| From: Glenn Petersen | 3/25/2022 11:17:01 AM | | | | | | Rapid Delivery Gets Some Insta-ValidationInstacart will add ultrafast delivery as it works to bolster growth
By Laura Forman
Heard on the Street
Wall Street Journal
March 24, 2022 11:39 am ET
Instacart fears it is running late.
The company said Wednesday it will be getting into ultrafast delivery over the coming months, beginning with grocery store Publix’s customers in Atlanta and Miami. The news came in conjunction with a broader push to enhance its partner retailers’ ability to transact online with tools like ads and performance trackers.
Rapid delivery is a burgeoning business in some of America’s largest cities, but it hasn’t been kind to all platforms. Intense competition has meant heavy losses as platforms dole out discounts to vie for business. Compared with typical food delivery models that use contracted workers, some rapid delivery platforms have also favored a more expensive employment model to ensure workers can quickly source and deliver goods from small warehouses that the companies also must pay to operate called “darkstores.”
Last year, New York-based rapid delivery service 1520 shut down after burning through its funding. And rapid delivery startup Fridge No More is no more as of a few weeks ago after deal talks with DoorDash reportedly fell through. That isn’t to say its service wasn’t popular with consumers: From early August 2021 through late February of this year, YipitData research shows Fridge No More’s New York City transaction volume had grown fourfold.
But even Gopuff—rapid delivery’s largest pure play platform, valued at $15 billion as of last July—didn’t turn a profit last year on the basis of earnings before interest, taxes, depreciation and amortization. (The company said earlier this year it was “contribution profit positive.”)
The losses have led many investors to question the viability of the rapid delivery model for smaller players, especially since some established delivery platforms that typically have longer delivery times such as Uber Technologies’ Uber Eats have only just started to turn profitable on an adjusted Ebitda basis.
Instacart’s move into quicker delivery seems to offer validation of the Gopuff-like model, at least in terms of customer demand. Instacart’s chief financial officer, Nick Giovanni, said in an interview Wednesday he thinks the rapid delivery trend has legs, noting consumers will “absolutely” still be demanding rapid delivery of groceries in 10 years because the customer will have become accustomed to the spee
But there are a few notable distinctions to be made between what most instant delivery startups are offering and what Instacart is trying to build. First, Instacart appears to be joining with retailers rather than becoming one itself. This could help from an economic perspective since its partners already have many brick and mortar locations in place. Instacart says it is the largest grocery marketplace in North America, helping facilitate online grocery shopping delivery and pick up services from more than 70,000 stores across more than 5,500 cities.
Having said that, Instacart’s announcement notes it will conduct 15-minute delivery in its first two cities from its own warehouses. The company said it would work to be flexible with retailers based on their preferences, offering them the ability to use warehouses Instacart operates and manages or to co-locate Instacart’s warehouses within their existing bricks-and-mortar locations.
Rapid delivery players have been investing in their own private-label brands—Gopuff recently launched “Basically,” for example—to help boost margins. Instacart should be able to offer traditional brand names through its retailer partners and avoid owning the inventory. Instacart’s workers are a mix of contractors and employees, though the company says most are contra
Another difference is that rapid delivery will be part of a more holistic product offering at Instacart. As such, the company will have the ability to subsidize potential losses from other offerings such as its traditional delivery service and ads. The company declined to comment on what an ideal mix of ultrafast delivery versus regular delivery would look like at maturity, but Mr. Giovanni did say delivering only small orders quickly would be “a tough business model.”
After booming early in the pandemic, Instacart’s growth has since moderated significantly, leading the company to lean into additional growth avenues. New Chief Executive Fidji Simo has favored the company’s push into higher-margin advertising, for example. But it is unclear whether Instacart’s move into rapid delivery is a bid to rekindle growth or one to retain key retail partners that may feel they are missing out as rapid delivery grows in popularity. Either way, its launch will be a high-profile experiment worth watching: If the grocery delivery giant can’t make the economics work, who can?
Write to Laura Forman at laura.forman@wsj.com
Delivery Gets Some Insta-Validation - WSJ |
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| From: Glenn Petersen | 4/6/2022 5:54:08 PM | | | | | | Instacart Faces Turbulence After Pandemic Boom in Grocery Delivery
As the pandemic eases, Instacart is trying to figure out how to sustain growth, while competition increases and grocery chains rethink their delivery operations
By Jaewon Kang, Preetika Rana and Corrie Driebusch
Wall Street Journal
Updated Apr. 5, 2022 5:54 pm ET
Instacart sends on-demand shoppers to fulfill orders in stores and deliver groceries to people’s homes. PHOTO: MICHAEL LOCCISANO/GETTY IMAGES
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More than a year into the pandemic, Instacart Inc., the biggest grocery-delivery company, was looking for a deal.
