For some time we’ve speculated that the San Francisco-based grocery delivery company Instacart would go public. We assumed this would happen once the company got its advertising engine revved up.
well, the industry learned earlier this week that Instacart has a new CEO, brought in from the outside. Fidji Simo, one of the higher-ranking executives at Facebook, will take the reigns of the fast-growing food delivery business early next month.
Facing Some Headwinds
Simo will take over at an interesting time for Instacart. The company was last valued at nearly $40 billion following an almost $700 million funding round. All in Instacart has raised $2.7 billion since its 2012 founding. Simo will leave her role at Facebook where she heads Facebook’s main social network.
She will face some headwinds as she takes the helm. Of course, that business vaulted forward in the last 18 months during the pandemic. As shoppers were hesitant to enter the local grocery store they turned to delivery platforms, notably Instacart. First, the company is seeing its revenue growth setting after an amazing boost over the past year. After Instacart’s sales quadrupled last spring, The Information is reporting that they began to slow in March of this year.
Two factors are acting as a drag on Instacart’s growth. Vaccinations and competition. Americans are getting jabbed and tossing their masks aside. As this happens, many who had others do their shopping are now going back to squeezing their own melons. The second is competition. We read recently that DoorDash has forged a deal with the grocery chain Albertson’s to provide one-hour grocery delivery across almost 2,000 stores, including the brands Safeway, Vons, and Jewel-Osco. This is as direct a shot at Instacart as we could imagine.
Signaling a New Direction
Why is this an interesting move on the part of Instacart? To us, it means that Instacart has a much more aspirational vision than its current core business of delivering groceries, which as noted, is setting down after a big pandemic-induced run.
The company has made it clear that they would be layering on an advertising play when the company hired Seth Dallaire from Amazon as CRO. At Amazon Dallaire had been the head of global advertising sales at Amazon. The last we checked, advertising was the fastest growing business inside Amazon, posting more than $20 billion in 2020 revenue.
With the addition of Simo, with her social media background, we can see that the company is pursuing a broader strategic path that marries local delivery, with advertising and a social, local networking play.
We also think the Instacart board believed that company founder Apoorva Mehta wasn’t the ideal CEO to take the company public. His core strength, after all, was in developing the logistics delivery machine that got Instacart to where it is today. By bringing in Simo and Dallaire to lead the company, Mehta is doing what great founders do. They hand the keys to experienced managers to take the company to the next place.
From Cold Email to IPO?
We presume Simo knows what she’s getting into having joined the company’s board earlier this year. The story goes that Mehta reached out to her via a cold email. Having been at Facebook for a decade, Simo played a key role in seeing the company’s advertising business grow from about $3 billion in 2011 to something that will near $100 billion in the not too distant future. She had an important hand in putting video at the center of much of the Facebook experience.
Simo shared her vision for Instacart in a recent CNBC interview. She said that she wants to build Instacart into an “incredible consumer app, an app that people want to open very many times a week to be inspired by food content, and then buy our groceries online.”
She connected her experienced at Facebook to what could happen with Instacart. “We saw the emergence of a lot of new companies built on top of Facebook ads,” she told CNBC. “And I’m seeing the same thing happening within Instacart’s business, where not only existing food companies are reaching new customers, but I see new food companies having the potential to be created.”
It doesn’t surprise us that Instacart is pursuing a much more ambitious vision of its future. One that is part food delivery and discovery, part advertising, and part social network. That is a really interesting recipe that will cause existing players to reexamine their role in the local food ecosystem.
Next up will be seeing what’s underneath the hood when the company decides the time is right to go public. We’d imagine with Simo on board in a month, that prospectus is probably not far away.