Form: DRS/A

Draft registration statement submitted by Emerging Growth Company under Securities Act Section 6(e) or by Foreign Private Issuer under Division of Corporation Finance policy

December 11, 2023


As confidentially submitted to the Securities and Exchange Commission on December 8, 2023.
This draft registration statement has not been publicly filed with the Securities and Exchange Commission and all information herein remains strictly confidential.
Registration No. 333-          
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
IBOTTA, INC.
(Exact name of registrant as specified in its charter)
Delaware 7310 35-2426358
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
1801 California Street, Suite 400
Denver, Colorado 80202
303-593-1633
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Bryan Leach
Chief Executive Officer and President
Ibotta, Inc.
1801 California Street, Suite 400
Denver, Colorado 80202
303-593-1633
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Larry W. Sonsini David Boston
Mark Baudler Tej Prakash
Melissa Rick Willkie Farr & Gallagher LLP
Seth Helfgott 787 Seventh Avenue
Rachel Nagashima New York, New York 10019-6099
Wilson Sonsini Goodrich & Rosati, P.C. 212-728-8000
650 Page Mill Road
Palo Alto, California 94304
650-493-9300
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a) may determine.



EXPLANATORY NOTE
Pursuant to the applicable provisions of the Fixing America’s Surface Transportation Act, we are omitting our unaudited financial statements as of and for the nine months ended September 30, 2023 and 2022 because they relate to historical periods that we believe will not be required to be included in the prospectus at the time of the contemplated offering. We intend to amend the registration statement to include all financial information required by Regulation S-X at the date of such amendment before distributing a preliminary prospectus to investors.



The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated                  , 2024
            Shares
prospectuscover1a.jpg
Class A Common Stock
This is an initial public offering of shares of Class A common stock of Ibotta, Inc. We are selling          shares of our Class A common stock.
Following this offering, we will have two series of authorized common stock: Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion rights. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to 20 votes and is convertible at any time into one share of Class A common stock. Upon completion of this offering, Bryan Leach, our Founder, Chief Executive Officer and President and member of our board of directors, and entities affiliated with Mr. Leach will hold approximately         % of the combined voting power of our outstanding capital stock, assuming no exercise by the underwriters of their option to purchase additional shares of Class A common stock from us in this offering. As a result, Mr. Leach generally will be able to determine any action requiring the approval of our stockholders, subject to limited exceptions, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and bylaws (where adopted by stockholders), and approval of any merger, consolidation, sale of all or substantially all of our assets, or other major corporation transactions.
Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price will be between $          and $     per share. We intend to apply to list our Class A common stock on the          under the symbol “IBTA.”
We are an “emerging growth company” as defined under the federal securities laws and, as such, we have elected to comply with certain reduced public company reporting requirements for this prospectus and may elect to do so in future filings.
Investing in our Class A common stock involves risks that are described in the “Risk Factors” section beginning on page 21 of this prospectus.

Per Share Total
Initial public offering price
$ $
Underwriting discounts and commissions(1)
$ $
Proceeds, before expenses, to us
$ $
______________
(1)See the section titled “Underwriting” for additional information regarding compensation payable to the underwriters.
To the extent that the underwriters sell more than              shares of Class A common stock, the underwriters have the option to purchase up to an additional          shares of Class A common stock from us at the initial public offering price less the underwriting discounts and commissions.
Neither the Securities and Exchange Commission nor any other state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares of Class A common stock to purchasers on or about     , 2024.
Goldman Sachs & Co. LLC Citigroup BofA Securities
Prospectus dated               , 2024



TABLE OF CONTENTS
Page
We and the underwriters have not authorized anyone to provide you any information other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We take no responsibility for and can provide no assurance as to the reliability of any other information that others may give you. We and the underwriters are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations, and prospects may have changed since that date.
For investors outside of the United States: we have not, and the underwriters have not, done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of Class A common stock and the distribution of this prospectus outside of the United States.



GLOSSARY OF KEY TERMS
Throughout this prospectus, we use the following key terms:
Ad products. Paid digital advertisements such as banners, tiles, newsletters, and feature placements bought by clients to raise awareness of their offers and/or communicate their brand messages.
Application Programming Interface (API). A set of functions and procedures allowing the creation of apps that access the features or data of an operating system, app, or other service.
Artificial Intelligence (AI). Capabilities that leverage machine learning, deep learning, generative AI, and natural language processing on Ibotta’s technology platform.
Campaign. An organized course of action that clients undertake to promote a product or service on the IPN. A campaign may include one or more offers and related ad products.
Cash back. A form of reward that gives consumers a cash rebate after they purchase a product that qualifies for the reward.
Client. A company that pays Ibotta for the use of its performance marketing platform with the goal of influencing consumer purchase behaviors. A client can own one or multiple CPG brands.
Closed-loop. Any retailer loyalty or rewards program that generates a positive currency that is stored in a digital wallet or stored value account and which then can be spent back at the retailer. Closed-loop programs are an alternative to “open loop” techniques such as paper or digital coupons that give consumers a discount at checkout.
Consumer. An individual who purchases groceries or general merchandise, either online or in-store. If a consumer has accessed the website or downloaded an app of one or more publishers or visited a store of a publisher, such consumer may be counted as multiple consumers.
CPG brand (or brand). A CPG brand is an identifying name of a specific product or group of products owned by a company that sells consumer packaged goods, including in the grocery and general merchandise categories.
Digital offer program. A program that allows consumers to engage with offers on digital properties that could include a website, mobile app, mobile web interface, or some combination thereof.
Digital promotions. Offers, discounts, and cash-back rewards that are marketed through online-based digital technologies such as desktop computers, mobile phones, and other digital media.
Discount. A reduction in the price of a product or service applied at the time of the purchase.
Ibotta Direct-to-Consumer (D2C). Ibotta’s direct-to-consumer products include a free mobile app, website, and browser extension that are branded through Ibotta and allow consumers to earn cash back rewards for everyday purchases.
Ibotta Performance Network (IPN). An AI-enabled technology platform that allows CPG brands to deliver digital promotions to consumers via a network of publishers, in a coordinated fashion and on a fee-per-sale basis.
Integrated retailer. A retailer that sends item-level purchase data to Ibotta so that offers can be seamlessly redeemed in its stores or on its apps or websites.
Manufacturer's Recommended Retail Price (MSRP). The price at which manufacturers recommend that retailers sell their product.
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Offer. A digital promotion that encourages consumers to purchase one or more CPG brands or shop at a specific retailer in exchange for a reward or discount.
Offer stacking. The possibility for a consumer to locate the same offer on more than one publisher, make a single purchase, and earn rewards more than once for that offer.
Point of Sale (POS). A device or system that is used to process consumer transactions by retailers.
Publisher. A company that hosts Ibotta-sourced offers on its websites or mobile apps, as part of the IPN. Publishers include third parties that host Ibotta’s offers on a white-label basis (e.g., a retailer publisher such as Walmart), as well as Ibotta itself, which hosts its own offers on Ibotta D2C properties.
Redeemer. A consumer who has redeemed at least one digital offer within the quarter. If a consumer were to redeem on more than one publisher during that period, they would be counted as multiple redeemers.
Redemption. A verified purchase of an item qualifying for an offer by a client on the IPN.
Retail banner. A unique brand name of one retail store or a chain of retail stores owned by a retailer. A retailer may operate one or more retail banners.
Retailer. A parent company that owns and operates one or more physical or virtual stores under one or more retail banners that sell CPG brands to consumers. Retailer includes retailer advertisers, retailer publishers, and integrated retailers.
Retailer advertiser. A retailer that pays Ibotta a publisher commission when consumers click through to, and make a purchase from, the retailer’s website from one of Ibotta’s D2C properties. In some cases, Ibotta may also run promotions funded by retailer advertisers that encompass both online and offline sales, meaning consumers can earn cash back as a percentage of their total in-store basket spend, or as a percentage of their total online basket.
Retailer-exclusive marketing. Marketing dollars that CPG brands designate for the purpose of helping drive sales within one specific retailer environment, sometimes referred to as “shopper marketing.”
Retailer publisher. A retailer that is also a publisher on the IPN, meaning it hosts Ibotta-sourced offers on its digital properties.
Return on Ad Spend (ROAS). A common marketing metric used by CPG brands and other advertisers that measures sales earned for each dollar spent on advertising.
Reward. Value or credit provided to a consumer upon the successful redemption of an offer, which may take the form of cash back, points, or other loyalty currency.
Third-Party publisher. A non-Ibotta D2C publisher that hosts Ibotta-sourced offers on its digital properties and is part of the IPN, e.g., major retailer publishers such as Walmart, Dollar General, and Kroger.
Universal Product Code (UPC). A number that uniquely identifies each product sold by retailers. Each offer specifies which UPCs are eligible for redemption.
White-label. An arrangement that allows publishers to leverage our technology and offers to power their loyalty program without Ibotta’s brand.
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LETTER FROM BRYAN LEACH, FOUNDER & CEO
In 2011, I was flying back from a legal conference on international arbitration in Rio de Janeiro, Brazil when I saw a woman on the plane taking a picture of her receipts to submit her expenses for reimbursement. It made me think about the power of all the data contained on a receipt: detailed information about everything we buy, including the UPC, price, and quantity of every item in the basket, along with the date, time, retailer, and store location of purchase. It was a treasure trove of information, but until then, there had been no way to organize the information into an accurate picture of a person’s spending habits across all the places they shop. If technology could allow us to harness that data to create a granular understanding of purchase behavior, how could that transform the way that promotions and advertisements are delivered? How could companies get smarter about convincing consumers to change their purchase habits in the grocery store and beyond? In those musings lay the kernel of Ibotta (“I-bought-a”), which I hoped might one day help millions of consumers earn rewards for trying new brands, while at the same time reshaping the future of digital marketing. My journey from that moment to the present has involved many twists and turns, but one motivation has remained: the desire to be part of a team that creates something that directly helps people in their everyday lives. Not just people who have means, but people who will use what we built to help pay for food, rent, medical bills, student debt, vacations, and gifts for their children at the holidays.
In the United States today, 60% of adults are living paycheck to paycheck. Nearly three-quarters say they are not financially secure, and over a quarter expect that they will never be financially secure. Persistent inflation has only made matters worse. For millions of American families, the ability to make ends meet depends on their capacity to save money wherever and whenever they can. 87% of consumers’ grocery purchases are influenced by offers, discounts, and promotions. Digital promotions now make up the majority of all consumer promotions, with paper promotions in rapid decline. In-store sales still comprised 88% of grocery sales in the $1.1 trillion grocery sector in 2022, but consumers expect to find value regardless of whether they shop in-store, buy ahead and pickup in-store, or shop online with delivery.