Last year, its founder approached rivals DoorDash Inc. and Uber Technologies Inc. about possible deals, according to people familiar with the matter. Instacart’s newly appointed chief executive later tried again, some of the people say. None of the talks resulted in an agreement. The company also considered an initial public offering last year, people close to the discussions said. By last month, Instacart slashed its valuation.
Now, one of the companies best positioned in the pandemic is trying to forge its future.
For the past two years, Covid-19 lockdowns and concerns led consumers to take more of their supermarket shopping online. This helped boost business for Instacart, the top grocery delivery app serving more than 750 retailers. Its service sends armies of on-demand shoppers to fulfill orders in stores and deliver groceries to people’s homes.
Competition is mounting. After relying on Instacart to handle the pandemic-driven surge of online orders, retailers are increasingly using multiple delivery companies to fill online orders and negotiate better terms. Other grocers are trying to build their own networks, and some are encouraging a return to in-person shopping, which remains the most profitable for the retailers and doesn’t carry delivery apps’ fees or product markups.
“Growth rates have normalized. Now, everybody is trying to figure out—where does this go? How do we do it profitably?” said James McCann, chief executive of Food Retail Ventures LLC and an investor in delivery technology companies.
Fidji Simo was hired as Instacart’s CEO last summer. PHOTO: DAVID PAUL MORRIS/BLOOMBERG NEWS
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Instacart’s sales rocketed 330% from 2019 to 2020, according to research firm 1010data Services LLC, but slowed to 15% growth in 2021. Sales growth has slowed for many pandemic-fueled industries including food delivery. But industry leader DoorDash has gained market share throughout the health crisis, according to research firm YipitData.
Meanwhile, Instacart’s share of the online grocery market has fallen to 30% from 40% two years ago, according to YipitData. It commanded 20% of the online grocery market before the pandemic.
Over the past year, the San Francisco-based company has announced plans to cut delivery times to 30 minutes for major customers like Kroger Co., mounted a push into advertising, and sought possible deals with rivals in an effort to fend off growing competition, according to people familiar with the discussions. Instacart fell short of some internal growth targets last year, one of those people said.
Last summer Instacart hired former Facebook executive Fidji Simo as chief executive, who pledged to expand options for shoppers and retailers ahead of an initial public offering for the company, which then had a private-market value of around $39 billion.
Instacart was founded by former Amazon employee Apoorva Mehta.PHOTO: BECK DIEFENBACH/REUTERS
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In the months since, several senior executives have departed, including Carolyn Everson, another former Facebook executive who left Instacart in December after joining in September. In March, Instacart told employees it would cut its valuation by 40% to $24 billion, citing market turbulence.
Instacart said sales hit a record in 2021 and its holiday season was the busiest in company history. Total revenue grew about 20% to $1.8 billion, said a person familiar with the matter. So far in 2022, sales are growing year over year, said another person familiar with the matter. While the number of orders has increased, people are ordering smaller amounts compared to the pandemic’s peak, because they aren’t staying at home as much, the company said.
Launched in 2012, Instacart helped pioneer the concept of making grocery store aisles shoppable from a smartphone screen. The company, founded by former Amazon.com Inc. employee Apoorva Mehta, pitched its technology to bricks-and-mortar supermarket chains as a faster and more efficient way to tap into e-commerce growth as Amazon.com and other online retailers were exploring grocery offerings.
The company’s business boomed after Amazon in 2017 acquired Whole Foods Market, Instacart’s former customer, prompting more retailers to join with Instacart to expand their online presence.
The pandemic turned more consumers—and retailers—toward Instacart. The company said its order volume increased 500% at the start of March 2020 and transaction volume quadrupled in 2020. It started delivering products from nongrocery retailers like Best Buy Co. Inc. and Dick’s Sporting Goods Inc., and raised more than $600 million from investors.
The proliferation of grocery delivery helped competitors, too. DoorDash and Uber Eats quickly expanded to delivering everything from toothpaste to Tylenol and toilet paper during the health crisis.
