The other day, I was at a Mets game. They won. It didn’t matter. What did matter — at least for this story — was the wave. That stand-up, sit-down thing people do at meaningless games. How-could-we-spend-this-much-to-be-this-bad Mets fans waved around Citi Field (née Shea) seven times. Talk about commitment for a bad product. Get one wave going. Sure. Two, nice. Four or five, impressive. More than that and you’ve built a cult brand. This group of fans waved themselves Nike or Apple.

— — —


When you start in finance, it’s a glorified grunt job. As a junior trader, I wrote down opening prices. As the lowest man on an impressive totem pole in a venture fund, I did due diligence. Venture funds invest in ideas to help them become products. Due diligence isn’t glamorous, it’s grounding. If a company said they had a rabid custom base — and, they all say they do — I had to confirm that.

The fundamentals never leave you. You know where to look for numbers, you know to write them down, you know to look for patterns, and you tend to know what you think they mean. As you get older, you pass along these critical business skills to the next generation. When they stop listening, you write them down in blog form.

The other day a company called Instacart went public. That’s called an IPO (for initial public offering). It’s when new public investors give money to old crusty venture folks so the latter can take their balls and go home. The public markets have been skittish for a while. So, venture types have had to play with their balls longer than they’d like. That makes this CART deal a big deal. If it does well, more companies will IPO (v.). I love when you can use a nouns as verbs.

Headlines delivered the goods about the good news. Motley Fool: Five reasons to buy the CART IPO. The Transcript: CART’s IPO surges as the grocery deliver company goes from the super market to the stock market (that illiteration surely comes from a wanna be ad copy writer). The Guardian: Instacart jumps 43% in grocery delivery business’s Nasdaq debut.

Like nuts in a forested area, numbers are everywhere. Squirrels sense winter and start to hunt for nuts. As a former analyst, looking for numbers is instinct. So I count the number of waves at a Mets game. Seven. And I summize that fans are equal parts bored and drunk.

When CART went public, my squirrel-y senses kicked in.



As you know, companies *LOVE* to dress up what they do. To understand a business, dispense with parables. This ain’t the book of Matthew. We’re not hiding a light under a bushel. Right, Matty?

“Instacart is powering the future of grocery through technology. We partner with retailers to help them successfully navigate the digital transformation of their businesses.”

Ignore the “… is powering…” best-case present tense (ugh), Instacart, “Delivers groceries.”

Ignore too happy words like, “Love.” It shows up eight times in CART’s offering document to make you believe people love this (I use it 11 times in this story). Often in places like this, “…enrich our customers’ relationship with food and how they engage with the retailers and brands they love.” Me? I don’t toss around the L-word when it comes to grocery store items. I mean, sure I like Yorkshire Gold Tea… but I don’t like-like it.

All that stuff is the norm. Three things in this story help you become a VC analyst.

Thing one — the guy who started CART left the day it IPO’ed. That’s a bad sign. Apoorva Mehta went to my alma mater, Waterloo. Guys like him and my old housemate, Mike, are why I’m not a notable alum. Mehta did logistics for Amazon. He burned through 20 ideas until, he copied Webvan. I mean why create a new idea when it’s safer (read that as more likely to get funding) when you copy one?

And he raised a lot of money. Investors showered Mehta with money to fund Instacart’s losses. We know it’s fine to lose money if investors love your brand. Investors loved CART enough to value it at $39b in March 2021. Today’s CART is worth 70% less. Yeah, you read that right. A lot of people have lost a lot of money betting on delivery businesses. And, betting on *this* delivery business.

Thing two — ordering, shopping, and delivering is all window dressing. That’s how they foment investor love. Grocery businesses make next-to-no money. You’re not going to pile up profits and keep investors happy delivering food stuffs.

Don’t be fooled, CART plans to be an ad business. Ads are already a third of CART’s revenue. And, it’s their only profitable product line.

Which leads to thing three. The big pivot. Just like Dunkin’ ditched donuts to become, a “beverage-led company,” CART pays lip service to their shoppers. Those are the 600,000 people who shop for and deliver groceries to CART’s customers.

CART claims to love their shoppers. As a matter of fact, when they talk about shoppers they start with two words. “Earnings potential.” To date, the real business of CART has been to give their investor money and customer dollars to shoppers. Don’t worry, there’s always more. This week alone, a whole new crop of people gave CART $600 million.

To date, CART has paid gig shoppers $15b. Big numbers are supposed to sound big. So, break it down. That’s $25k per shopper over a decade. Or, $2,500 per year per shopper. Those shoppers got CART customers. Customers got CART more investor money. That got them Goldman Sachs to take CART public.

That all ends now. How do I know? Due diligence. I looked at App Store reviews. Instacart has 3.3 million reviews on the App Store. It has a 4.8 rating. Sounds good, right?

Not so fast. “Great service! Very Fast!!!!” is a five-star rating from 2019. Early users always love a new service. That’s when things are small, every customer matters, and the CEO sticks around to deliver white-glove service. In Mets terms, wave one.

As things scale, they peter out. That’s why I always look at recent reviews. Most of the recent ones are from shoppers; not customers. They’re all lousy. Payouts are way down. Algos have changed. The business of shopping is done. CART doesn’t need shoppers any more. The gravy train gig is over.

CART’s millions of customers will see ads. The founder left. The shoppers are being ditched. It’s the eighth wave. A few yahoos in section 531 are trying to keep it going. They won’t. Mets fans’ butts are back in their seats about to sing Piano Man by Billy Joel. I think the word you’re looking for is grifting.

CART stock has dropped 30% since it opening-day high. Public market investors and analysts worry about the growth of its delivery business. VC’s don’t worry about companies once they’re public. The public people are all still looking at the window dressing. In eighteen months, the public story will be about ads. That’s why their new CEO came from Meta and not Uber. Eighteen months after that, the analysts will focus on ad revenue. And, this will be a media story. It will scale OK but not great. Because there are no shoppers being overpaid to shop for the customers to see the ads. But, the retail ad category that Amazon started in 2013 will be in its middle wave era. So, CART will sell to someone who wants more retail ads. Like Meta.

But you know all this already. Because you learned to become a venture fund analyst in six minutes. The eleventh time is the charm. Do you *love* me now?

Charles Benaiah is the CEO of Watzan, a techy company for medical media. When he’s not running a media company, he reads about media, thinks about it, pull out what’s left of his hair dealing with it, and, then, he writes about it at Substack/unCharles.