At Ibotta, our mission is simple: Make Every Purchase Rewarding. Consumers earn millions of dollars in cash back rewards on their everyday purchases by interacting with our mobile app and website, and through the programs we power behind the scenes for third-party publishers. Unlike other forms of advertising, we cut consumers in on the deal, meaning whenever someone buys a product in response to a promotion, we pass along a portion of our advertising fee in the form of a reward. Because our offers are 100% digital, we can target promotions not merely based on what websites they have visited or where or when they have shopped, but based on which specific items they have bought in the past across a wide range of retailers, in-store or online. And we can tie everything out to a sale.
Our journey reflects our desire to reward as many purchases as possible. We began by releasing our own cash back mobile app in October 2012. Since then, it has attracted over 50 million registered users and more than 2.3 million ratings across the App Store and Google Play Store, earning an average of 4.7 out of 5 stars. In 2020, we began building the Ibotta Performance Network (IPN) with the goal of dramatically expanding our scale by distributing our exclusive offers on various third-party digital properties. Making every purchase rewarding meant not only operating under our own brand but also taking the technology and infrastructure we had built, and our exclusive offers, and making it all available on a white-label basis to publishers that wanted a plug and play technology solution. A significant portion of our offer redemptions now occur on third-party publishers that leverage our technology platform and offers. Today, millions of consumers redeem our offers on Walmart, Dollar General, Kroger, Shell, and other retailer properties without ever creating an Ibotta account or downloading our app.
Thousands of CPG brands rely on Ibotta to help them promote their products through the use of digital incentives. Instead of asking our clients to pay us a fee based on the number of impressions, clips, or clicks we deliver, we ask them to pay us only when their campaign results in a confirmed sale of their product, either in-store or online. We are accountable for the bottom of funnel results; our clients do not bear the risk of underperformance. In a world where one can trace a digital interaction all the way out to
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an in-store or online sale, we believe that the rationale for selling ads or promotions on anything other than a fee-per-sale basis is weaker than ever.
The desire for new forms of digital marketing that offer greater certainty of results and higher conversion is nearly universal. Therefore, we have not limited ourselves to helping CPG brands in the grocery category. Today, we work with many leading CPG brands in other categories such as toys, clothing, beauty, electronics, pet, home goods, and sporting goods. Companies in these categories have historically had limited access to true, omnichannel fee-per-sale marketing tools. Our AI-enabled technology platform aims to give them an easy way to reach the right consumers with the right incentive at the right time, based on their specific marketing objectives, at a scale previously unattainable in the digital promotions industry. Our tools allow them to track campaign performance and measure offer redemptions across multiple retailers simultaneously, all while remaining within a fixed budget and avoiding common pitfalls such as offer stacking.
We take pride in knowing that so many CPG brands have been with us since the beginning and continue to spend more with us each passing year. And yet, we have barely scratched the surface of our potential addressable market. We capture less than one percent of the approximately $200 billion that CPG brands spend annually to shape consumer purchase behaviors.
Ibotta’s success has been fueled by our strong culture. We take pride in our mission, which helps people in a very concrete way. We live by our “IBOTTA” values: Integrity, Boldness, Ownership, Teamwork, Transparency, and A Good Idea Can Come From Anywhere. We foster an inclusive environment that welcomes diverse experience, backgrounds, lifestyles, and perspectives. We hold a high bar for performance. Among the many benefits we offer, we believe the most valuable is the opportunity to solve challenging problems with dedicated colleagues every single day.
The Ibotta experiment began twelve years ago in the windowless basement of an old fire station in downtown Denver. Our capital-light business has allowed us to grow rapidly while increasing profitability over time and capturing the benefits of a multi-sided network that we believe is very hard to replicate. So far, we have given over $1.6 billion in cash back to U.S. consumers on their everyday purchases, but we’re just getting started.
I hope you’ll decide to join us!
Bryan Leach
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PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this prospectus and is qualified in its entirety by the more detailed information and consolidated financial statements included elsewhere in this prospectus. It does not contain all of the information that may be important to you and your investment decision. You should carefully read this entire prospectus, including the sections titled “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our financial statements and related notes included elsewhere in this prospectus. In this prospectus, unless context requires otherwise, references to “we,” “us,” “our,” “Ibotta,” or the “Company” refer to Ibotta, Inc. and its wholly-owned subsidiary and references to “common stock” include our Class A common stock and Class B common stock.
Overview
Ibotta’s mission is to Make Every Purchase Rewarding. Our technology allows CPG brands to deliver digital promotions to over 200 million consumers through a single, convenient network called the Ibotta Performance Network (IPN). We are pioneers in success-based marketing: we only get paid when our client’s promotion results in a sale, not when a consumer merely views or clicks on the promotion. We have built the largest digital item-level promotions network in the United States by forming strategic relationships with major retailers such as Walmart Inc. (Walmart) and Dollar General Corporation (Dollar General), which use our digital offers to power their loyalty programs on a white-label basis. Through the IPN, our clients can also reach millions more consumers on our widely used rewards app digital properties, which include the Ibotta-branded cash back mobile app, website, and browser extension (collectively, Ibotta D2C).
We work directly with over 750 different clients, representing over 2,250 different CPG brands to source exclusive offers. Most of our offers cover products in non-discretionary categories, such as grocery, but we also work with general merchandise manufacturers in categories such as toys, clothing, beauty, electronics, pet, home goods, and sporting goods. Over time, our clients have generally ramped up their spend with us, and they rarely drop off our network. In fact, of our top 100 clients, 99% were retained from 2021 to 2022.
Our technology platform uses an Artificial Intelligence (AI)-enabled offer engine that is designed to match and distribute the right offer to the right consumer at the right time. This is possible because we receive a large volume of item-level purchase data through our secure point of sale (POS) integrations with 86 different retailers. Using this data, we form a profile of each consumer based on what they have bought in the past and how they have responded to various price promotions. From there, we build recommenders that are driven by machine learning and designed to create personalized savings experiences for each consumer. The more data we accumulate, the smarter our recommenders become. Whatever our clients’ specific objectives may be – such as encouraging brand switching, shortening purchase cycles, incentivizing consumers to stock up, or promoting around key seasonal events – our platform helps them design a promotional campaign to accomplish their goals.
Ibotta’s technology tracks which offers are selected by consumers, matches offers to the products that have been purchased, logs redemptions, handles the flow of funds, and takes care of all downstream billing and logistics. We perform the function of “air traffic control,” meaning our network enables offers to be matched, distributed, and redeemed across multiple large third-party publishers in a coordinated fashion. This minimizes the risks that offer budgets are exceeded and that consumers redeem the same offer several times for a single purchase (i.e., offer stacking). Our client tools allow CPG brands to set up campaigns, monitor redemption and budget levels, and analyze overall campaign performance – all in a single, convenient interface.
We deliver success-based digital promotions at-scale because we manage a growing, open network of third-party publishers that host our offers. Retailers are among our most important publishers because their apps and websites are frequently visited by consumers with high purchase intent. A retailer may
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ingest digital offers from Ibotta’s Application Programming Interface (API) and present them to its consumers as part of its own branded loyalty program. We call these partners “retailer publishers.” We believe retailer publishers choose to work with Ibotta because we are a trusted partner that can provide a large universe of exclusive offers coupled with a set of plug and play capabilities that would be difficult for them to create and scale on their own. For example, Ibotta and Walmart entered into a multi-year strategic relationship that makes Ibotta the exclusive provider of digital item-level rebate offer content for Walmart U.S., across all product categories, for online and offline shopping. Consumers redeem our offers on Walmart properties without ever creating an Ibotta account. Instead, they can select manufacturer offers from the Walmart website or app, buy the featured items in-store or online, and instantly earn Walmart Cash which can be applied to future purchases in a Walmart store or on Walmart.com. All CPG brands wishing to run digital item-level rebates on Walmart’s website can only do so through the IPN.
Ibotta also partners with several other leading retailer publishers. For example, Dollar General, the leader by market share in the dollar channel and one of the fastest growing retailers in the United States, began hosting Ibotta’s cash back offers in 2023. The DG Cash program represents Dollar General’s first foray into closed-loop item-level rewards, meaning offers, when redeemed, create a DG Cash currency that can be spent on future trips to Dollar General. The program is available to all users of the Dollar General mobile app and website, an audience that is price sensitive and focused on finding digital offers. Ibotta similarly partners with Family Dollar, a retail banner of Dollar Tree, Inc., who is in the process of becoming an IPN publisher. We also work indirectly to publish offers on certain retailer properties, including Kroger (powering Kroger Cash) and Shell (powering Shell Fuel Rewards).
In addition to providing digital offers for retailers, Ibotta also makes the same offers available on its own digital properties, which include Ibotta D2C. Since 2012, over 50 million Americans have registered for our free app. Ibotta D2C reaches a highly engaged audience of savings-conscious consumers who want a single digital starting point where they can find cash back offers across a variety of retailers. Many of these consumers decide where to shop based on the availability of deals in different retailers. Once the IPN launched, Ibotta D2C became a publisher on the IPN, meaning it is now one of many nodes through which our digital offers are delivered to the end consumer.
In the future, we believe the IPN may be extended to other publishers across a variety of new verticals. For example, new publishers could include delivery services, banks, or other apps and websites that want to give their consumers access to offers on popular everyday items without having to source those offers from thousands of different CPG brands or secure item-level data from multiple integrated retailers where the offers can be redeemed.
We believe Ibotta is well positioned to capitalize on a large and growing market opportunity. U.S. consumers spent an estimated $1.1 trillion dollars in the grocery sector in 2022. CPG brands compete fiercely to influence consumer spending habits, spending approximately $200 billion on marketing annually in the United States. In fact, no other industry spends more on marketing, as a percentage of overall budgets, than CPG.
Most of our revenue is redemption revenue which is generated from redemptions of offers across the IPN. A significant portion of that redemption revenue arises from offer redemptions on third-party publishers. We also generate revenue by selling ad products on our Ibotta D2C properties. Specifically, we allow CPG brands and retailers to enhance awareness of their offers by buying display ads, in-app videos, or email marketing campaigns. We also charge partners a licensing fee to leverage our aggregated data in ways that help them better understand their target consumers and improve their promotional activities. Finally, on Ibotta’s D2C properties, we also allow thousands of online retailers to advertise and present consumers with their own sitewide cash back offers. These clients benefit from the incremental sales generated by Ibotta’s savings-conscious audience.
Our revenue growth significantly accelerated with the addition of new publishers to the IPN. Most recently, the rollout of our offers on the digital properties of Walmart and Dollar General has attracted
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larger audiences, and in turn, resulted in greater spend by CPG brands and a greater number of redeemed offers. These developments have increased our scale, growth and profitability.
Total revenue grew from $210.7 million in 2022 to $       million in 2023, an increase of       %;
Redemption revenue grew from $138.7 million (or 66% of total revenue) in 2022 to $       million (or       % of total revenue) in 2023, an increase of       %;
Gross profit grew from $164.5 million in 2022 to $       million in 2023, an increase of       %;
Net loss decreased from $54.9 million in 2022 to $       million in 2023; and
Adjusted EBITDA margin improved from (13)% in 2022 to        % in 2023.