As competition mounted in the summer of 2021, Instacart founder and then CEO Mr. Mehta approached DoorDash about a potential merger, according to people familiar with the discussions. Mr. Mehta then approached Uber, while continuing discussions with DoorDash, those people said. Instacart’s then-valuation made it unattractive for both rivals, the people said. Antitrust concerns also complicated a potential deal with DoorDash, another person close to the discussions said. None of the talks resulted in a deal. Instacart also considered the IPO last year, said people familiar with the matter.
The Information previously reported on Instacart’s initial talks with DoorDash and Uber.
In July, Mr. Mehta stepped down as CEO, with Ms. Simo replacing him. Some Instacart investors thought an outsider could help recapture the company’s momentum, according to a person familiar. Ms. Simo reopened talks with Uber and DoorDash shortly after her appointment, according to people familiar with the discussions, but they didn’t materialize into an agreement.
Seth Dallaire, a former Amazon executive who led Instacart’s fast-growing advertising business, left in October. Ms. Everson, the former Facebook executive who became Instacart’s president in September, announced plans to quit in December. Ms. Simo told employees at the time there was a “mismatch” with Instacart’s priorities and that Ms. Everson’s departure gave the company an opportunity to make organizational changes that will put it in a better position.
The Covid-19 lockdowns boosted business for Instacart. PHOTO: CHENEY ORR/REUTERS
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Then in March, the company slashed its valuation. Executives told staff in a March 25 meeting that Instacart is working to mimic the functions of a publicly traded company, and that lower valuation doesn’t affect its plans to eventually launch an IPO, according to a recording reviewed by The Wall Street Journal. They said that Instacart is granting company stock using the new valuation, which will give employees more share units.
Instacart said it is focusing on helping retailers use technologies to expand their business online and in stores. Its recently launched Instacart Platform, which consists of warehouses, including those designed for 15-minute deliveries, advertising and in-store services such as smart carts. In recent months, Instacart bought a maker of automated shopping carts and a catering software company.
Instacart executives didn’t expect the growth rates of 2020 to continue, said people close to the company, and it is working to deliver more products from its top customers and expand services such as reaching food stamp users. Before the pandemic, Instacart focused on signing retailers exclusively, some of the people said, which has become a lower priority after more customers came online over the past two years.
Instacart is also focusing on customers who are likely to keep using the service. People who buy both food and nonfood items have had better retention, and those who joined in recent months have been more likely to become repeat users than customers trying out the service earlier in the pandemic, said one of the people.
Advertising is another business Instacart is expanding, charging food companies to promote products to users on Instacart. Executives have said that ad revenue helps offset Instacart’s costs of delivering orders, though the effort puts Instacart into competition with major grocery sellers—and Instacart customers—including Kroger and Walmart Inc., which are developing their own, similar online advertising platforms.
Write to Jaewon Kang at jaewon.kang@wsj.com, Preetika Rana at preetika.rana@wsj.com and Corrie Driebusch at corrie.driebusch@wsj.com
Appeared in the April 6, 2022, print edition as 'Instacart Hits Volatility After Boom'.
Instacart Faces Turbulence After Pandemic Boom in Grocery Delivery - WSJ |
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| From: Glenn Petersen | 5/1/2022 5:13:54 PM | | | | | | For Instacart Shoppers, the Job Is Getting Harder, Slower
Some shoppers say customers are ordering and tipping less, prompting them to pick up gigs from other delivery companies
By Jaewon Kang
Wall Street Journal
May. 1, 2022 10:00 am ET
Hundreds of thousands of workers joined Instacart as shoppers during the pandemic, drawn to flexible hours and good pay. PHOTO: MICHAEL LOCCISANO/GETTY IMAGES
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The pandemic made shopping for Instacart Inc. one of the hottest jobs in the supermarket business. Now, it is getting tougher.
Instacart workers, who fulfill online orders for consumers, say their jobs have become more difficult and less lucrative as they see fewer, smaller orders than they did earlier in the pandemic. Some said they are increasingly competing against other so-called shoppers, waiting around for orders or driving to neighborhoods where they are more likely to find work.
The job is changing as growth slows at Instacart. Hundreds of thousands of workers joined the grocery-delivery company during the pandemic, drawn to flexible hours, ample work and good pay. Some shoppers say they are looking for different gigs, posing a challenge for Instacart, which relies on them to deliver groceries.
Lisa Kochersperger, who has shopped for Instacart since 2017, said her waits are getting longer and fewer orders are coming into the app that she and other Instacart shoppers use to fulfill customers’ shopping lists. Those orders that do appear have become harder to fill since products are often out of stock, she said, and customers often don’t respond quickly on possible substitutions.
