Instacart Pushing Off IPO As Valuation Continues to Drop

In March of 2022, the CEO of Instacart Fidji Simo mentioned that "she wanted to build a company, not IPO." Well, she will get her wish. Be careful what you wish for I guess.

It was reported yesterday that Instacart has already shelved its plans for a 2022 IPO. You almost feel a little bad for Instacart. The company announced an IPO in May 2022. Even then, it didn't seem likely to happen.

However, how long must they have been planning this? Quite a while.

What's happened since then?

Oh, nothing much! Just this:

- More and more retailers want control over their customers.

- Instacart has been acquiring companies rapidly to build service revenues and change its positioning in the market.

- Many investor valuation metrics have switched to EBIT rather than revenue. 3x EBIT seemed common earlier this year.

- Instacart has reduced its valuation several times in the past year. From a valuation of $39B down to $13B. Do you think that Instacart has $4.3 B in EBIT? Nope.

Reports I have seen have revenue at $1.8 B in 2021. Let's say it's growing 25% y/y (?) which means $2.25 B this year. Even by the old-school metrics of 3x revenue valuation, it would be worth something like $7B. The fact that this number seems ridiculous tells you they could fall much further from here.

I don't know about you, but I think it's very obvious that previous valuations were not based on revenue even. They were based on GMV and growth.

As a SaaS company, it could get higher valuation multiples, but what % of this revenue is SaaS? Less than 20% is highly likely.

This doesn't mean that people have stopped buying groceries, but they have likely significantly slowed down buying groceries inefficiently. And retailers have increasingly prioritized direct customer relationships. For one of the pioneers of the gig economy in this sector, both trends are negative.