Industry Background
CPG brands have long sought the ability to advertise or promote their products in a way that can be directly measured out to a sale and tied back to a known consumer. Having this capability would allow a CPG brand to prioritize investing in tactics with the highest observable conversion to sale in-store or online, present a different message or promotion to each segment of consumers, and pay only when the campaign succeeds in driving a sale.
As far back as 1880, CPG brands such as Coca-Cola looked for ways to entice consumers to try their products. They invented manufacturer coupons to address this challenge. Ever since, paper coupons and free-standing inserts (FSIs) have been printed and distributed in newspapers, cut out or “clipped” by consumers, presented at checkout in exchange for a discount on qualifying products, and then gathered up by retailers and shipped off to coupon clearinghouses. The use of paper coupons peaked in 1999, when approximately 340 billion of them were circulated in U.S. newspapers.
Paper coupons have several obvious drawbacks, however. First, rapidly declining newspaper circulation, particularly among younger consumers, has severely constrained their reach. Second, they often require CPG brands to take a one-size-fits-all approach by providing the same discount to everyone, regardless of their past purchase behaviors. Third, paper coupons suffer from very low redemption rates due to high friction in the redemption experience, including clipping a coupon, remembering to bring that coupon to the store, and presenting that coupon to the store clerk at checkout. Fourth, because of the cost to produce and distribute paper coupons, they are billed on a fee-per-print basis, meaning the brand is asked to pay a fixed rate based on the number of coupons circulated in print, regardless of whether conversion to sale ends up being low or high. Lastly, paper coupons harm the environment by causing millions of trees to be cut down unnecessarily each year, only to have 99.5% of the coupons go unused. Despite these significant drawbacks, paper coupons account for almost all of promotion volume.
About 20 years ago, print-at-home and load-to-card digital coupons began to address certain deficiencies of paper coupons. Digital coupons could be delivered via more modern distribution channels such as email, websites, and mobile apps, and they could be tailored to individuals based on their specific purchase patterns. But digital coupons still left much to be desired. Most notably, they were still billed on a fee-per-clip basis, meaning the CPG brand was charged as soon as a consumer activated an offer, regardless of whether they went on to purchase anything. The performance of these campaigns also often could not be measured by CPG brands in real-time, leaving them unable to optimize programs mid-flight. Equally problematic, digital coupon programs did not provide a way to deliver promotions nationally – i.e., across retailers – in the same way that paper manufacturer coupons had done. Instead, each retailer ran its own load-to-card program, and CPG brands could only run retailer-specific offers through those siloed programs.
Retailers also experienced challenges with digital coupons. Whenever a redemption occurred, they still had to forego the full retail price of a product and seek reimbursement via a clearinghouse. This maintained the negative working capital dynamics inherent in any discounting system. Additionally, digital
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coupons remained entirely open loop, meaning all the savings dissipated instead of being internalized in the form of positive currency that had to be spent back at the same retailer on a future trip.
As the promotions industry has evolved, one feature has remained constant: the need for a third-party to manage offer distribution on behalf of all CPG brands and retailers in the ecosystem. This need persists for several reasons, including:
Efficiency. It is inefficient for a CPG brand to negotiate, set up, and coordinate delivery of offers with each retailer that carries its products or each publisher that hosts its content.
Scale. CPG brands and retailers need to reach the widest possible audience, including potential new consumers who do not belong to their loyalty programs or visit their apps and websites.
National content. CPG brands generally have large national budgets that are reserved for platforms that can deliver promotions across multiple retailers. If a single retailer were to source its own offers, it would immediately be confined to the smaller retailer-exclusive marketing budgets set aside by a CPG brand for use with just that retailer.
Coordination. CPG brands must ensure that their offers cannot be stacked across multiple publishers. To achieve this, there needs to be a single third-party network administrator that performs an “air traffic control” function, keeping track of which offers have been used on which publishers, in what order, and where credit has already been awarded so that it cannot be given a second time for the same purchase.
Technological capability. CPG brands are experts in developing and marketing new products. Retailers are experts in merchandising, product placement, supply chain management, and retail operations. Neither is likely to have the time, expertise or desire to develop the necessary technology, including the tools to manage offer setup, design and optimization, AI-powered recommenders, digital wallet technology, billing, fraud prevention, and so forth.
Like promotions, advertising has also evolved to better meet the CPG brand’s needs over time. Traditional television, radio, and out of home are all tactics that reach a mass audience but do not enable precise targeting or direct measurement. Over time, new alternatives emerged which offered greater precision and measurability. Digital ad platforms, including walled gardens such as Google and Meta and independent demand-side platforms such as The Trade Desk, allow CPG brands to target ads primarily based on what websites a consumer has visited, online searches they have conducted, social pages they have liked, or connected television programs they have watched.
While the scale of these platforms is compelling, they continue to fall short in many regards. First, despite the growth of online grocery shopping, in-store sales still comprised 88% of grocery sales in 2022. Ad platforms optimized for online conversion work well where consumers frequently click through and buy products or services online. But in the CPG industry, where products are largely purchased in-store and transacted online far less frequently, these platforms are less effective. Second, CPG brands prefer to target ads using data about past purchases to measure the actual incremental sales lift generated by their ads. Digital ad platforms do not have access to cross-retailer, item-level purchase data that can be tied back to the individual consumer who viewed the ad to measure changes in purchase behavior over time. Third, recent privacy policies implemented by Apple, along with the imminent phase out of third-party cookies on Google’s Chrome browser, threaten to constrain advertisers’ future ability to target ads as effectively because consumers have little incentive to opt into sharing their data for the purpose of receiving more targeted display ads. Finally, and perhaps most importantly, digital ad platforms do not offer success-based billing in the sense that they charge for impressions and clicks rather than on a fee-per-sale basis.
Many CPG brands prefer to shift spend lower down in the funnel toward fee-per-sale based tactics because they can guarantee a desired level of return on ad spend (ROAS). Historically, the main
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limitation has been that CPG brands lacked a fee-per-sale platform that could deliver digital promotions nationally and at a massive consumer scale.
Market Opportunity
U.S. consumers spent an estimated $1.1 trillion in the grocery sector in 2022. American consumers purchased groceries 1.5 times per week spending $438 per month in 2021, on average. Despite the growth of online grocery shopping, 88% of all grocery sales were made in physical stores in 2022.
We began by focusing on grocery because consumers purchase groceries at a higher frequency, which gives us an opportunity to influence consumer purchase habits on a weekly basis. Companies in the CPG industry spend a higher percentage of their gross sales on marketing than companies in any other industry. In 2022, total annual CPG marketing spend reached approximately $200 billion in the United States, of which approximately $172.5 billion was spent on trade promotions, digital, consumer promotions, and retailer-exclusive marketing. Total spend on digital rebates grew 26% year-over-year in the first half of 2022, and the digital promotions market is projected to grow at an 18.5% compound annual growth rate from 2023 to 2030.
The Ibotta Performance Network
The IPN provides an at-scale success-based marketing solution for the CPG industry. By using the IPN, CPG brands and their media agencies can create digital offers and match and distribute them in a coordinated manner across multiple publisher properties. These publishers include large retailers, which display our offers on their websites, as well as Ibotta’s D2C properties, which consist of our mobile app, website, and browser extension, which are popular tools for savings-oriented consumers. The IPN is powered by our proprietary, AI-enabled technology platform, which takes advantage of a unique set of purchase data that we receive through POS integrations with retailers.
business1b.jpg
The key components of our network are as follows:
Offer sourcing. Ibotta’s sales team directly sources digital offers from over 2,250 different CPG brands, and in some cases their media buying agencies.
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Technology platform. Our cloud-based, AI-driven technology platform is built on an open architecture that enables us to deliver millions of offers from CPG brands to consumers across our network of publishers. The key components of this platform include:
Purchase data. We receive and process a large amount of item-level consumer purchase data from our retailer POS integrations and use that data to process offer redemptions and help drive high return on investment outcomes for CPG brands.
AI offer engine. We help our clients determine the optimal offer value, offer cadence, offer breadth, and targeting criteria for a given campaign, based on their strategic objectives. Using AI, we build recommenders that are designed to match the right offers with the right consumers at the right time. With machine learning, our recommendation algorithms continuously improve, allowing us to drive higher conversion and cost efficiency for our clients.
Administration. We handle all aspects of billing and collections, as well as managing cash flows. We also provide our clients with a portal that allows them to set up and refine their offer parameters, as well as monitor and analyze their campaign performance.
Risk management. We help minimize offer stacking by ensuring that a consumer who earns a reward for redeeming an offer on Ibotta’s app cannot earn a second, redundant reward on a third-party publisher for the same underlying purchase.
Distribution via publishers. We match and distribute our digital offers through retailer publishers and Ibotta D2C properties, with additional distribution channels planned for the future. We have formed strategic, and in some cases, exclusive relationships with large retailers such as Walmart, Dollar General, and Family Dollar.
The above components of our network work together to create interconnected flywheels that can over time strengthen and accelerate the value of the IPN for our constituents.
CPG brand flywheel. The more offers CPG brands sponsor, the greater value we are able to deliver to consumers, and the more likely that they continue to engage with and recommend our offers to friends. The more consumers engage, the more investment we receive from both new and existing CPG brands that are eager to influence the greater spending power of this audience.
Retailer flywheel. As retailers make offers easier to redeem, more consumers use them, which in turn attracts greater investments in offers from CPG brands, which ultimately results in more consumers using the retailer’s loyalty program.
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Our Competitive Strengths
We believe the following attributes and capabilities represent our core strengths and provide us with valuable competitive advantages.
“One-stop shop” for national promotions. Ibotta provides CPG brands with a comprehensive solution that simplifies and streamlines the entire digital promotions process from end-to-end.
Shared success model that aligns our incentives with our clients’ incentives. Our innovative fee-per-sale model increases the cost efficiency of digital marketing within the CPG industry. We only make money when CPG brands make money, and this alignment of incentives creates trust and encourages them to invest more on the IPN over time.
Audience scale capable of moving substantial sales volumes for clients. Built over a decade, the IPN represents the largest item-level network of CPG brands, publishers, and consumers in the digital promotion space. We believe this scale positions the IPN as a viable alternative to top-of-funnel media tactics such as TV and programmatic media.
Ability to access national promotions budgets, leveraging our large D2C business. Ibotta’s sales team has over a decade of experience building relationships with thousands of CPG brands and sourcing offers for placement on our widely used app, and more recently for distribution across our broader network. This gives Ibotta an advantage in winning business with new retailer publishers because our competitors cannot match the same volume of incremental, national offers.
Strong partner network that includes leading retailers. As CPG brands place promotions on the IPN, their products place pressure on those brands’ competitors to engage with Ibotta to help them remain competitive. We believe this bandwagon effect has and will continue to help Ibotta grow revenue with clients.