“I used to see big batches. I never see that now,” Ms. Kochersperger said, referring to the size of customers’ incoming Instacart orders. In recent months, she said, she has been making more money delivering orders for Amazon.com Inc.
Instacart said it is committed to supporting shoppers and is continuing to update its platform. The privately held company said it has made substantial improvements to its shopping and payment systems in recent months and will add more features over the next few months, using feedback from shoppers via surveys and focus groups.
Instacart, the biggest grocery-delivery company by sales, helped people like Ms. Kochersperger navigate the pandemic when consumers avoided making trips to supermarkets. Shoppers, in turn, helped Instacart achieve tremendous growth, its sales rocketing 330% from 2019 to 2020, according to research firm 1010data Services LLC, and pushing the company’s valuation to roughly $39 billion.
Instacart’s sales growth slowed to 15% in 2021, according to 1010data, while rivals like DoorDash Inc. have gained market share, according to research firm YipitData. Some supermarket companies are trying to coax more consumers back into their stores, where retailers don’t have to pay fees to delivery app companies. Instacart cut its valuation to $24 billion in March.
Instacart shoppers are independent contractors who sign up to fulfill online orders when they can, rather than work a set number of hours. Since the start of the pandemic, Instacart has tripled its number of shoppers to about 600,000—the company’s highest ever—to meet escalating demand, paying referral bonuses as high as $1,000 in some areas of the U.S.
Instacart said order volume is growing, though sizes are lower partly because people are going out more. In recent months, it introduced a 40-cent gas surcharge to each order, and upgraded its pay system to allow shoppers to cash out tips in two hours, versus 24 hours before. Instacart recently said it will cover up to $10 if a customer removes an initially offered tip without reporting issues, a practice known as tip baiting. Instacart is also rolling out a new feature that gives workers the option to take multiple orders at once, and add another batch while shopping. It began offering phone support to help address issues for shoppers.
Those efforts aim to hang on to shoppers like Tony Hoang, who quit his e-commerce job in the summer of 2020 and began shopping for Instacart. He said he initially earned $30 to $40 an hour and worked about 20 hours a week, bumping that up to 30 to 40 hours a week after he was vaccinated against Covid-19. Mr. Hoang and other shoppers get paid per batch by Instacart and a tip by customers, typically a percentage of the total order. Shoppers keep 100% of the tip.
Last year, Mr. Hoang said he began noticing fewer available orders on Instacart and that the size of each batch was shrinking. He said his tips and payments from Instacart declined, too. When his income took a hit, Mr. Hoang said he started filling orders for DoorDash as well as Instacart.
To retain shoppers, Instacart offers cash promotions based on demand, region and when they last filled an order for Instacart. PHOTO: MICHAEL LOCCISANO/GETTY IMAGES
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“Now, my majority is DoorDash,” Mr. Hoang said, adding that he finds DoorDash orders more consistent than Instacart. Today, he said, he makes about $25 an hour from Instacart, representing about one-third of his income. Mr. Hoang said he plans to keep shopping for Instacart so he isn’t reliant on a single gig job and can choose what pays more between the two companies.
A DoorDash spokeswoman said that having restaurants, supermarkets and other stores on the company’s platform gives workers more avenues to earn money.
Workers who can quickly fill orders help delivery companies such as Instacart make money and retain more customers, said Noor Abdel-Samed, a managing director at L.E.K. Consulting LLC who previously led e-commerce at BJ’s Wholesale Club Holdings Inc. Orders that take a long time to fill or have many substitute items can cost delivery companies customers, he said.
To retain shoppers, Instacart offers cash promotions based on demand, region and when they last filled an order for Instacart. It also reaches out to workers who signed up but never completed a batch. The company late last year introduced safety features including alerts and emergency assistance.
Abigail Nordstrom said she started shopping for Instacart in December to bring in extra income as she finishes up school in Wisconsin. She said she takes orders mostly in the evening and weekends, working about 12 to 14 hours a week, and skips orders with no or low tip.
“There are not a lot of jobs where you can, right off the gate, make $20 to $30 on your own time,” she said.
Write to Jaewon Kang at jaewon.kang@wsj.com
For Instacart Shoppers, the Job Is Getting Harder, Slower - WSJ |
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| From: Glenn Petersen | 5/5/2022 6:23:22 PM | | | | | | DoorDash rises after reporting 35% sales growth
PUBLISHED THU, MAY 5 20224:39 PM EDT
Kif Leswing @KIFLESWING
CNBC.com
KEY POINTS
-- DoorDash stock rose in extended trading after the company reported 35% revenue growth in the first quarter, suggesting that the company’s core business of delivering takeout food can still grow even after pandemic-driven highs.
