How To Invest In Instacart IPO: Buy Instacart Stock

Founded in 2012 and headquartered in San Francisco, Instacart provides online grocery shopping and delivery services, and is known for its intuitive app. 

In 2013, Instacart introduced a low-fee subscription model enabling unlimited free deliveries. In 2014, the company expanded to 10 additional metropolitan centres, including Los Angeles, New York City, and Portland. In 2017, their second major expansion went nationwide and into Canada. And in 2022, they included new verticals such as beauty, electronics, and pets.  

Earlier in 2022, the company launched “Instacart Platform,” providing scale and consumer reach to smaller retailers outside of larger stores or grocery franchises. 

Their strategy continues to be one of market share dominance and hyper-growth as an early mover. However, the market remains slightly saturated with names such as Grubhub, DoorDash, Seamless, Uber Eats, Postmates, Walmart, and so on. 

Yet Instacart controls roughly 25% of the online grocery market in the USA, according to an analyst from investment firm Baird. 

Likely due to the recent cuts in fintech company valuations by virtue of 2022’s bear markets, the company has not yet provided a finite IPO date. However, a reasonable market estimation is by late 2023. This could change pursuant to the direction of interest rate hikes from the Federal Reserve and inflation. IPOs are unlikely to occur during a prolonged bear market. 

The company’s incredible rise from launch to 24 billion USD in ten years and its market dominance make it a hotly anticipated IPO. But investors must continue to wait as the startup observes the market and any possible recovery. 

Its major investors include: 

• Tiger Global Management
• G Squared
• Dragoneer Investment Group
• Kleiner Perkins
• Thrive Capital
• Canaan Partners
• DST Global
• Sequoia Capital

A top-tier list such as the above suggests that it receives substantial advice and guidance. Further, it has no urgent need of cash, particularly as it reportedly has over 1 billion USD in cash reserves.

Generally, investing in an IPO is riskier than investing in a stock already known to the public market, either through an American exchange like the NYSE or a European exchange like the LSE. 

However, there remain a few essential items to have on your analytical checklist no matter the stock or sector. 

1. Gross revenue (“top line”) 
2. The revenue drivers, such as active user or member growth
3. Profit margins, often EBITDA as a percentage of top line; EBITDA means “earnings before interest, tax, depreciation, and amortization”
4. Its private valuation growth, earned whenever a private capital raising with major investors, hedge funds, or banks occurs
5. Cumulative funding and current (pre-IPO) investors 
6. The management team
7. Its competitors

If an “IPO Filing” has already occurred, a great place to start is taking the time to read through any stock’s original prospectus available on SEC. This helps cut through the noise and hype typically surrounding an IPO. 

Finding such information prior to a public IPO filing remains difficult, yet reputable trade journals such as Forbes, WSJ, Crunchbase, or TechCrunch provide meaningful estimates. 

With respect to Instacart’s IPO, the below estimates are currently available, noting it is in USD:

1. Revenue (2021): 1.8 billion, a 20% increase over 2020’s 1.5 billion
2. Customer count (2020): 9.6 million active users 
3. Partnering companies (2021): 750, a 25% increase over 2020
4. Private valuation: 24 billion, a 40% decrease from the last funding round
5. Total cumulative funding: 2.2 billion
6. Investors include: substantial; please see above 
7. Management: CEO Fidji Simo was previously Vice President and Head of the Facebook App at Facebook (now Meta)
8. Close parallels include Walmart and Grubhub, in addition to several other competitors

And there you have a quick snapshot of Instacart. It’s important to remember that you want to see consistent growth over several years (at least three) without any breaks in momentum. 

In this scenario where a company reveals limited information, particularly concerning their income statement and balance sheet, it’s also vital to track their customer growth and investor base. If multiple independent trade journals or conferences also rate their products highly, the company could be a winner. 

However, a clear hesitation to reveal financials suggests an inordinate amount of spending, which almost always draws intense scrutiny. This data becomes available in an IPO filing.

The Bottom Line

We’re excited about Instacart’s IPO. It has garnered an incredible valuation at 24 billion USD in ten years and is almost earning two billion a year in top-line revenue. 

It’s clear the company tapped into a new market captivating the likes of Amazon and Walmart. While the “smart money” follows Instacart, investors should never turn complacent. Any growth story needs consistency and solid financials.