Single source of truth for coordinated offer delivery. Before the introduction of the IPN, CPG brands had to stagger their digital promotions to prevent them from overlapping or being stacked with each other. The IPN made it possible for CPG brands to deliver digital promotions across retailers without the risk that their promotions could be redeemed in more than one publisher environment for a single purchase.
Powerful AI-driven technology that leverages a highly differentiated data set. We use cloud-based, serverless technology to ingest and process vast amounts of cross-retailer, item-level purchase data. This valuable dataset powers our proprietary AI models and helps us get better and better at recommending the right offers to consumers and creating the right types of offers for our clients.
Privacy-compliant approach to digital marketing. The core of Ibotta’s solution does not rely on third-party cookies for targeting and measurement. Instead, consumers voluntarily provide their purchase data in order to receive rewards and personalized offers.
Ibotta’s Value Proposition
Value for CPG brands
Grow market share efficiently through success-based marketing at-scale
Drive verified incremental sales
Enable seamless, coordinated campaign execution and measurement
Receive valuable data and insights
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Value for Publishers
Drive more revenue and consumer engagement through differentiated rewards content
Grow revenue from Retail Media Networks (RMNs)
Build customer loyalty by enabling closed-loop rewards instead of discounts
Reduce time and investment for building and maintaining a rewards infrastructure
Receive valuable ongoing consultation regarding rewards best practices
Value for Consumers
Receive savings on everyday items
Earn rewards easily through seamless, convenient, and intuitive digital interfaces
Growth Strategies
We intend to capitalize on our large market opportunity with the following key growth strategies.
Grow our audience. To deliver more redemptions in the future, we plan to reach more consumers with our digital offers. Ibotta will seek to continue to grow the audience that we reach through the IPN through increased penetration at existing publishers and by adding to the network of third-party publishers.
Grow redeemers on existing third-party publisher properties. We believe there is significant opportunity to grow the audience at existing third-party publishers.
Add new third-party publishers in grocery. We are focused on expanding our audience by building new partnerships with retailers.
Expand into new categories of publishers. In addition to expanding within the grocery channel, Ibotta may also seek to publish its content on the properties of delivery service providers, specialty retailers, and other, non-retailer publishers.
Add offers. We have observed a strong correlation between the offers we make available to consumers and the number of redemptions we generate. We will seek to grow investment from our existing CPG brands, while also seeking to expand into new brands and categories.
Grow investment from current clients. Within each client that invests in Ibotta today, we believe there is a significant opportunity to grow their budget invested to keep up with the growth of our audience. Additionally, many of our clients have multiple brands within their portfolio, and we only service a subset of those brands today.
Expand our client base. While we already work with many of the CPG companies in the United States, there are still many CPG companies that do not yet use our services. Additionally, we have significant untapped opportunities in general merchandise categories such as toys, clothing, beauty, electronics, pet, home goods, and sporting goods.
Continue to enhance the IPN through innovation. We will continue to invest in technology to further develop and accelerate the growth of the IPN for CPG brands, publishers, and consumers. As the data generated by the IPN grows, we believe Ibotta will generate more valuable insights about purchase behavior and market trends and may be able to automatically optimize recommendations for consumers as well as campaigns for clients based on real-time data from across the network.
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Risk Factors Summary
Our business is subject to numerous risks and uncertainties that you should consider before investing in our Company. These risks are described more fully in the section titled “Risk Factors” in this prospectus. These risks include, but are not limited to, the following:
We have a history of net losses, we anticipate increasing expenses in the future, and we may not be able to attain profitability in the future.
Our business, financial condition, results of operations, and prospects will be adversely affected if we do not renew, maintain, and expand our relationships with existing publishers and add new publishers to the IPN.
We are also dependent on our publishers to take steps to integrate with the IPN and to maximize and encourage offer redemption, including decisions relating to user experience and design, marketing, and proper maintenance of their technology.
If we fail to maintain or grow offer redemptions on our network, our revenues and business may be negatively affected.
Our business, financial condition, results of operations, and prospects will suffer if CPG brands do not use our network for digital promotions.
We may not be able to sustain our revenue growth rate in the future.
We provide content to publishers indirectly through third-party technology partners and our business, financial condition, results of operations, and prospects will be adversely affected if we do not renew, maintain and expand our relationships with such third-party technology partners.
We expect a number of factors to cause our results of operations to fluctuate on a quarterly and annual basis, which may make it difficult to predict our future performance.
Macroeconomic conditions, including slower growth or a recession and supply chain disruptions, have previously and could continue to adversely affect our business, financial condition, results of operations, and prospects.
Competition presents an ongoing threat to the success of our business.
Our business, financial condition, results of operations, and prospects will suffer if we do not renew, maintain and expand our relationships with retailers.
If we fail to effectively manage our growth, our business, financial condition, results of operations, and prospects could be adversely affected.
We have a limited operating history and operate in an evolving industry, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.
We are making substantial investments in our technologies, and if we do not continue to innovate and further develop our platform, our platform developments do not perform, or we are not able to keep pace with technological developments, we may not remain competitive, and our business and results of operations could suffer.
We have previously identified material weaknesses in our internal controls over financial reporting and if we are unable to maintain effective internal controls or if we identify additional material weaknesses in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business, financial condition, results of operations, and prospects.
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The dual class stock structure of our common stock will have the effect of concentrating voting control with Bryan Leach, our Founder, Chief Executive Officer and President and a member of our board of directors, which will generally preclude your ability to influence the outcome of matters submitted to our stockholders for approval, subject to limited exceptions, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and bylaws (where adopted by stockholders), and the approval of any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transactions.
Although we do not expect to rely on the “controlled company” exemption under the listing standards of the , we expect to have the right to use such exemption and therefore we could in the future avail ourselves of certain reduced corporate governance requirements.
Corporate Information
We were incorporated in 2011 as Zing Enterprises, Inc., a Delaware corporation. In 2012, we changed our name to Ibotta, Inc. Our principal executive office is located at 1801 California Street, Suite 400, Denver, Colorado 80202, and our telephone number is 303-593-1633. Our website address is https://www.ibotta.com. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus and should not be considered to be part of this prospectus.
We use Ibotta, the Ibotta logo, the IPN logo, and other marks as trademarks in the United States. This prospectus contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus, including logos, artwork, and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights, or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other entities’ trade names, trademarks, or service marks to imply an endorsement or sponsorship of us by any other entity.
Status as a Controlled Company
As a result of our dual class common stock structure, Bryan Leach, our Founder, Chief Executive Officer and President and a member of our board of directors, and entities affiliated with Mr. Leach, will be able to exercise voting control with respect to an aggregate of shares of our Class B common stock, representing approximately % of the total voting power of our outstanding capital stock as of . Mr. Leach will have the authority to vote the shares of Class B common stock at his discretion on all matters to be voted upon by stockholders. Therefore, we will be considered a “controlled company” as that term is set forth in the listing standards of the . Under these listing standards, a company in which over 50% of the voting power for the election of directors is held by an individual, a group, or another company is a “controlled company” and may elect not to comply with certain listing standards of the regarding corporate governance including the requirements (1) that a majority of our board of directors consist of independent directors, (2) the compensation committee and nominating and corporate governance committee be comprised entirely of independent members and (3) to make the charters for each of the compensation committee and nominating and corporate governance committee available on the Company’s website. These requirements would not apply to us if, in the future, we choose to avail ourselves of the “controlled company” exemption. Although we qualify as a “controlled company,” we do not currently expect to rely on these exemptions and intend to fully comply with all corporate governance requirements under the listing standards of the .
However, if we were to utilize some or all of these exemptions, we would not comply with certain of the corporate governance standards of the , which could adversely affect the protections for other stockholders.
In addition, our “controlled company” status will generally preclude our stockholders’ ability to influence the outcome of matters submitted to our stockholders for approval, subject to limited exceptions, including the election of our board of directors, the adoption of amendments to our certificate of
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incorporation and bylaws (where adopted by stockholders), and the approval of any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transactions.
Implications of Being an Emerging Growth Company
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended (JOBS Act). We will remain an emerging growth company until the earliest to occur of: (i) the last day of the fiscal year in which we have more than $1.235 billion in annual revenue; (ii) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (iii) the date on which we have issued, in any three-year period, by us of more than $1.0 billion in non-convertible debt securities; and (iv) the last day of the fiscal year ending after the fifth anniversary of our initial public offering.
As a result of this status, we have elected to take advantage of reduced reporting requirements in the registration of which this prospectus forms a part and may elect to take advantage of other reduced reporting requirements in our future filings with the Securities and Exchange Commission (SEC). In particular, in this prospectus we have not included all of the executive compensation-related information that would be required if we were not an emerging growth company. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. We intend to elect to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting standards as of public company effective dates.
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THE OFFERING
Class A common stock offered by us
                shares
Class A common stock to be outstanding immediately after this offering
                shares (or                 shares if the underwriters exercise their option to purchase additional shares of common stock in full).
Class B common stock to be outstanding immediately after this offering
                shares
Class A and B common stock to be outstanding immediately after this offering
                shares
Option to purchase additional shares
We have granted the underwriters an option exercisable for a period of 30 days to purchase up to                 additional shares of our Class A common stock.
Use of proceeds
We estimate that the net proceeds to us from the sale of the shares of our Class A common stock in this offering will be approximately $                million, or approximately $                million if the underwriters exercise their option to purchase additional shares in full, based upon an assumed initial public offering price of $                per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
We intend to use the net proceeds we receive from this offering for general corporate purposes, including working capital, operating expenses, and capital expenditures. See the section titled “Use of Proceeds” for more information.
Risk factors
See the section titled “Risk Factors” and other information for a discussion of factors you should carefully consider before deciding to invest in shares of our Class A common stock.
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Voting Rights
We will have two series of common stock: Class A common stock and Class B common stock. Shares of Class A common stock are entitled to one vote per share. Shares of Class B common stock are entitled to twenty votes per share.
Holders of our Class A common stock and Class B common stock will generally vote together as a single series, unless otherwise required by law or our amended and restated certificate of incorporation. Upon completion of this offering, Bryan Leach, our Founder, Chief Executive Officer and President and a member of our board of directors, and entities affiliated
with Mr. Leach will hold approximately         % of the voting power of our outstanding capital stock in the aggregate, which voting power may increase over time as Mr. Leach’s equity awards which are outstanding at the time of the completion of this offering are exercised or vested. If all such equity awards held by Mr. Leach had been exercised or vested and exchanged for shares of Class B common stock as of the date of the completion of this offer, Mr. Leach and entities affiliated with Mr. Leach would collectively hold        % of the voting power of our outstanding capital stock. As a result, Mr. Leach generally will be able to determine any action requiring the approval of our stockholders, subject to limited exceptions, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and bylaws (where adopted by stockholders), and the approval of any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transactions. Additionally, our executive officers, directors, and holders of 5% or more of our capital stock will hold, in the aggregate, approximately            % of the voting power of our outstanding capital stock following this offering. See the sections titled “Principal Stockholders” and “Description of Capital Stock” for additional information.