DoorDash stock rose over 10% in extended trading after the company reported 35% revenue growth in the first quarter, suggesting that the company’s core business of delivering takeout food can still grow even after pandemic-driven highs.
However, the stock was whacked during regular session trading on Thursday, dropping over 10% during a bad day for markets in general.
Here’s how Doordash did versus Refinitiv consensus estimates:
Loss per share: $0.48 loss per share versus $0.41 loss per share expected
Revenue: $1.46 billion versus $1.38 billion estimated
DoorDash said the total number of orders it delivered during the quarter rose 23% to 404 million and that it added the most new customers to its service since the first quarter of 2021, which was during a significant wave of Covid infections in the United States.
However, DoorDash reported a significantly slower rate of revenue growth than it did in the same quarter in 2021, when net sales nearly tripled.
DoorDash said that its EBITDA, which excludes certain costs such as its legal fights over worker classification and taxes, rose to $54 million from $43 million in the 2021 March quarter.
In the current quarter, DoorDash expects EBITDA between $0 and $100 million.
The company said in a letter to investors that DoorDash is taking market share in the food delivery market in the United States, and that it plans to spend the cash created from food deliveries to move into other categories, including groceries, alcohol, and retail delivery.
The company also said that it paid fewer incentives and promotions to attract delivery workers compared to the first quarter of 2021.
DoorDash (DASH) earnings Q1 2022 (cnbc.com) |
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| From: Glenn Petersen | 5/6/2022 1:48:06 PM | | | | | | Instacart Searches for a Direction as Its Pandemic Boom Fades
New York Times
April 29, 2022
SAN FRANCISCO — Last summer, Instacart had a rough reality check. After a year of explosive, pandemic-driven growth for its grocery delivery business, people were returning to grocery stores. Sales slowed. New customers were harder to find. It could have been the kiss of death for a start-up that expected to grow very fast.
So Apoorva Mehta, Instacart’s co-founder and chief executive, asked Uber and DoorDash, two top competitors, if they were interested in acquiring or partnering with his company, said eight people with knowledge of the talks. Nothing came of the discussions, and in early July Mr. Mehta said he would leave the top job at his company but stay on as chairman.
The tumultuous summer set the stage for Instacart’s current uncertainty as it tries to avoid becoming another pandemic boom company that has fizzled, like Peloton or Zoom. Mr. Mehta’s replacement, Fidji Simo, a member of Instacart’s board and a former executive at Facebook, now has to lead the company against competition that has become tougher since the pandemic started. She also has to manage skeptical investors who have been waiting at least four years for Instacart to go public.
When exactly that will happen became murkier last month when, in a rare move, Instacart said it was slashing its valuation by 40 percent to $24 billion, citing the “market turbulence” that has roiled technology companies. In addition, top executives have left, including two presidents, one of whom resigned after just three months.
Instacart faces tougher competition from its gig economy peers, as well as from new instant delivery start-ups like Gopuff and grocery chains’ own online services. Revenue was still growing last year, but not nearly as fast as it did in 2020. Sales growth also slowed sharply, to 15 percent last year from 330 percent in 2020, according to 1010data, a market research firm, while the average size of each order shrank, the company said.
In a recent interview, Ms. Simo said she had a plan to tackle those challenges. She has a new vision for the business that includes selling software to grocers and selling more ads inside the app, where people place their orders.
Ms. Simo attributed the executive departures to people who perhaps didn’t want to stay at a company that no longer felt like a little start-up. Instacart’s growth was still “stupendous,” she added, though the company would not reveal exact numbers.
“Grocery delivery, generally, is a service that people love,” Ms. Simo said. “It adds real value to people’s families, and so I believe that that is very much here to stay.”
Instacart, which was founded in 2012, has struggled to show that its business model works and that it is compatible with the historically thin profit margins of the grocery business.
The company allows people to order groceries from its partnering stores through its app, then dispatches freelance shoppers to gather and deliver them, charging fees to customers and the grocers. It pays its gig workers by the job and treats them as independent contractors — a model that has led to labor fights over worker conditions.
In 2020, the San Francisco company found success in the pandemic. Revenue hit $1.5 billion, and while Instacart was not profitable by normal accounting standards, it began generating more cash than it was burning, a person familiar with the company’s finances said. The company said order volume jumped as much as 500 percent. Instacart raked in more than $1 billion in venture funding at a valuation of $39 billion, up from $7.9 billion before the pandemic.
