In the vast amount of information provided in Instacart’s recent IPO filing, buried on page 280, a single paragraph about business ties created quite a stir between two seemingly unrelated companies. The revelation that Instacart had made significant payments to Snowflake, a cloud-based data warehousing services provider, led to speculation about the state of their relationship. What initially appeared to be a troubling decline in spending on Snowflake turned into a heated debate between Snowflake and its rival Databricks. The controversy highlighted an ongoing rivalry in the technology sector and left investors questioning the true nature of Instacart’s business ties.
Instacart’s IPO filing disclosed that the company had made payments to Snowflake amounting to $13 million in 2020, $28 million in 2021, and $51 million in 2022. However, the figures for 2023 seemed to indicate a drastic drop, with Instacart stating that they anticipated paying only $15 million for the full year. The apparent decline of 71% in payments raised concerns and sparked a series of social media posts by employees of Databricks. They claimed that Instacart was shifting its workloads to Databricks infrastructure, causing a loss of business for Snowflake. Snowflake pushed back, asserting that the numbers were taken out of context and accusing Databricks of spinning a false narrative.
In the midst of the controversy, both Instacart and Databricks took actions that further fueled speculation. Instacart had previously published a blog post describing their migration to Databricks’ Lakehouse technology and the cost savings that ensued. However, shortly after the IPO filing, the blog post mysteriously disappeared, leaving visitors with a “404 errorverse” message. Similarly, Databricks removed a case study detailing Instacart’s use of their technology. The situation became even more convoluted with the deletion of numerous posts on platforms like Reddit, LinkedIn, and Twitter. The silence from all parties involved only intensified the frenzy surrounding the issue.
The underlying rivalry between Snowflake and Databricks, brought to light due to Frank Slootman’s position on Instacart’s board, added another layer of complexity to the controversy. As two companies engaged in the competitive sphere of cloud, data, and artificial intelligence, conflicts and tensions were not uncommon. The very fact that users on Reddit had previously expressed their desire for the companies to stop fighting on social media speaks volumes about the intensity of this rivalry. With Snowflake’s massive $3 billion IPO and a market cap exceeding $50 billion, and Databricks’ valuation reaching $38 billion and potentially even $43 billion, the stakes were high for both companies.
While the spending decline on Snowflake in 2023 initially appeared significant, digging deeper into Instacart’s IPO filing revealed a different perspective. The footnote under “Related Party Transactions” clarified that the actual usage of Snowflake’s services by Instacart revealed a more nuanced picture. Operating expenses related to Snowflake were $28 million in 2021, $28 million in 2022, and $11 million in the first half of 2023. While there was still a drop in spending for the current year, when viewed on an annualized basis, it equated to around a 21% decrease rather than the alarming 71%. This crucial piece of information shed new light on the situation.
Amidst the growing online discourse, Snowflake felt compelled to set the record straight. They published a blog post titled “Snowflake and Instacart: The Facts,” where they emphasized that the scope and trajectory of Instacart’s use of Snowflake had been misrepresented on social media. The post refrained from mentioning Databricks, a consistent pattern in Snowflake’s financial filings which did not identify Databricks as a direct competitor. Instead, Snowflake focused on their collaboration with Instacart to optimize efficiency and highlighted the extensive usage of their technology across various teams within Instacart. They refuted claims of a significant decline in spending, attributing any decrease to factors other than the loss of business to Databricks.
The controversy surrounding Instacart’s disclosure and the subsequent response from Snowflake and Databricks demonstrated the challenges and risks associated with public filings and the IPO process. However, Instacart and Snowflake might have an opportunity to address the matter and provide greater clarity in subsequent prospectus updates. As Instacart seeks to unlock the frozen tech IPO market, it becomes even more crucial for them to ensure transparency and alleviate concerns among potential investors. The true nature of their business ties with Snowflake, as well as the impact of Databricks’ presence, must be communicated effectively to restore confidence in Instacart’s trajectory.
In the world of technology, where competition and innovation intersect, controversies like the one surrounding Instacart and its disclosure of business ties can quickly escalate. As companies jostle for market share and position themselves as industry leaders, the pressure to maintain appearances and address concerns is paramount. Only time will tell if Instacart’s IPO journey will be marred by this incident or if they can navigate the storm and emerge stronger.
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