Instacart, the food delivery company that cut its valuation during last year’s market decline, on Friday filed for its IPO in what is expected to be its first significant venture capital-backed tech IPO since December 2021.

The stock is listed on the Nasdaq under the ticker symbol “CART”. In its prospectus, the company said that net income totaled $114 million while revenue for the most recent quarter hit $716 million, up 15% from the same period last year. According to the filing, Instacart has now been profitable for five straight quarters. PepsiCo has agreed to purchase $175 million of stock in the company in a private placement.

Instacart said it will continue to focus on integrating artificial intelligence and machine learning capabilities into the platform and that the company expects to “rely on AIML solutions to drive the future growth of our business.” In May, Instacart announced it was jumping into the generative AI boom with Ask Instacart, a search tool aimed at answering customers’ questions about grocery shopping.

“We believe the future of grocery retailing will no longer be about choosing between online shopping and in-store shopping,” CEO Fidji Simo wrote in the prospectus. “Most of us will do both. That’s why we want to create a true omni-channel experience that brings the best of the online shopping experience to physical stores and vice versa.”

Instacart will try to crack the IPO market, which has been mostly closed since late 2021. In December of that year, software vendors HashiCorp and Samsara, which develop cloud technology for industrial companies, went public, but there have been no notable venture-backed tech IPOs since. Chip designer Arm, owned by Japan’s SoftBank, applied for a Nasdaq listing on Monday.

Founded in 2012 and initially incorporated as Maplebear Inc., Instacart will join a group of so-called gig economy companies in the public market after launching Airbnb and DoorDash in 2020, and carsharing companies Uber and Lyft a year earlier. They weren’t a good choice for investors as only Airbnb is currently trading above its IPO price.

According to its website, Instacart buyers and drivers deliver goods in over 5,500 cities from more than 40,000 grocers and other stores. Business boomed during the Covid pandemic as consumers avoided public places. But profitability has always been a major challenge, as is the case in much of the gig economy, due to the high cost of paying all those contractors.

Headcount peaked in the second quarter of 2022, Instacart said, “and declined over the next two quarters, reducing our fixed operating cost base.” At the end of June, the company had 3,486 full-time employees.

In March of last year, Instacart slashed its valuation from $39 billion to $24 billion as share prices plummeted. The valuation reportedly dropped another 50% by the end of 2022. Its competitors included Instacart Amazon, Target, Walmart, and DoorDash.

The largest area for cost reductions was general and administrative expenses. Those costs fell to $51 million in the most recent quarter from $77 million last year, and peaked at $102 million in the final period of 2021. Instacart said the drop was a “result of lower fees related to legal matters and settlements.”

Simo assumed the position of CEO of Instacart in August 2021 and became the company’s CEO in July 2022. Previously, she was head of the Facebook app at Meta, reporting directly to CEO Mark Zuckerberg. Apoorva Mehta, founder and CEO of Instacart, plans to step down from the board in 2022 after the company’s IPO, according to a press release.

The company’s Board of Directors also includes Barry McCarthy, CEO of Peloton, Frank Slootman, CEO of Snowflake, and Jeff Jordan of Andreessen Horowitz.

Instacart will be one of the first independent food delivery companies to go public. Amazon Fresh, Walmart Grocery, and Google Express are all units of large corporations. Shipt was acquired by Target in 2017 and Fresh Direct, another direct-to-consumer grocery delivery company, was bought by global grocery retailer Ahold Delhaize in 2021.

Sequoia Capital and D1 Capital Partners are the only shareholders owning at least 5% of the shares. Instacart said these two firms, along with Norges Bank Investment Management and companies affiliated with TCV and Valiant Capital Management, have “individually and not collectively expressed an interest” to purchase up to $400 million of shares in the IPO at the offer price .

Instacart’s entry into AI has largely come through a series of acquisitions over the past two years. Those deals include buying e-commerce startup Rosie, AI-powered pricing company Eversight, AI shopping cart and checkout solution provider Caper, and FoodStorm, a software startup specializing in self-service kiosks for customers in stores.

The company also touted the use of machine learning to predict grocery availability for retailers and boost consumer sales. The company said its algorithms predict the availability of the “vast majority” of its 1.4 billion groceries every two hours, and that more than 70% of customers purchased items through Instacart’s recommendation algorithm in Q2 2023.

Goldman Sachs is leading the offering. This is the former employer of Instacart chief financial officer Nick Giovanni, who was previously global head of the investment bank’s technology, media and telecoms group.

REGARD: Instacart files for IPO

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