By late spring of 2021, as the country emerged from lockdowns, that momentum had faded. Instacart’s sales in the second quarter of the year fell sharply. Plans to go public that year looked less certain.
Mr. Mehta’s attempt to sell Instacart was a long shot. He approached Dara Khosrowshahi, the chief executive of Uber, about a partnership. That fell through because Uber had recently acquired a similar delivery start-up called Cornershop. The companies also talked about the possibility of Uber acquiring Instacart, which would have valued Instacart between $35 billion and $42 billion. But that also fell through, said four people familiar with the conversations who were not authorized to discuss them.
M. Mehta also called Tony Xu, the chief executive of DoorDash, to ask if the food delivery service would want to acquire Instacart, five people said.
Mr. Mehta told each company that he was talking to one of its biggest competitors, so it had to act fast. But the discussions did not get far. The other companies had concerns about the price and antitrust scrutiny. Instacart declined to comment on deal talks, which were previously reported by The Information.
Around that time, there were tense discussions between Mr. Mehta and a group of board members led by Michael Moritz, an investor from Sequoia Capital, said four people with knowledge of the situation. The talks with DoorDash and Uber were part of those discussions, some of those people said. (Still, Instacart and Mr. Mehta have said his departure was a voluntary move.)
Before Ms. Simo was named chief executive in July, there was a brief discussion about making her and Mr. Mehta co-chief executives, three people with knowledge of the situation said. That idea was quickly abandoned, and Mr. Mehta became chairman. (The chief executive of The New York Times, Meredith Kopit Levien, joined Instacart’s board of directors in October 2021.)
Carolyn Everson, a former Facebook executive who became Instacart’s president in September, left the company after just three months — the highest-profile departure from the company, which also lost its chief revenue officer as well as the person who was president before Ms. Everson. Ms. Everson was not happy because she ended up spending most of her time working on the company’s relationships with grocery executives, a person with knowledge of the situation said.
Instacart’s business has continued to grow through the management turmoil, hitting $1.8 billion in revenue last year, a person familiar with the business said. But that was far from the quadrupling growth of 2020.
Grocery industry experts and some inside Instacart have floated the idea that the company should cut out grocers by opening its own warehouses of goods, which could be more lucrative. But Ms. Simo has steadfastly opposed the move. Instead, she has tightened Instacart’s relationships with grocers, including Kroger, Publix, Wegmans and Costco.
Instacart’s next act hinges on Instacart Platform, a set of new software and advertising tools the company announced in March, with an aim of becoming more of a technology provider to grocery companies. With tools like “Carrot Ads” and “Carrot Insights,” Instacart said it would bring its own advertising capabilities and analytics to grocers’ websites. The company is also introducing fulfillment centers stocked by its grocery store partners to help it deliver products in 15 minutes.
But after Instacart Platform was announced, grocery retailers were underwhelmed and confused by how it was different from what Instacart already provided, said seven grocery industry executives and consultants, some of whom asked to speak anonymously to avoid damaging their relationships with Instacart.
Burt Flickinger III, a longtime industry consultant, described the announcement as something “grown in a hothouse at Harvard or Stanford that really had no common-sense, commercial application for the common shopper or retailer.”
Retailers have viewed Instacart as a helpful introduction to online delivery but not a necessity, the grocery industry people said. Grocers must pay Instacart fees to be part of the platform, and some think they are better off delivering to customers themselves. Large grocery companies, including Walmart and Albertsons, have also diversified beyond Instacart, offering to deliver groceries through DoorDash, Uber or their own services.
Ms. Simo said that Instacart maintained close relationships with its grocer partners and that she had not expected grocers to think the newly announced services were novel, because “I’ve been preaching that vision to them ever since I started.”
She also dismissed concerns about competition: “We have 10 years of experience building grocery products,” she said. “All of the new entrants in the space have, at best, 18 months.”
When Instacart cut its valuation in March, some employees complained that it amounted to a pay cut for employees who were offered shares at the higher price, three employees said. Some of them were given more shares as a result of the cut.
Ms. Simo has still hired aggressively, with a plan to significantly add to the 1,000 people who joined the company last year. The company now has 3,000 employees, and executives believe new employees will see more upside to being offered stock at a lower price. Still, current and former employees say some prospective candidates have been hesitant to join Instacart because of turnover and because some aren’t sure the company will turn a profit over the long term.
