Instacart's long-awaited IPO prospectus caused an uproar last week, to the grocery-delivery company's surprise. The filing detailed the money being allocated to Snowflake and hinted at a sharp decrease in 2023. This sparked confusion, which Snowflake addressed in a blog post this week, clarifying that its technology is utilized by every Instacart team.
Buried in Instacart's IPO filing last week was a paragraph that sparked a dispute between two companies not associated with grocery delivery. Frank Slootman, CEO of Snowflake and board member of Instacart, led to the disclosure of Instacart's business ties to the cloud-based data warehousing service. The spending numbers appeared to show a sharp decline in Instacart's payments to Snowflake; however, this was clarified by a footnote later in the prospectus. As a result of the filing, employees of Snowflake's competitor, Databricks, took to social media to suggest that the decrease in Snowflake's payments was due to Instacart's move to their own infrastructure. Snowflake's staff promptly refuted this, accusing Databricks of spinning the narrative to their favor. Instacart removed a blog post relating to the cost savings they had seen, and Databricks did the same with a case study. Representatives from Instacart, Snowflake, and Databricks refused to comment. This conflict between the two companies has been ongoing for some time, with one Reddit user writing, "Databricks and Snowflake: Stop fighting on social". The battle between the two over cloud, data, and AI, might make one wonder if this is the "pro-wrestling of data engineering".
Snowflake made history in 2020 when it went public and raised over $3 billion, the biggest U.S. IPO for a software business ever. The company has a market capitalization of more than $50 billion, even after last year's market crash. Databricks, an organization that is still not public, is one of the most highly valued venture-backed firms, with investors valuing it at $38 billion in 2021. Bloomberg reported last week that talks were underway to raise more funding, which could value the business at $43 billion. In order to bolster its AI capabilities, Snowflake purchased Neeva, an AI search engine, for $185 million, while Databricks spent $1.3 billion on the generative AI organization MosaicML.
That brings us back to Instacart. While Databricks is receiving business from the grocery-delivery service, the footnote in Instacart's S-1 stating the association with Snowflake displays that the decrease in expenditure in 2023 is not the primary emphasis. Instead, regarding to how Instacart accounts for operational outlays - its genuine utilisation of Snowflake - that quantity was $28 million in 2021, $28 million 2022, and then $11 million in the first half of 2023. That still pertains to a fall this year, but on an annual basis it would be close to 21% instead of 71%.
To generate further disarray, the footnote under "Related Party Transactions" did not name Slootman or Snowflake, alluding only to a "an executive officer of a software vendor." As online discussion increased, Snowflake wanted to make the picture more precise, from its standpoint. On Wednesday, the company put out a four-paragraph blog post named, "Snowflake and Instacart: The Facts."
"In these previous few days, the extent and direction of Instacart's application of Snowflake has been misrepresented by a few on social media," the post begins. Nowhere is Databricks pointed out in the post, a continuing topic for Snowflake, which does not cite Databricks as a competitor in its financial filings. Snowflake continued by stating that it was working with Instacart to "enhance for effectiveness," a phrase that hints at doing more with less, and that its technology is "widely used by nearly each and every team within Instacart, inclusive of the catalog team, machine learning, advertisements, shoppers, suppliers, patrons, and logistics organisations."
The post then highlights the usage stats from the filing footnote and claims that, "In some social media posts, payment tribunals have been inaccurately amalgamated with real usage to propose a large cutback in spending - this is not the case." To summarise, if there is a decrease in spending, it is not due to us losing business to an unnamed organisation.
The good news for Snowflake is that the IPO process requires multiple prospectus alterations. Instacart, which is aiming to open up a tech IPO market that has been mostly dormant for 20 months, will get the opportunity to explain the issue to investors very soon. — CNBC's Jonathan Vanian and Jordan Novet helped with this report. WATCH: Instacart files for IPO under 'CART' on Nasdaq
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