Ibotta’s expansion into enterprise should set it up for a successful IPO

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Ibotta confidently submitted an S-1 filing pinch nan SEC connected March 22 pinch nan intent to database its shares connected nan New York Stock Exchange. The 13-year-old cash-back startup looks to make its nationalist debut aft turning profitable and signaling awesome gross maturation successful 2023.

The institution reported $320 cardinal successful gross successful 2023, up 52% from 2022 erstwhile it produced $210 cardinal successful revenue. Ibotta’s gross profits grew 68% from 2022, $164.5 million, to 2023, $276 million.

The Denver-based institution started arsenic an app for consumers to get rate backmost connected purchases done Ibotta’s marque partnerships. The institution has since expanded into building back-end package for reward programs for endeavor customers including Walmart, Shell and Exxon.

Ibotta’s move into B2B2C — trading to companies that past usage those products to waste to consumers — is apt a cardinal logic why investors whitethorn beryllium willing successful this IPO, says Nicholas Smith, a elder equity investigation expert astatine Renaissance Capital, a investigation patient focused connected pre-IPO and IPO-focused ETFs. Selling to companies besides apt played a large domiciled successful Ibotta’s caller financial gains.

“The truth that [Ibotta] has become, pinch Walmart, much of an endeavor package play, fundamentally being nan back-end for its Walmart rate rewards program, that lends much credence to it,” Smith said. “[Compared to] ‘Hey we person this app and we request to turn users and proceed down that avenue.'”

The institution started building its endeavor program, known arsenic Ibotta capacity web (IPN), backmost successful 2020. Its business pinch Walmart besides started successful 2020 but expanded its IPN business pinch nan unit elephantine successful 2022. According to nan S-1, this business plays a large domiciled successful Ibotta’s gross boost.

“Our gross maturation importantly accelerated pinch nan summation of caller publishers to nan IPN,” according to nan S-1. “Most recently, nan rollout of our offers connected nan integer spot of Walmart has attracted larger audiences, and successful turn, resulted successful greater walk by CPG brands and a greater number of redeemed offers. These developments person accrued our scale, growth, and profitability.”

Putting nan Ibotta remark into perspective, from 2022 to 2023 its direct-to-consumer business grew by 19%, a respectable amount. The company’s endeavor business (“third-party publishers revenue” successful its filing), by contrast, grew 711% complete nan aforesaid timeframe, scaling from conscionable nether $10 cardinal to conscionable complete $80 cardinal successful a azygous year. That growth, and a resulting betterment successful its gross margins — from 78% successful 2022 to astir 86% successful 2023 — helped nan institution flip from persistent nett losses to accordant profitability.

Quarterly information from Ibotta underscores really precocious — and quickly — it became a profitable company. From Q1 2022 done Q1 2023, nan institution posted regular, decreasing nett losses. In nan first 4th of 2022 it had antagonistic nett income of $22.9 million, which declined to $4.3 cardinal 1 twelvemonth later. Then, starting successful nan 2nd 4th of 2023, it began to make regular profits, which grew to $18.6 cardinal by nan past 4th of past year.

Rapid gross growth, an expanding secondary gross line, improving gross value and GAAP profits each came together for Ibotta to database its shares. If it stumbles moreover pinch those backing characteristics, late-stage venture-backed startups could position its debut arsenic a cautionary tale.

But location is logic to expect that its maturation will continue. The institution has signed IPN partnerships pinch Family Dollar, Shell, Exxon and Kroger, implying wide firm demand, moreover if nan grade of those relationships is little clear compared to Ibotta’s business pinch Walmart. The S-1 did not explain really agelong Ibotta’s business pinch Walmart is contracted for, but it did mention that if nan retailer does extremity nan relationship, it would person a worldly effect connected Ibotta’s business.

The biggest mobility that remains is really Ibotta will value its shares. While nan institution apt chose to record its intent now — it primitively hired bankers backmost successful November — to thrust nan caller activity of successful IPOs from Astera Labs and Reddit, Ibotta is very different from some of those companies.

Ibotta has seen very little, if any, secondary activity according to secondary information platforms, which makes it difficult to gauge really investors are presently valuing nan startup. Smith said nan pricing could spell a fewer ways considering nan institution has aggregate gross streams that traditionally get weighted rather differently.

“It’s difficult because location is nary cleanable comp,” Smith said. “It’s a small spot of an adtech company, possibly getting much [into] endeavor software. [If it’s] looked astatine genuinely from a tech perspective, it will astir apt spell for a precocious multiple, if it’s much benignant of adtech aliases moreover user it mightiness beryllium lower.”

Smith added that if investors peg it much arsenic an advertizing aliases trading institution that it mightiness value likewise to really Klaviyo, nan integer trading company, was priced past fall. Klaviyo priced astatine $31 a share, $1 supra its target of $30, which gave it a valuation of $9.2 billion, a hairsbreadth beneath its erstwhile superior information valuation of $9.5 billion. The institution presently has a marketplace headdress of $6.8 billion.

Ibotta has raised a small complete $90 cardinal successful task superior from costs including GGV Capital, Great Oak Ventures, and Teamworth Ventures, among others ,in summation to a slew of angel investors including Thomas Jermoluk and Jim Clark, nan co-founders of Beyond Identity. The institution was past weighted astatine $1.08 billion.