Every week at all-hands meetings, employees have asked Ms. Simo whether Instacart is still on track to go public, two employees said. She has responded that it is.
“Companies are challenged when they stay private too long,” said Jeremy Abelson, an investor at Irving Investors, which owns shares in Instacart. “The question is: How much meat is left on the bone?”
The post Instacart Searches for a Direction as Its Pandemic Boom Fades appeared first on New York Times.
Instacart Searches for a Direction as Its Pandemic Boom Fades – DNyuz |
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| From: Glenn Petersen | 5/12/2022 5:23:32 AM | | | | | | Online grocery delivery platform Instacart confidentially files for IPO in the U.S.
PUBLISHED WED, MAY 11 202210:28 PM EDT
UPDATED 6 HOURS AGO
Weizhen Tan @WEIZENT
CNBC.com
KEY POINTS
-- Grocery delivery platform Instacart said late Wednesday it has filed a draft registration statement with the U.S. Securities and Exchange Commission (SEC), paving the way for the firm to list its shares.
-- This development comes at a volatile time for tech stocks in the U.S. this year.
Grocery delivery platform Instacart said late Wednesday it has filed a draft registration statement with the U.S. Securities and Exchange Commission (SEC), paving the way for the firm to list its shares.
The grocery delivery company was valued at $39 billion in March 2021, when it raised $265 million. That made Instacart one of the most valuable venture-backed companies in the U.S. at that time.
However, it said in March it was slashing its valuation by almost 40% to about $24 billion, to reflect this year’s sell-off in technology stocks.
This development comes at a volatile time for tech stocks in the U.S. this year, with the Nasdaq tumbling nearly 30% from last November’s high.
For Instacart, the last few years have been a roller-coaster. Faced with a challenging business model heading into 2020, the company got a major boost during the Covid-19 pandemic as many consumers cut trips to the supermarket and turned to online grocery orders.
But twin concerns of accelerating inflation and projections for higher interest rates sent risky assets into a tailspin starting in November.
Instacart, however, has said its business outlook remained strong.
The company is trying to expand beyond its core marketplace, announcing this week a software suite to sell to supermarkets, along with a fulfillment service called Carrot Warehouses, which is intended to help grocers offer 15-minute delivery.
— CNBC’s Annie Palmer contributed to this report.
Online grocery delivery platform Instacart confidentially files for IPO in the U.S. (cnbc.com) |
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| To: Glenn Petersen who wrote (866) | 5/13/2022 10:52:00 PM | | From: Sun Tzu | | | | >> Revenue: $1.46 billion versus $1.38 billion estimated
>> DoorDash said that its EBITDA, which excludes certain costs such as its legal fights over worker classification and taxes, rose to $54 million from $43 million in the 2021 March quarter.
What a truly low margin business...but they are at least CF+ |
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| To: Glenn Petersen who wrote (868) | 5/13/2022 10:54:06 PM | | From: Sun Tzu | | | | >> Online grocery delivery platform Instacart confidentially files for IPO in the U.S.
I believe the proper word is "desperately" rather than "confidently".
It'll be interesting to see what kind of valuations they can get. My guess is it will be below the last round of private equity funding. |
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| From: Glenn Petersen | 5/26/2022 7:25:37 PM | | | | | | The Airbnb of Wall Street Wants to Free Up Trapped Bank Capital
Capitolis, backed by JPMorgan and Silicon Valley, is using investor money to help banks do more lending and trading
By David Benoit
Photographs by Victor Llorente
The Wall Street Journal
May 23, 2022 7:00 am ET
Wall Street banks are running out of room to keep the markets humming. The sharing economy could hold the solution.
That is the idea behind Capitolis Inc., a startup backed by some of the biggest names on Wall Street and Silicon Valley. In the same way Airbnb turned vacant homes into vacation rentals, Capitolis is turning the unused capital of investing giants like BlackRock Inc. into assets that banks can use to facilitate all kinds of transactions.
Banks play a vital role in the markets, serving as the middleman between buyers and sellers of securities and lending money to businesses. Regulators require them to set aside capital for each of those transactions, creating a buffer meant to shield depositors from losses.
New regulations imposed after the 2008 financial crisis forced banks to grow those capital buffers. Banks took it even further, locking up trillions of dollars that once flowed through the financial system. They became safer but less able to take in all comers, especially in times of market chaos.
Enter Capitolis: It matches investments from asset managers, pension funds and money-market funds with the transactions banks facilitate and underwrite. The firm has raised some $60 billion from investors for the banks to use in the past two years and reduced trillions of dollars in trading positions, said Gil Mandelzis, its founder and chief executive.
