

Also, did you know that Instacart's real name is Maplebear d/b/a Instacart? I have to know the story behind the bear! Who knows this 😀