Proposed trading symbol
“IBTA”
The number of shares of our Class A common stock and Class B common stock to be outstanding after this offering is based on                   shares of our Class A common stock and shares of our Class B common stock outstanding as of December 31, 2023 after giving effect to the Capital Stock Conversion, Reclassification, and Class B Stock Exchange (each as described below), as if they had occurred on December 31, 2023, and reflects:
             shares of our convertible preferred stock that will automatically convert into an equal number of shares of our common stock immediately prior to the effectiveness of the filing of our amended and restated certificate of incorporation filed in connection with this offering. We refer to this conversion of our convertible preferred stock into common stock as the Capital Stock Conversion;
             shares of common stock outstanding, which shares will be reclassified into an equal number of shares of Class A common stock in connection with the filing of our amended and restated certificate of incorporation filed in connection with this offering. We refer to this reclassification of our common stock into Class A common stock as the Reclassification; and
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            shares of our Class B common stock outstanding after giving effect to the Reclassification, which reflects shares of our Class A common stock outstanding and beneficially owned by Bryan Leach and certain related entities as of December 31, 2023 that will be exchanged for an equivalent number of shares of our Class B common stock following the effectiveness of the filing of our amended and restated certificate of incorporation filed in connection with this offering (Class B Stock Exchange).
The number of shares of our Class A common stock and Class B common stock to be outstanding as of December 31, 2023 after giving effect to the Capital Stock Conversion, Reclassification, and Class B Stock Exchange, as if they had occurred on December 31, 2023, excludes the following:
          shares of our Class A common stock issuable upon exercise of options to purchase shares of our Class A common stock outstanding as of December 31, 2023 under our 2011 Equity Incentive Plan (2011 Plan), at a weighted average exercise price of $          per share;
          shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock that we granted after December 31, 2023 under our 2011 Plan, at an exercise price of $          per share;
               shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock that we granted after December 31, 2023 under our 2011 Plan, at an exercise price of $             per share to Bryan Leach that can be exchanged for an equivalent number of shares of Class B common stock pursuant to the Equity Award Exchange Agreement (as defined below);
          shares of Class A common stock reserved for future issuance under our 2011 Plan as of December 31, 2023, which shares will be added to the shares to be reserved for issuance under our 2024 Equity Incentive Plan (2024 Plan), which will become effective on the business day immediately prior to the date of effectiveness of the registration statement of which this prospectus forms a part;
          shares of our Class A common stock reserved for future issuance under our 2024 Plan as well as any automatic increases in the number of shares of our Class A common stock reserved for future issuance under the 2024 Plan;
          shares of our Class A common stock to be reserved for future issuance under our 2024 Employee Stock Purchase Plan (ESPP), which will become effective on the business day immediately prior to the date of effectiveness of the registration statement of which this prospectus forms a part, as well as any automatic increases in the number of shares of our Class A common stock reserved for future issuance under the ESPP; and
          shares of Class A common stock, following the issuance of shares of our Class A common stock upon the automatic conversion of the convertible notes, based upon an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after taking into account option grants made following the issuance of Class A common stock warrants (Walmart Warrant) held by Walmart. The vesting and exercise terms of the Walmart Warrant are further described in the section titled “Certain Relationships and Related Party Transactions—Agreements with Walmart.”
Following the completion of this offering and pursuant to an equity award exchange agreement (Equity Award Exchange Agreement) to be entered into between us and Bryan Leach, our Founder, Chief Executive Officer and President, Mr. Leach shall have a right (but not an obligation) to require us to exchange any shares of Class A common stock received upon the exercise of outstanding options to purchase shares of Class A common stock for an equivalent number of shares of Class B common stock. We refer to this right as the Equity Award Exchange. The Equity Award Exchange applies only to equity awards granted to Mr. Leach prior to the effectiveness of the filing of our amended and restated certificate
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of incorporation. As of , there were shares of our Class A common stock subject to options held by Mr. Leach under our 2011 Plan that may be exchanged, upon exercise, for an equivalent number of shares of our Class B common stock following this offering.
Unless otherwise indicated, this prospectus reflects and assumes the following:
the Capital Stock Conversion will occur immediately prior to the effectiveness of our amended and restated certificate of incorporation in Delaware filed in connection with this offering;
the filing and effectiveness of our amended and restated certificate of incorporation in Delaware     and the effectiveness of our amended and restated bylaws will each occur prior to the completion of this offering and will effect the Reclassification of our common stock into Class A common stock;
the Class B Stock Exchange will occur immediately following the effectiveness of our amended and restated certificate of incorporation in Delaware, and the completion of this offering will occur following the Class B Stock Exchange;
          shares of our Class A common stock issuable upon the automatic conversion of $                    million in convertible unsecured subordinated promissory notes, which will occur concurrently upon the closing of this offering, which we refer to as the Notes Conversion, based upon the assumed initial public offering price of $                    per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, the conversion terms which are further described in the section titled, “Certain Relationships and Related Party Transactions—2022 Promissory Notes”;
the effectiveness of a               -for-1 stock split of our capital stock to be effected on           ;
no exercise of outstanding options after December 31, 2023; and
no exercise by the underwriters of their option to purchase additional shares of Class A common stock from us in this offering.
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SUMMARY CONSOLIDATED FINANCIAL DATA
The following tables summarize our consolidated financial and other data. We have derived the summary consolidated statement of operations data for 2023 and 2022 and summary consolidated balance sheet data as of December 31, 2023 from our audited consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future. The following summary consolidated financial and other data should be read in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our consolidated financial statements and the related notes, and our unaudited condensed combined statement of operations included elsewhere in this prospectus.
Year ended December 31,
2023
2022
(in thousands, except share amounts and per share amounts)
Consolidated Statements of Operations Data:
Revenue
$
$ 210,702 
Cost of revenue
46,176 
Gross profit
164,526 
Operating expenses:
Sales and marketing
110,069 
Research and development
42,558 
General and administrative
49,164 
Depreciation and amortization
3,048 
Total operating expenses
204,839 
Loss from operations
(40,313)
Other expense, net
(14,286)
Loss before provision for income taxes
(54,599)
Provision for income taxes
(262)
Net loss
$
$ (54,861)
Net loss per share:
Basic
(6.33)
Diluted
(6.33)
Weighted average common shares outstanding:
Basic
8,672,426 
Diluted
8,672,426 
Pro forma net loss per share attributable to common stockholders, basic and diluted (1)
Pro forma weighted average common shares outstanding, basic and diluted (1)
______________
(1)See Note to our consolidated financial statements as of and for the year ended December 31, 2022 and Note to our financial statements as of and for the year ended December 31, 2023 included elsewhere in this prospectus for an explanation of the method used to calculate historical and pro forma net loss per share, basic and diluted, and the weighted average number of shares of common stock used in the computation of the per share amounts.
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As of December 31, 2023
Actual
 
Pro Forma (1)
 
Pro Forma As Adjusted (2) (3)
(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents
$
$
$
Short-term investments
Working capital (4)
Total assets
Current liabilities
Convertible notes
Total liabilities
Redeemable convertible preferred stock
Accumulated deficit
Total stockholders’ deficit
______________
(1)The pro forma column in the consolidated balance sheet data table above reflects (i) the Capital Stock Conversion, as if such conversion had occurred on December 31, 2023; (ii) the Reclassification, as if such Reclassification had occurred on December 31, 2023; (iii) the Class B Stock Exchange, as if such stock exchange had occurred on December 31, 2023; (iv) the Notes Conversion, as if such conversion had occurred on December 31, 2023 and (v) the filing and effectiveness of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws prior to the completion of this offering.
(2)The pro forma as adjusted column in the consolidated balance sheet data table above gives effect to (i) the pro forma adjustments set forth in note 1 above, and (ii) the sale and issuance by us of shares of our Class A common stock in this offering, based upon the assumed initial public offering price of $           per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
(3)Each $1.00 increase or decrease in the assumed initial public offering price of $           per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase or decrease the amount of our pro forma as adjusted cash and cash equivalents, working capital, total assets, and total stockholders’ (deficit) equity by $             million, assuming that the number of shares of Class A common stock offered, as set forth on the cover page of this prospectus, remains the same, after deducting estimated underwriting discounts and commissions payable by us. An increase or decrease of 1.0 million shares in the number of shares offered by us would increase or decrease, as applicable, the amount of our pro forma as adjusted cash and cash equivalents, working capital, total assets, and total stockholders’ (deficit) equity by $           million, assuming the assumed initial public offering price remains the same, and after deducting estimated underwriting discounts and commissions payable by us.
(4)Working capital is defined as current assets less current liabilities.
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Performance Metrics and Non-GAAP Measures
In addition to the measures presented in our consolidated financial statements, we use the following key business and non-GAAP metrics, among others, to help us evaluate our business, identify trends affecting our performance, formulate business plans, and make strategic decisions.
Year ended December 31,
2023
2022
(in thousands, except percentages and per redeemer figures)
Redemptions
141,368 
Redeemers(1)
2,901 
Redemptions per redeemer
48.7 
Redemption revenue per redemption
$ 0.98 
Revenue
$ 210,702 
Gross profit
$ 164,526 
Gross margin
78  %
Net loss
$ (54,861)
Net loss as a percent of revenue
(26) %
Adjusted EBITDA(2)
$ (27,493)
Adjusted EBITDA margin(2)
(13) %
______________
(1)A consumer who has redeemed at least one digital offer within the quarter. If a consumer were to redeem on more than one publisher during that period, they would be counted as multiple redeemers.
(2)Adjusted EBITDA and Adjusted EBITDA margin are not calculated in accordance with U.S. generally accepted accounting principles (GAAP). For more information regarding our use of Adjusted EBITDA and Adjusted EBITDA margin, and a reconciliation of Adjusted EBITDA to net loss and Adjusted EBITDA margin to net loss as a percent of revenue, the most directly comparable financial measures calculated in accordance with GAAP, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Performance Metrics and Non-GAAP Measures.”
See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Performance Metrics and Non-GAAP Measures” included elsewhere in this prospectus for a description of, and additional information about, these non-GAAP measures and performance metrics.
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RISK FACTORS
Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this prospectus, including our audited financial statements and the related notes included elsewhere in this prospectus and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our Class A common stock. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations, and growth prospects. In such an event, the market price of our Class A common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations and the market price of our Class A common stock.
Risks Related to our Business
We have a history of net losses, we anticipate increasing expenses in the future, and we may not be able to attain profitability in the future.