JPMorgan Chase & Co. and Citigroup Inc., two of the biggest players in global markets, use Capitolis to free up their traders to work with more clients. The two banks are also Capitolis investors, alongside venture-capital firms Sequoia Capital and Andreessen Horowitz. A March funding round valued the startup at $1.6 billion.
Gil Mandelzis was a bar owner in Israel and a banker before launching another Wall Street startup he eventually sold.
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Mr. Mandelzis’s new idea resembles an old one: Banks have long sliced up and sold their big corporate loans to other banks and investors. Capitolis figured out how to use this syndication concept to turn all kinds of banking products—foreign-exchange swaps and lines of credit, to name a few—into a kind of fixed-income security or loan they can sell to investors.
For example, Citigroup owns a basket of equities tied to its clients’ trades. Capitolis, using investor money, essentially mirrors Citigroup’s trades—entering into a derivative contract to take the risk off the bank’s balance sheet. Citigroup is freed up to do more trading, and the investors get a fixed payout.
Capitolis’s plan to outsource banks’ capital needs, while still in its infancy, has the potential to reshape their role in the market and the broader economy. Divorcing the capital required for transactions from the process of executing them could allow banks to serve more customers—businesses and consumers alike—without taking on so much risk that they could blow up the financial system. The goal, the company’s founders say, is a market better able to absorb big spikes in trading volume and loan demand.
“When it’s all over, we will have uncoupled capital from the underwriting equation,” said Mr. Mandelzis. “We’re going to look back and wonder how they used to do it when it was bundled.”
Not everyone agrees the banks have retrenched much or that it is a problem if they do. A host of market players—high-frequency traders and nonbank lenders among them—have sprung up to take on the business banks now turn away.
But there is evidence that banks’ capital-hoarding is exacerbating market disruptions. That happened in September 2019, when a cash shortfall caused borrowing costs to spike in a key short-term lending market. It happened again in March 2020, when banks were unable to steady the suddenly volatile market for supersafe U.S. government bonds. Both times, the Federal Reserve had to intervene.
“Before 2008, no one was thinking about the balance sheet,” said Tom Glocer, Capitolis’s co-founder and chairman. “Now it drives all the decisions.”
Capitolis was born on the tennis court, where Mr. Mandelzis—a one-time bar owner in his native Israel who had become a banker and entrepreneur—had a regular game with Mr. Glocer, a Morgan Stanley director and former CEO of Thomson Reuters.
It was on the tennis court that Mr. Mandelzis hammered out the idea for Capitolis with his partner.
Between serves, the two men discussed the growing disconnect in finance. Investors and asset managers were flush with cash and looking for new ways to invest it. Banks were turning away potential customers for lack of capital.
Mr. Mandelzis was one of those customers. At the time, he was the CEO of EBS BrokerTec, a fixed-income trading platform whose parent company had bought his first startup. BrokerTec needed a line of credit to cover unexpected margin calls in rough market conditions.
Banks used to hand out these lines of credit to businesses like the lollipops they give to retail customers. But after the financial crisis, regulators made banks hold capital against even undrawn credit lines. Banks, in turn, reserved these once ubiquitous perks for the biggest or most lucrative customers. Everyone else had to pay big or go without.
Mr. Mandelzis said he told BrokerTec’s board a credit line would be expensive but worth it; after all, a credit line could mean the difference of life or death in a crisis. He went to 15 banks. No one would even give him a quote.
An audiobook about the platform economy that birthed Uber and Airbnb provided the inspiration: What if, he asked Mr. Glocer, the same thing was done with capital markets? Along with a third partner, Igor Teleshevsky, they launched Capitolis in 2017.
State Street Corp. was an early customer. The custody bank called on Capitolis in 2018, worried the Fed’s stress test was going to force it to hold more capital against its growing foreign-exchange trading operation, said Tobias Krause, who oversees risk and financial resources for State Street’s markets division. Capitolis found investors to take over the risk after the trades, helping the unit double its trading volume in the past five years.
State Street invested in Capitolis, and Mr. Krause joined its board.
“It helps us free up capital which we can deploy elsewhere,” he said.
“We’re going to look back and wonder how they used to do it,” Mr. Mandelzis said.
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Write to David Benoit at David.Benoit@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Appeared in the May 24, 2022, print edition as 'Startup Is Airbnb of Wall Street.'
The Airbnb of Wall Street Wants to Free Up Trapped Bank Capital - WSJ |
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