On-demand grocery delivery giant Instacart has finally dropped its much anticipated S-1. The company, actually named MapleBear, is one of the best-known unicorns on the IPO shortlist. Instacart’s public-offering filing has been long awaited due to not only its massive fundraising history, but also its sheer anticipated heft.
Instacart is, indeed, a very large private company, making its IPO filing and eventual debut a critical event for the back half of 2023. Since its 2012 inception, Instacart has raised $2.9 billion in funding, according to Crunchbase. In March 2021, the company secured a $265 million funding round from investors such as Andreessen Horowitz, Sequoia Capital, D1 Capital Partners and others, at a $39 billion valuation.
After so long an IPO drought, what does Instacart have in store for its existing investors and those perhaps looking to snap up some of its shares? Below we’ve compiled five initial takeaways from its SEC documents to help understand its growth, health and business.
We’ll dig more deeply into the mechanics of its grocery delivery business and the profitability of the model. Today we’re focused on the big numbers and the big trends.
The orders keep coming
While Instacart certainly experienced a pandemic-fueled boom in business, it has managed to maintain that momentum even as pandemic restrictions have eased. More people could go back to the grocery store for shopping, but many got used to the convenience of having their grocery items delivered to them. Orders climbed by 18% in 2022 to 262.6 million compared to 223.4 million in 2021. Those numbers have remained more consistent in 2023 thus far, with orders totaling 132.9 million for the six months ended June 30 compared to 132.3 million the first six months of 2022.
Meanwhile, gross transaction volume increased by 16% to $28.8 billion in 2022 compared to $24.9 billion in 2021. Transaction revenue surged by 44% in 2022 to $1.8 billion compared to $1.23 billion in 2021. For the first six months of 2023, transaction revenue was up 34% to $1.07 billion compared with $799 million in the first six months of 2022. That’s a lot of delivered foodstuffs.
Instacart has reached rare scale as a private company
Instacart’s revenue last year came to $2.55 billion, up 39% from its 2021 result of $1.83 billion. Over the same time horizon, Instacart flipped from operating losses to operating profits, improving from -$72 million in 2021 operating income to +$71 million last year.
Instacart also disclosed its results through the first half of 2023, giving us very recent data regarding its performance. In the first half of this year, Instacart’s revenues scaled from $1.13 billion in H1 2022 to $1.48 billion, a gain of 31%. That’s really not bad for a company of its scale, and the massive growth bump during the COVID period certainly helped; other firms like Zoom that saw a similar explosion in demand during the pandemic have given back more of their growth in absolute terms.
How did Instacart generate nearly $1.5 billion in H1 2023 revenue? The company claims to “reach over 95% of households in North America” and that it helps match retailers with 7.7 million monthly active orderers who spend approximately $317 per month on average using the platform.
Instacart is generating massive cash flows
One way that we track startups and their health is through their cash usage. Most startups consume, or burn, cash to operate. This is not a bad thing, as they are often backed by private capital for the express purpose of accelerating their operations in advance of revenue.
However, as startups get closer to an exit, they often work to tidy their cash expenses to lower, or at least limit, their cash needs. Instacart did one better, flipping to real cash generation before going public.
According to its S-1 filing, the company’s operations burned $204 million in 2021, a figure that flipped to +$277 million in 2022. Even better, in the first half of 2022, Instacart’s operating cash flow came to $99 million. That figure rose to $242 million in the first half of 2023.
In short, Instacart is now generating more than $100 million per quarter in operating cash flow, on average. That’s more than $1 million per day, mind, and is a real accomplishment.
Instacart is profitable
Cash is great, but once a startup grows up, it needs to start operating against firmer and more inclusive profit metrics. So, adjusted EBITDA, GAAP operating income, and the leader of them all, GAAP net income, come into play.
Instacart is doing well by each metric. Adjusted EBITDA, the softest of all profitability metrics that can call themselves such, grew from $34 million in 2021 to $187 million in 2022. More recently, Instacart’s adjusted EBITDA grew from -$20 million in H1 2022 to +$279 million in H1 2023.
Turning to operating income, Instacart eked out a $62 million result in 2022 after posting an $86 million operating loss in 2021. Again, as we look at more recent periods, the figures improve. In H1 2022, Instacart’s operating income came to -$73 million, a figure that improved massively to +$269 million in the first half of this year.
Finally, net income. This figure is a little tricky due to some accounting matters in 2022, so let’s narrow our focus to just the first half of 2022 and 2023. In those periods, Instacart saw its net income flip from -$74 million to +$27 million.
No matter how you slice it, Instacart is profitable. Not bad!
Instacart’s advertising push is paying dividends
In March 2022, TechCrunch+ wrote favorably about Instacart’s growth strategy. While it seems that our general optimism at the time was warranted, we need to double-click on a key plank of that battle plan to see how it is playing out in the market. We need to talk about advertising.
Instacart is a clear vehicle for advertising. It knows when customers are looking to buy a specific category of goods. If you are in its app looking for detergent, Instacart knows that you are indeed looking to buy detergent. So an advertisement at that juncture can have a very high value given its proximity to a purchase.
It is no surprise, then, that advertising is driving real numbers for the company. Instacart’s revenue from advertising in 2021 came to $572 million, or 31% of total revenue. That figure rose to $740 million in 2022, a gain of around 29% (notably in that year, ad-based incomes were a smaller 29% of total revenue).
More recently, the company’s advertising revenues rose from $327 million in H1 2022 to $406 million in H2 2023. That’s solid growth from a secondary business line.
However, in its risk factors, Instacart does note that it is “still in the early stages” of building its Instacart Ads offerings, noting that if it fails to grow its advertising revenue, its business and financial conditions “would be negatively impacted.”
Given how important ads have become to Instacart, that warning might sound a little stark. Don’t worry too much, though, as risk factors in IPO filings always make the ultra-bear case. Instead, read that line as the company clearly telling investors that ads are, and will remain, a big part of its operating results.
All told, the Instacart filing shows a large, healthy, growing and profitable unicorn. May its debut be enough to kick the IPO window wide open.
More to come! It’s raining IPOs!