We have incurred net losses in each year since our founding, we anticipate increasing expenses in the future, and we may not be able to attain, or maintain, profitability. We incurred a net loss of $54.9 million for the year ended December 31, 2022 and as of December 31, 2022, we had an accumulated deficit of $247.3 million. We expect our costs will increase over time and our losses to continue as we expect to invest significant additional funds towards growing our business and operating as a public company. See the risk factor below titled “Even if this offering is successful, operating and growing our business may require additional capital, and if capital is not available to us, our business, financial condition, results of operations, and prospects, may suffer.” We have expended and expect to continue to expend substantial financial and other resources on developing our platform, including expanding our solutions, developing or acquiring new platform features and solutions, and increasing our sales and marketing efforts. These efforts may be more costly than we expect and may not result in increased revenue or growth in our business. Any failure to increase our revenue sufficiently to keep pace with our investments and other expenses could prevent us from achieving profitability or positive cash flow on a consistent basis. If we are unable to successfully address these risks and challenges as we encounter them, our business, financial condition, results of operations, and prospects could be adversely affected.
Our ability to achieve and maintain profitability is impacted by growth in our network and our ability to drive operational efficiencies in our business. Our efforts to achieve profitability may not succeed due to factors such as evolving consumer behavior trends in shopping, consumer engagement and retention, our ability to maintain and expand our relationships with publishers, CPG brands, and retailers; our ability to hire and retain highly skilled personnel; unfavorable macroeconomic conditions (such as inflationary pressures); our ability to effectively scale our operations; and the continuing evolution of the industry, many of which are beyond our control.
Our ability to achieve and maintain profitability also depends on our ability to manage our costs. We have expended and expect to continue to expend substantial financial and other resources to:
increase the engagement and investment levels of publishers, CPG brands, retailers, and consumers;
increase the number and variety of publishers that participate in the Ibotta Performance Network (IPN), including retailer publishers;
drive adoption of Ibotta through marketing and incentives and increase awareness through brand campaigns; and
invest in our operations to continue scaling our business to achieve and sustain long-term efficiencies.
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These investments may contribute to net losses in the near term. We may discover that these initiatives are more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these expenses or realize the benefits we anticipate. Certain initiatives may also require incremental investments or recurring expenses and may not be accretive to revenue growth, margin, or profitability for a longer time period, if at all. Many of our efforts to increase revenue and manage operating costs are new and unproven given the unique and evolving complexities of our business and the evolving nature of the industry. Any failure to adequately increase revenue or manage operating costs could prevent us from achieving profitability. In addition, we may make concessions to publishers, CPG brands, and retailers that are designed to maximize profitability in the long-term but may decrease profitability in the short-term. As a result, the impact of concessions on our financial results may continue into future periods or have higher impacts than we anticipate. We may also incur higher operating expenses as we implement strategic initiatives, including in response to external pressures such as competition, retailer consolidation, and evolving consumer behavior trends in shopping. For example, we expect that sales and marketing will increase for the foreseeable future, primarily stemming from increased headcount and marketing efforts. Additionally, we may not realize, or there may be limits to, the efficiencies we expect to achieve through our efforts to scale the business, reduce friction in the direct-to-consumer (D2C) shopping experience, customer support, and consumer acquisition and onboarding costs. Our efforts to encourage the growth of loyalty programs on third-party publishers’ apps and websites may cause fewer consumers to use our D2C properties, leading to a loss of revenue and adversely affecting our financial position. We will also face greater compliance costs associated with the increased scope of our business and being a public company.
We may encounter unforeseen operating expenses, difficulties, complications, delays, and other factors, including as we expand our business, execute on strategic initiatives, and navigate macroeconomic uncertainty, which may result in losses or a failure to generate profitable growth in future periods.
As such, due to these factors and others described in this “Risk Factors” section, including the risk factor titled, “We may not be able to sustain our revenue growth rate in the future”, we may not be able to achieve or maintain profitability or generate profitable growth in the future. If we are unable to achieve and maintain profitability, the value of our business and the trading price of our Class A common stock may be negatively impacted.
Our business, financial condition, results of operations, and prospects will be adversely affected if we do not renew, maintain, and expand our relationships with existing publishers and add new publishers to the IPN.
Our business, financial condition, results of operations, and prospects will be adversely affected if we do not renew, maintain, and expand our relationships with existing publishers and add new publishers to the IPN. We provide offers on a white-label basis to Walmart Inc., a Delaware corporation (Walmart), Dollar General, Shell, Exxon, and Kroger. We have invested heavily in the IPN, which matches and distributes offers across a variety of publisher sites. Our contract negotiation process with such publishers can be lengthy, which can contribute to variability in our revenue generation and makes our revenue difficult to forecast. As a result, it is difficult to predict our ability to form new partnerships with publishers, and our revenue could be lower than expected, which would have an adverse effect on our business, financial condition, results of operations, and prospects.
We match and distribute our digital offers through large retailer publishers, grocery retailers, and Ibotta D2C properties. If we do not renew, maintain and expand these relationships or add new publishers, our business will be negatively affected. We rely heavily on our publishers to match and distribute our digital promotions content, with a substantial portion of our white-label redemptions originating from offer selections on their websites and mobile applications. In particular, the Walmart Program Agreement is a multi-year arrangement and automatically renews for successive twenty-four month periods unless either party provides notice of termination at least 180 days prior to the expiration of the applicable period. The Walmart Program Agreement can be terminated by Walmart with at least 270
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days notice to us (provided that Walmart cannot replace us during the then-remaining term of the Walmart Program Agreement with a digital offers program created by Walmart or a third-party), and may be terminated under certain circumstances including for material breach by either party. If Walmart terminated or elected not to renew the Walmart Program Agreement with us, our business, financial condition, results of operations, and prospects would be adversely affected.
Publishers may also ask to modify their agreement terms in a cost-prohibitive or strategically detrimental manner when their agreements are up for renewal. Our inability to maintain our relationships with our publishers on terms consistent with or better than those already in place and that are otherwise favorable to us could increase competitive pressure and/or offering pricing, and otherwise adversely affect our business, financial condition, results of operations, and prospects. Retailer consolidation may also result in a decrease in or cessation of engagement with Ibotta, or result in Ibotta receiving less favorable contract terms with the consolidated entity. Publishers could also experience downturns or fail (including due to macroeconomic pressures), fail to adopt additional offerings or fulfillment methods, or cease using Ibotta altogether for many reasons.
We are also dependent on our publishers to take steps to integrate with the IPN and to maximize and encourage offer redemption, including decisions relating to user experience and design, marketing, and proper maintenance of their technology.
We are dependent on publishers to integrate to the IPN since publishers have a significant amount of control over their integration to the IPN, including their user experience and marketing. We are also dependent on publishers’ timelines, and the amount of time, effort, and support provided by publishers and publishers’ third-party service providers to implement the IPN and to maintain their technology to support the IPN after integration, all of which can vary for each publisher. Certain decisions by publishers could result in an unsuccessful integration of a publisher to the IPN, including lower user experience or delay the addition of a publisher to the IPN, which would negatively impact our business, financial condition, results of operations, and prospects.
We are also highly dependent on our publishers’ efforts to promote their loyalty programs and decisions they make relating to their loyalty programs, and we have limited ability, if any, to control and predict such decisions by publishers. We cannot control, and in many cases cannot predict, the timing of various publisher initiatives, such as the marketing of their loyalty programs, which may have an outsized impact on the number of redemptions occurring on their properties. For example, a failure of publishers to increase awareness and usage of offers on their loyalty programs could result in a reduced number of redemptions on our network.
If we fail to maintain or grow offer redemptions on our network, our revenues and business may be negatively affected.
Both the redeemers and our redeemers’ level of redemptions are critical to our success. For 2022, total redeemers were approximately 2.9 million. For clarity, if one consumer were to redeem on more than one publisher, they would be counted as a redeemer on each publisher. We have in the past experienced fluctuations and declines in the pace of growth of redeemers and could in the future be unable to grow or increase the engagement of our redeemers and as a result our business may suffer. If we are unable to maintain and expand the use by consumers of digital promotions in our network or if we do not do so to a greater extent than our competitors, publishers, CPG brands, and retailers may find that offering digital promotions on our network do not reach consumers with the scale and effectiveness that is compelling to them.
Any number of factors can negatively affect growth in the number of redeemers, redemptions per redeemer, and redemptions on our network, including if:
our publishers, CPG brands, and retailers reduce, suspend, or terminate their relationship with us;
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we are unable to convince consumers of the value of the IPN and publishers of the value of white-label retailer loyalty programs that leverage our offers and technology;
our publishers, CPG brands, and retailers do not devote sufficient time, resources, or funds to the promotion of our network and marketing of our digital promotions;
we are unable to provide a broad range of valuable offers;
we are unable to deliver a user-friendly experience to consumers;
consumers increasingly use competitors’ platforms;
consumers have difficulty installing, updating, or otherwise accessing our platform as a result of actions by us or third parties;
there are concerns on consumer data practices, concerns about the nature of content made available on our products and offerings, or concerns related to privacy, security or other factors;
we are unable to manage and prioritize offers to ensure consumers are presented with offers that are appropriate, interesting, useful, and relevant to them;
we adopt terms, policies, or procedures related to areas such as sharing, content, consumer data, or advertising, or we take, or fail to take, actions to enforce our policies, that are perceived negatively by consumers;
we undertake initiatives designed to attract and retain consumers, including the use of new technologies such as Artificial Intelligence (AI), that are unsuccessful or discontinued;
we fail to provide adequate customer service to our publishers, CPG brands, retailers, and consumers;
CPG brands reduce their investment in offers and offer inventory suffers, which could occur for a variety of reasons, including reduced marketing budgets or supply chain disruptions; and
our inability to keep up with the rapid growth of the IPN, which could exhaust CPG brand offers too quickly, diminish the number of available offers, and reduce value for consumers.
From time to time, certain of these factors have negatively affected our redeemer and redemption growth. We need to ensure that our platform is convenient, rewarding, trustworthy, and personalized, and that we offer the most competitive offers within our ecosystem. If we are unable to maintain or increase our redeemers and redemptions, it could have a material adverse impact on our business, financial condition, results of operations, and prospects.
Our business, financial condition, results of operations, and prospects will suffer if CPG brands do not use our network for digital promotions.
As of September 30, 2023, we have over 750 different clients. The success and scale of our network depends on our strategic relationships with CPG brands. If we are not able to attract consumers, including through third-party publishers’ white-label loyalty programs, CPG brands may not be willing to use our network for digital promotions. If we do not renew, maintain and expand these relationships or add new CPG brands, we may not be able to grow our redemptions and our business will be negatively affected.
If our CPG brands terminate or reduce their relationships with us or suspend, limit, or cease their operations or otherwise, our business, financial condition, results of operations, and prospects will suffer. Also, since our contracts with CPG brands are generally less than one year long, there is a risk that CPG brands will not renew their contracts with us which would also negatively affect our business, potentially materially.
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If our CPG brands choose to materially alter the breadth, depth, or targeting parameters of the offers they provide to us for distribution throughout our network, this could cause unforeseen reductions in the number of redemptions.
