A banner for Snowflake Inc. is displayed on the Latest York Stock Exchange to have a good time the corporate’s initial public offering, Sept. 16, 2020.
Brendan McDermid | Reuters
Buried on page 280 of Instacart’s IPO filing last week was a paragraph that caused a brouhaha between two firms that don’t have anything to do with grocery delivery.
One in all Instacart’s board members is Frank Slootman, the CEO of Snowflake, a publicly traded company that helps businesses store and manage hefty workloads within the cloud. Slootman joined Instacart’s board in 2021 and, due to that relationship, the corporate has to reveal its business ties to Snowflake.
On first blush, the Instacart spending figure looks troubling for Snowflake.
Instacart said it “made payments to Snowflake” of $13 million in 2020, a number that increased to $28 million in 2021 and $51 million in 2022 for the corporate’s “cloud-based data warehousing services.” The 2023 numbers appear to point out a reversal, with Instacart saying “we anticipate we’ll pay Snowflake roughly $15 million” for the total yr.
That may be a daunting 71% drop in payments.
But Snowflake would later say that those figures don’t tell the true story, a proven fact that’s mostly backed up by a footnote even deeper within the prospectus.
Within the meantime, chaos ensued.
Employees of Snowflake rival Databricks pounced. They took to social media to spotlight the apparent decline in spending on Snowflake and to suggest that it was the results of Instacart moving workloads to Databricks infrastructure.
Snowflake staffers fired back, claiming the numbers were being taken out of context, and accused Databricks of consistently spinning the narrative that it was taking business from Snowflake.
Lots of the posts on Reddit, LinkedIn and X, the location formerly referred to as Twitter, have since been deleted.
Instacart did some deleting of its own.
In May, the corporate published a blog post titled “How Instacart Ads Modularized Data Pipelines With Lakehouse Architecture and Spark.” The post, which described software underpinning Instacart’s ads infrastructure, included discussion of a migration to Databricks’ Lakehouse technology and the fee savings that followed.
Nevertheless, that blog was taken down as questions began to swirl following the IPO filing. A reader on the lookout for the post now finally ends up on a page that claims, “You’ve got landed within the 404 errorverse.” Databricks also took down a case study detailing Instacart’s use of its technology, though its website still has presentations from earlier this yr on the subject.
Representatives from Instacart, Snowflake and Databricks declined to comment.
The controversy, which only got here to light because Slootman is on Instacart’s board, has fanned the flames of a fierce rivalry between two firms battling it out in certainly one of the most popular corners of technology, where cloud, data and artificial intelligence collide. It is a conflict that is made its method to social media loads of times up to now, a lot in order that one Reddit user wrote a post a couple of months ago, titled “Databricks and Snowflake: Stop fighting on social.” A commenter responded, “Is that this the pro-wrestling of knowledge engineering?”
FALMOUTH, MA – APRIL 8: Instacart shopper Loralyn Geggatt makes a delivery to a customer’s home throughout the COVID-19 pandemic in Falmouth, MA on April 7, 2020. Some Amazon, Instacart and other staff protested for higher wages, hazard pay and sick time. (Photo by David L. Ryan/The Boston Globe via Getty Images)
Boston Globe
Snowflake went public in 2020, raising over $3 billion in the largest U.S. IPO ever for a business software company. Even after last yr’s market plunge, Snowflake has a market cap of over $50 billion.
Databricks remains to be private, however it’s probably the most richly valued venture-backed firms. Private investors valued the corporate at $38 billion in 2021, and Bloomberg reported last week that the corporate was in talks to boost funding at a $43 billion valuation.
To expand in AI, Snowflake recently acquired AI search engine Neeva for $185 million, while Databricks spent $1.3 billion on generative AI startup MosaicML.
What’s the true story with Instacart?
That brings us back to Instacart.
While Databricks is picking up business from the grocery-delivery company, the footnote in Instacart’s S-1 spelling out the connection with Snowflake shows that the spending decline in 2023 is just not probably the most relevant figure.
Moderately, in terms of how Instacart accounts for operating expenses — its actual usage of Snowflake — that quantity was $28 million in 2021, $28 million 2022, after which $11 million in the primary half of 2023. That is still a drop this yr, but on an annualized basis it might be around 21% as a substitute of 71%.
So as to add to the confusion, the footnote under “Related Party Transactions” didn’t name Slootman or Snowflake, referring only to a “an executive officer of a software vendor.”Â
With the web chatter picking up, Snowflake desired to clear up the image, no less than from its perspective. On Wednesday, the corporate published a four-paragraph blog post titled, “Snowflake and Instacart: The Facts.”
“Previously few days, the scope and trajectory of Instacart’s use of Snowflake has been misrepresented by some on social media,” the post begins. Nowhere is Databricks mentioned within the post, a consistent theme for Snowflake, which does not name Databricks as a competitor in its financial filings.
Snowflake went on to say that it was working with Instacart to “optimize for efficiency,” a phrase that suggests doing more with less, and that its technology is “used extensively by nearly every team inside Instacart, including the catalog team, machine learning, ads, shoppers, retailers, customers, and logistics organizations.”
The post then highlights the usage figures from the filing footnote and claims that, “In some social media posts, payment schedules have been incorrectly conflated with actual usage to suggest a big decline in spending — this is just not the case.”
In other words, if there is a decline in spending, it is not because we’re losing business to an unnamed company.
The excellent news for Snowflake is that the IPO process calls for multiple prospectus updates. Instacart, which is attempting to unlock a tech IPO market that is been largely frozen for 20 months, will get a probability to clear up the matter with investors very soon.
— CNBC’s Jonathan Vanian and Jordan Novet contributed to this report.
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