The IPO market is still frozen like a Nordic lake dotted with fishing huts, but there are signs that a thaw is now in sight.
News from Insider indicates that TripActions, a unicorn in the corporate travel and expense category, has filed confidential paperwork to go public. Per the publication, the company is targeting a Q2 2023 public debut at around a $12 billion price tag. (Bloomberg’s Katie Roof, a former TechCruncher, first reported that TripActions was eyeing an IPO).
The news warmed our hearts, as we have heartily missed S-1 filings, a particular flavor of startup news that we feasted on during the 2021 boom but were forced to learn to live without this year as falling public-market prices and lackluster returns from some prior debuts slammed shut the IPO window a few quarters back.
Mix in the fact that we are — still — expecting a late-2022 Instacart S-1 filing and perhaps even debut, we now have not merely two IPOs on our dockets but two potential decacorn public offerings. These are going to be big, noisy, large-dollar transactions that will provide valuable data concerning market appetite for tech shares generally and shed light on two important startup sectors’ respective worth. Hell yeah, we’re excited. Nothing like a little new data to fill in the gaps in our understanding of today’s market.
Today, we’re going to discuss what we hope to learn from each IPO filing and which startups will be impacted by those particular data points.
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Recall that Instacart had a huge pandemic run, growing quickly before swapping CEOs, reaccelerating growth and sticking to its IPO-timing guns.
TripActions is different. The pandemic didn’t help its business right away — in fact, it roughed it up a little. But the company shook up its model, expanding its product mix in the process, and now, with business travel coming back, is apparently satisfied with its results to the point where an IPO is in the cards.
S-1 hopes, IPO dreams
Starting with Instacart because it’s ground that we’ve trod before, we know that the company’s revenue is accelerating and that it reached terrific scale thanks to COVID-19 shifting consumer behavior closer to its product.
We also recently learned that the company is slowly trimming staff, likely to get its profit metrics in the right spot to sell stock to public-market investors; the word of the day is profit, or perhaps “efficiency instead of merely growth,” after all.
When Instacart does file, here’s our working list of things that we want to better understand about the company and its larger business area:
- What are the gross margins like on grocery delivery at scale? If Instacart can’t rip fat margins out of its delivery business, which has partnerships, history, brand and scale to its advantage — can anyone? This will help us better understand startups in similar business areas, as well as the work that DoorDash and Uber (among others) are executing inside the core Instacart remit.
- What fraction of Instacart’s revenue comes from its best-known business, versus its more nascent software and advertising work? Instacart is expanding its business lines, working to leverage its throughput of consumer grocery orders to offer advertising products and its underlying tech to power grocery chains’ online work. Are these revenues material, and, if so, are they high margin? Do they change the company’s overall profitability picture?
- Will the company lean more on adjusted or traditional profit reporting, and how do public-market investors react to that choice? And speaking of profitability more generally, does Instacart try to sell us an adjusted EBITDA picture, or does it lean on all-inclusive metrics like GAAP net income?
- What can its S-1 tell us about the state of labor? We’re curious if Instacart is handling greater inflation and other living costs by paying its delivery crew more over time; do incentives matter here as much as they do for Uber and other ride-hailing companies that also need to balance supply and demand?
Lots to chew on there — we cannot wait for this document to drop. Perhaps the Instacart S-1 will come first in early Q4, later updated to include Q3 numbers before pricing? If not, this would be more likely a 2023 transaction than something that we’ll see this year.
Turning to TripActions, we have a very different list. Here’s our rundown of things we’d like to better understand that the company may help us grok:
- How lucrative is servicing the corporate travel market? We presume that the customer is companies instead of individuals, so there’s good money to be made here. But we don’t know for sure.
- What impact has TripAction’s expansion into the corporate spend market had on its overall business results? Corporate spend — where Brex and Ramp and others compete — is a big space and supposedly rather profitable. Is that bearing out for relative latecomer TripActions?
- How competitive is TripActions’ core market, and how much recovery juice is left there? We presume that more folks doing more work travel is helping TripActions’ near-term growth story. But! Are we back to 90% of former travel levels? Or 50%?
- TripActions deals with capital — its Liquid product has a big credit line, after all — which means we’re going to want to understand the costs of, well, capital in a changing interest rate environment. We hear that money is getting more expensive. Hopefully, we can learn a bit more about the impacts thereof when TripActions files.
We could go on, but that’s the key stuff we have bouncing around in our heads. Now we merely want to fast-forward and get to the damn numbers.
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