Further, our revenue may fluctuate due to changes in marketing budgets of CPG brands. CPG brands can change their spend without notice, which can result in our inability to anticipate such fluctuations. For example, budget pressures or unspent budgets at the end of a CPG brand’s fiscal year may lead to unexpected reduced or increased spending on our network. In addition, CPG brands and media agencies may determine that other media tactics are more compelling and divert investment to such tactics instead of to digital promotions, leading to less offers. Our revenue may also fluctuate because of certain macroeconomic factors. For example, in the first half of 2022, our D2C redemptions per redeemer were negatively impacted due to supply chain constraints which made it difficult for our clients to keep their product on shelves and led to decreased promotions on high frequency purchased products.
CPG brands may also ask to modify their agreement terms in a cost-prohibitive or strategically detrimental manner when their agreements are up for renewal. Our inability to maintain our relationships with CPG brands on terms consistent with or better than those already in place and that are otherwise favorable to us could increase competitive pressure and/or offering pricing, and otherwise adversely affect our business, financial condition, results of operations, and prospects. CPG consolidation may also result in a decrease in or cessation of engagement with Ibotta, or result in Ibotta receiving less favorable contract terms with the consolidated entity. CPG brands could also experience downturns or fail, including due to macroeconomic pressures or ceasing use of Ibotta altogether for many reasons. CPG brands have traditionally been slow to adopt new digital offer programs. As a result, we have at times experienced, and may continue to experience, slower adoption and implementation of our products and offerings by our current and potential CPG brands. If we lack a sufficient variety and supply of CPG brands or lack access to the most popular CPG brands such that Ibotta becomes less appealing to consumers and CPG brands, our business may be harmed.
We may not be able to sustain our revenue growth rate in the future.
Historically, the growth rate of our business, and as a result, our revenue growth, has varied from quarter-to-quarter and year-to-year, and we expect that variability to continue. For the fiscal year ended December 31, 2022, our revenue was $210.7 million. There can be no assurances that revenue will grow or do so at current rates and you should not rely on the revenue of any prior quarterly or annual period as an indication of our future performance. Our revenue growth rate may decline in future periods.
Our revenue may fluctuate due to changes in the marketing budgets of existing and prospective clients, and the timing of their marketing spend. Our growth also depends on our publishers’ efforts to promote their digital offers programs. Existing and prospective clients can change their spend without notice, which can result in our inability to anticipate such fluctuations. For example, budget pressures or unspent budgets at the end of an existing or prospective clients’ fiscal year may lead to unexpected reduced or increased spending on our network. It may also fluctuate because of certain macroeconomic factors as further described in the risk factor titled “Macroeconomic conditions, including slower growth or a recession and supply chain disruptions, have previously and could continue to adversely affect our business, financial condition, results of operations, and prospects.”
Our business is complex and evolving. We may offer new products and technologies, pricing, service models, and delivery methods to existing and prospective clients. These new capabilities may change the way we generate and/or recognize revenue, which could impact our operating results. In addition, if we shift a greater number of our arrangements with publishers, CPG brands, and retailers to new pricing models and we are not able to deliver on the results, our revenue growth and revenue could be negatively affected.
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We believe that our continued revenue growth will depend on our ability to:
increase and retain the number of publishers, CPG brands, and consumers that participate in the IPN;
diversify the mix of our redemptions from publishers;
increase the degree to which publishers market their white-label retailer loyalty programs;
increase our share of advertiser on promotions and media (collectively, marketing spend) through our network;
preserve and grow the fees we charge on a per redemption or percentage of total basket basis;
preserve and grow our ad products and other business;
provide publishers, CPG brands, retailers, and consumers with high-quality support that meets their needs;
adapt to changes in marketing goals, strategies, and budgets of advertisers and the timing of their marketing spend;
preserve and grow the rate of redemptions by consumers of their digital promotions;
preserve or grow our ad products business as well as our data, media, and consumer insights revenue business;
increase the number of and retain retailers;
expand our business in existing markets and enter new verticals, markets, and geographies;
anticipate and respond to macroeconomic changes and changes in the markets in which we operate;
adapt to rapidly evolving trends in the ways CPG brands, retailers, and consumers interact with technology;
capitalize on the shift from offline to digital marketing and growth in e-commerce;
deploy, execute, and continue to develop our analytics capabilities;
expand the number, variety, quality, and relevance of digital promotions available on our network;
increase the awareness of our brand to build our reputation;
hire, integrate, train, and retain talented personnel;
develop a scalable, high-performance technology infrastructure that can efficiently and reliably handle increased usage, as well as the deployment of new features and solutions;
identify and acquire or invest in businesses, products, or technologies that we believe could complement or expand our products and offerings;
effectively manage the scaling of our operations;
avoid interruptions or disruptions to our services; and
compete successfully with existing and new competitors.
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If we fail to address the risks and difficulties that we face, including those associated with the challenges listed above as well as those described elsewhere in this “Risk Factors” section, our business, financial condition, results of operations, and prospects could be adversely affected. Further, because we operate in a rapidly evolving market, any predictions about our future revenue and expenses may not be as accurate as they would be if we had a longer operating history or operated in a more predictable market. We have encountered in the past, and will encounter in the future, risks and uncertainties frequently experienced by growing companies with limited operating histories in rapidly changing industries. If our assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our results of operations could suffer and our business, financial condition, results of operations, and prospects could be adversely affected.
We provide content to publishers indirectly through third-party technology partners and our business, financial condition, results of operations, and prospects will be adversely affected if we do not renew, maintain and expand our relationships with such third-party technology partners.
In some cases, we provide content to publishers indirectly, via third-party technology partners, as in the case of Kroger, Shell, and Exxon. We have also entered into an agreement with AppCard, through which Ibotta will soon gain access to the digital audiences of more than 300 small or medium sized grocery retailers. If any of our third-party technology partners terminate or reduce their relationships with us or suspend, limit, or cease their operations or otherwise, we will not be able reach certain retailers and our business, financial condition, results of operations, and prospects will suffer.
Our business, financial condition, results of operations, and prospects will be adversely affected if we do not renew, maintain and expand our relationships with our third-party technology partners. Our ability to deliver offers at-scale is dependent on adding new third-party technology partners and maintaining our existing third-party technology partners. Our contract negotiation process with such third-party technology partners can be lengthy, which can contribute to variability in our revenue generation. As a result, it is difficult to predict our ability to form new partnerships with third-party technology partners and our revenue could be lower than expected, which would have an adverse effect on our business, financial condition, results of operations, and prospects.
Third-party technology partners may also ask to modify their agreement terms in a cost-prohibitive or strategically detrimental manner when their agreements are up for renewal. Our inability to maintain our relationships with our third-party technology partners on terms consistent with, or better than, those already in place and that are otherwise favorable to us could increase competitive pressure and/or offering pricing, and otherwise adversely affect our business, financial condition, results of operations, and prospects.
We expect a number of factors to cause our results of operations to fluctuate on a quarterly and annual basis, which may make it difficult to predict our future performance.
Our results of operations have historically varied from period to period, and we expect that our results of operations will continue to vary significantly from quarter to quarter and year to year because of a variety of factors, many of which are outside of our control. As a result, comparing our results of operations on a period-to-period basis may not be meaningful. In addition to other risk factors described elsewhere in this “Risk Factors” section, factors that may contribute to the variability of our quarterly and annual results include:
our ability to attract and retain publishers, CPG brands, and retailers that use our network and convert their activity into sales;
the mix of our redemptions among our publishers;
the mix of redemptions as between different CPG brands, which have different fee arrangements;
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our ability to accurately forecast revenue and appropriately plan expenses;
our ability to respond favorably to existing or new competitors in our market;
increases in publisher concentration;
our ability to expand into new CPG brand verticals and new third-party publisher verticals;
increases in marketing, sales, and other operating expenses including those that are incurred to acquire and retain new publishers, CPG brands, consumers, and retailers;
the percent of our fee that we share with our publishers;
the impact of worldwide economic conditions, including inflation, rising interest rates, supply chain disruptions, geopolitical events, such as the conflict involving Russia and Ukraine and Hamas and Israel, and the resulting effect on consumer spending and consumer confidence;
fluctuations in transaction costs associated with processing consumer cash outs;
evolving fee arrangements with publishers and CPG brands;
the seasonality of our business;
our ability to maintain an adequate rate of growth and effectively manage that growth;
our ability to maintain and increase traffic to our network;
the effects of changes in search engine placement and prominence;
our ability to keep pace with technology changes in our industry, and related privacy regulations;
the effects of negative publicity on our business, reputation, or brand;
our ability to protect, maintain, and enforce our intellectual property rights;
legal expenses including costs associated with defending claims, including intellectual property infringement claims, and related judgments or settlements;
changes in governmental or other regulations affecting our business;
interruptions in service including any cybersecurity breaches and any related impact on our business, reputation, or brand;
our ability to attract and engage qualified employees and key personnel;
our ability to choose and effectively manage third-party service providers;
the effects of natural or man-made catastrophic events;
the impact of a pandemic or an outbreak of disease or similar public health concern, such as the COVID-19 pandemic, or fear of such an event;
our ability to collect amounts owed to us;
the timing of the recognition of our deferred revenue;
the timing of strategic investments and expenditures;
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fluctuations in operating expenses, including cost of revenue, as we seek to improve efficiencies, comply with changing regulatory requirements, and expand our business, offerings, and technologies;
changes to financial accounting standards and the interpretation of those standards, which may affect the way we recognize and report our financial results;
the effectiveness of our internal controls over financial reporting; and
changes in our tax rates or exposure to additional tax liabilities.
The variability and unpredictability of our results of operations could result in our failure to meet the expectations of investors or analysts that cover us, with respect to revenue or other results of operations for a particular period. If we fail to meet or fail to exceed such expectations, the market price of our Class A common stock could fall substantially, and we could face costly lawsuits, including securities class action suits.
Macroeconomic conditions, including slower growth or a recession and supply chain disruptions, have previously and could continue to adversely affect our business, financial condition, results of operations, and prospects.
Our business and results of operations are subject to global economic conditions. Our revenue depends on the ability of consumers to buy products that are featured on the IPN. Deteriorating macroeconomic conditions, including slower growth or a recession, inflation, bank failures, supply chain disruption, increases in interest rates, increases to fuel and other energy costs or vehicle costs, geopolitical events, including the potential for new or unforeseen conflicts such as the impact of the Russia and Ukraine conflict and Hamas and Israel conflict, changes in the labor market, or decreases in consumer spending power or confidence, are likely to result in a decline in client spending which could adversely affect the number of offer redemptions.
Supply chain disruptions may adversely affect the willingness of our clients to continue promoting their products through the IPN. For example, in the first half of 2022, our D2C redemptions per redeemer were negatively impacted due to supply chain constraints which made it difficult for our clients to keep their product on shelves and decreased promotions on products purchased with high frequency. Clients experienced decreased inventory levels, increased shipment delays, increased freight costs, and elevated levels of demand, leading to decreased demand for our platform and decreased revenues as well as decreased earning opportunities.
