Instacart Targets $9.3bn IPO, Testing Appetite For Tech Listings

Instacart Targets $9.3bn IPO, Testing Appetite For Tech Listings

In a crucial moment for tech sector valuations, Instacart is hitting the public markets with an IPO price range that could value the grocery delivery giant between $7.17 billion and $9.3 billion—far less than its private valuation from just two years ago.

Transaction Highlights:

  • Deal Value: IPO could value Instacart up to $9.3 billion.
  • Valuation Shift: The current valuation marks a steep drop from its $39 billion private valuation in 2021.
  • Acquirer: Public investors, with Goldman Sachs and JPMorgan leading the IPO.
  • Target: Instacart, a key player in online grocery delivery, founded in San Francisco in 2012.

Company Snapshot:

  • Revenue: Specific revenue details are undisclosed, but the company is profitable for the first time.
  • Net Profit: Switched from a $74 million net loss in H1 2022 to a net income of $242 million in H1 2023.
  • Market Health: The IPO is viewed as a critical indicator for the health of VC-backed tech companies in public markets.
  • Looking Ahead: A successful IPO for Instacart could pave the way for other tech companies considering a public debut.

Instacart CEO Fidji Simo, a former Facebook exec, has led the company through a valuation cut to $12 billion earlier this year, a move that prompted some VC investors to write down their investments. The inevitable public offering will force investors to recognize any losses on their holdings.

The VC Pulse:

Sequoia Capital and Khosla Ventures have been long-standing investors in Instacart and still have much to gain from the IPO, despite the reduced valuation. According to sources, Sequoia owns roughly 15% of Instacart, translating to about 51 million shares. If the company goes public at a $10 billion valuation, Sequoia's stake could be worth $1.5 billion.

Instacart's Litmus Test for the Broader Tech Sector:

Instacart’s IPO serves as a key litmus test for investor sentiment around VC-backed tech startups. The event is particularly timely, given the opening of IPO windows by UK chip designer Arm, slated for a record $52 billion listing. However, Instacart may offer a clearer barometer for investor appetite, as it differs significantly from Arm’s mature and profitable business model.

Market Sentiment: The Bigger Picture

If Instacart's IPO is well-received, it could potentially open doors for more VC-backed companies eyeing public markets. A failure, on the other hand, might deter future listings. Investors are carefully watching how the market responds to Instacart as a gauge for what might come next in the tech IPO landscape.

In an unconventional twist, Sequoia and other major backers like Norges Bank, TCV, Valiant Capital, and D1 Capital plan to buy approximately $400 million of Instacart shares at the IPO, signaling a bullish outlook despite the slashed valuation.

A Sign of the Times for Tech Startups:

While Instacart’s valuation cut has been significant, it’s part of a larger trend affecting tech startups globally. Cost-cutting and reduced valuations are becoming commonplace, as seen with Turkish-based Getir reducing its valuation from $11.8 billion to $2.5 billion recently.

A successful IPO for Instacart, even at a reduced valuation, could set an important precedent for other companies in a technology sector that's facing both opportunities and headwinds.

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