A recession or market correction could also decrease marketing spend, particularly in media, adversely affecting the demand for our solutions, our business, and the value of our Class A common stock. Small businesses that do not have substantial resources, like some of our partners on our network, tend to be more adversely affected by poor economic conditions than larger businesses. An increase in our clients’ operating costs, or other deterioration in the financial condition of our partners, whether due to macroeconomic conditions (such as inflation) or otherwise, could cause our clients to reduce discount offerings or seek to renegotiate contract terms, which may impact our fee agreements with them. If such partners on our network were to cease operations, temporarily or permanently, or face financial distress or other business disruption, we may not be able to provide consumers with a sufficient selection of CPG brands and retailers, and they may be less likely to use our network.
In addition, uncertainty and volatility in the banking and financial services sectors, inflation and higher interest rates, supply chain disruptions, increased labor and benefits costs, and increased insurance costs have, and may continue to, put pressure on economic conditions, which has led, and could lead, to greater operating expenses. Certain of our longer-term strategic initiatives may also be deferred or not have the intended effects in the event of an economic recession, which we may not be able to predict.
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The extent of the impact of these factors on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, the impact on our clients, partners, and employees, all of which continue to evolve and are unpredictable. Accordingly, current results and financial condition discussed herein may not be indicative of future operating results and trends.
Competition presents an ongoing threat to the success of our business.
We operate in a highly competitive environment. The digital promotions market is rapidly evolving and our continued success will depend on our ability to successfully adjust our strategy to meet the changing market dynamics. If we are not able to continue to innovate and further develop our platform to respond to changes in the digital promotions market, our business could be adversely affected and our competition may develop offerings that are more competitive than ours.
As we seek investments by CPG brands and retailers, we compete with large social media and search-oriented platforms, as well as programmatic media networks that sell ads on a cost-per-click or cost-per-impression basis. Following Amazon’s lead, other large retailers are now offering CPG brands the opportunity to buy media, usually in the form of sponsored search results or display ads, on their own platforms. These retailers offer more sophisticated media targeting and attribution capabilities because they can leverage their own purchase data in ways the social media and search platforms cannot.
CPG brands and retailers also have multiple different promotional tools at their disposal. We compete with companies that distribute paper coupons and free-standing inserts (FSIs) as well as digital coupons through grocery retail websites in a white-label fashion. We also compete with other mobile apps that offer digital promotions.
For consumers, there are many other rewards programs that provide cash back, including credit cards, individual retailer loyalty programs, and online shopping sites that aggregate retailer offers. We aim to differentiate ourselves by offering an at-scale solution that hosts a wider range of rewards content, allows for a higher degree of targeting and measurement, operates on a fee-per-sale basis, works offline and online, and drives sales across multiple publishers, and retailers. However, our ability to maintain and improve our competitive advantage depends upon many factors both within and beyond our control, including the following:
scale and quality of the publishers, CPG brands, and retailers in the IPN;
ability to attract consumers to our network;
platform security, usability, scalability, reliability, and availability;
ability to integrate with publishers and retailers in a timely manner;
ongoing and uninterrupted access to item-level consumer data with the necessary usage rights required to power our solution;
measurement that demonstrates the effectiveness of our network;
brand recognition and reputation; and
ability to recruit, retain, and train employees.
Some of our competitors have longer operating histories, greater financial, marketing and other resources, and larger customer bases than we do. In addition, our competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies, which may allow them to build larger customer and/or merchant bases or generate revenue from their customer bases more effectively than we do.
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Our business, financial condition, results of operations, and prospects will suffer if we do not renew, maintain and expand our relationships with retailers.
As of September 30, 2023, we had 86 integrated retailers. Our integrated retailers provide us with item-level data that is integral to our platform because such data helps facilitate a simpler redemption of offers on Ibotta D2C properties. We also allow thousands of online retailers to advertise and present consumers with their own cash back offers on Ibotta’s D2C properties. Our ability to renew, maintain, and expand our relationships with retailers is dependent on, among other factors, our ability to increase the number of redeemers that use our network, and any failure to do so will negatively affect our business. If our retailers terminate their relationships with us or suspend, limit or cease their operations or otherwise, our business, financial condition, results of operations, and prospects will suffer.
Retailers may also ask to modify their agreement terms in a cost-prohibitive or strategically detrimental manner when their agreements are up for renewal. Our inability to maintain our relationships with our clients on terms consistent with or better than those already in place and that are otherwise favorable to us could increase competitive pressure and/or offering pricing, and otherwise adversely affect our business, financial condition, results of operations, and prospects.
Retailer consolidation may also result in a decrease in or cessation of engagement with Ibotta, or result in Ibotta receiving less favorable contract terms with the consolidated entity. Retailers could also experience downturns or fail, including due to macroeconomic pressures, and cease using Ibotta altogether for many reasons.
If we fail to effectively manage our growth, our business, financial condition, results of operations, and prospects could be adversely affected.
We have experienced growth in our business and we anticipate continuing to experience growth in the future. For example, the number of our full-time employees has increased from 530 as of December 31, 2020 to              as of December 31, 2023. This growth has placed, and may continue to place, significant demands on our management and our operational and financial infrastructure. Our ability to manage our growth effectively and to integrate new employees, technologies, and acquisitions into our existing business will require us to continue to expand our operational and financial infrastructure and to continue to retain, attract, train, motivate, and manage employees. Continued growth could strain our ability to develop and improve our operational, financial and management controls; enhance our reporting systems and procedures; recruit, train, and retain highly skilled personnel; and maintain user satisfaction. Additionally, if we do not effectively manage the growth of our business and operations, the quality of our solutions could suffer, which could negatively affect our reputation and brand, business, financial condition, results of operations, and prospects.
We have a limited operating history and operate in an evolving industry, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.
We incorporated in 2011, and we have since frequently expanded our solutions. This limited operating history at our current scale and our evolving business make it difficult to evaluate our future prospects and the risks and challenges we may encounter. These risks and challenges include our ability to:
accurately forecast our revenue and plan our operating expenses;
increase and retain the number of publishers, CPG brands, retailers, and consumers;
successfully compete with current and future competitors;
successfully expand our business in existing markets and enter new markets and geographies;
anticipate and respond to macroeconomic changes and changes in the markets in which we operate;
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plan for and manage capital expenditures;
comply with existing and new laws and regulations applicable to our business;
maintain and enhance the value of our reputation and brand;
adapt to rapidly evolving trends in the ways publishers, CPG brands, retailers, and consumers interact with technology;
avoid interruptions or disruptions in our service;
develop a scalable, high-performance technology infrastructure that can efficiently and reliably handle increased usage, as well as the deployment of new features and solutions;
hire, integrate, and retain talented technology, sales, customer service, and other personnel;
effectively manage rapid growth in our personnel and operations; and
effectively manage our costs.
If we fail to address the risks and difficulties that we face, including those associated with the challenges listed above as well as those described elsewhere in this “Risk Factors” section, our business, financial condition, results of operations, and prospects could be adversely affected.
Any predictions about our future revenue and expenses may not be as accurate as they would be if we had a longer history operating our business at its current scale, scope, and complexity, operated in a more predictable market or regulatory environment, or had more certainty regarding levels of demand for our products and offerings. We have limited experience operating our business at its current scale, including the distribution of our offers to third-party publishers. For example, in September of 2023, Walmart made its program available to all Walmart customers with a Walmart.com account, while Dollar General joined the IPN in 2022 and began hosting Ibotta’s cash back offers in 2023.
Our limited history and experience operating our current business may also negatively impact our ability to plan strategic investments and initiatives to further expand our business and offerings, including to support our publishers, CPG brands, retailers, and consumers, certain of which may require significant capital expenditures and future operating expenses that may be difficult to forecast. In addition, existing and future operational and strategic initiatives may have lengthy return on investment time horizons, such as certain investments in our platform. As a result, we will not be able to adequately assess the benefits of such initiatives until we have made substantial investments of time and capital, resulting in high opportunity costs. We are also devoting significant resources to bolster our capacity and information technology infrastructure, financial and accounting systems and controls, sales and marketing and engineering capabilities, and operations and support infrastructure, as well as to retain, manage, and train employees in geographically dispersed locations to service new and existing customers. We may not successfully accomplish any of these objectives in a timely manner or at all.
Further, because we operate in a rapidly evolving market, any predictions about our future revenue and expenses may not be as accurate as they would be if we had a longer operating history or operated in a more predictable market. We have encountered in the past, and will encounter in the future, risks and uncertainties frequently experienced by growing companies with limited operating histories in rapidly changing industries. If our assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our results of operations could differ materially from our expectations and our business, financial condition, results of operations, and prospects could be adversely affected.
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Our business depends on a strong brand, and if we are not able to maintain and enhance our brand, or if we receive unfavorable media coverage, our ability to retain and expand our number of publishers, CPG brands, retailers, and consumers will be impaired, and our business and operating results will be negatively affected.
We believe that the brand identity that we have developed has significantly contributed to the success of our business. We also believe that maintaining and enhancing our brand is important to expanding our base of publishers, CPG brands, retailers, and consumers. Maintaining and enhancing our brand may require us to make substantial investments and these investments may not be successful. If we fail to promote and maintain our brand or if we incur excessive expenses in this effort, our business would be negatively affected. We anticipate that, as our market becomes increasingly competitive, maintaining and enhancing our brand may become increasingly difficult and expensive.
Unfavorable publicity or consumer perception of our website, mobile app, platform, practices, or the offerings of our publishers, CPG brands, and retailers could adversely affect our reputation, resulting in difficulties in recruiting, decreased revenues, and a negative impact on the number of publishers, CPG brands, and retailers in the IPN, and the loyalty of our consumers. As a result, our business could be negatively affected.
Our sales cycles can be long and unpredictable, and our sales efforts require considerable time and expense. As a result, our sales and revenue are difficult to predict and may vary substantially from period to period, which may cause our results of operations to fluctuate significantly.
Our sales cycle can be long, and we may make investments and incur significant expenses before an agreement or renewal with CPG brands or retailers are reached, if at all, and before we are able to generate any revenue from such agreement or renewal. There are no guarantees that we will be able to recoup such investments and expenses, which would have an adverse effect on our business, financial condition, results of operations, and prospects.
In addition, the length of time that CPG brands or retailers devote to their evaluation, contract negotiation, and budgeting processes varies significantly. In particular, our contract negotiation process with publishers can be lengthy. Our sales cycles can be lengthy in certain cases, especially with respect to our prospective large end publishers or customers. During the sales cycle, we expend significant time and money on sales and marketing activities, which lower our operating margins, particularly if no sale occurs. Even if we expand our relationship with publishers, CPG brands, and retailers, there are many factors affecting the timing of our recognition of revenue, which makes our revenue difficult to forecast. In addition, due to macroeconomic uncertainties, the sales cycle may be extended, and there may be delays and reductions of expenditures and cancellations by clients. There are many other factors that contribute to variability of our revenue recognition, including budgetary constraints and changes in their personnel. As a result, it is difficult to predict whether a sale will be completed, the particular period in which a sale will be completed, or the period in which revenue from a sale will be recognized. If our sales cycles lengthen, our revenue could be lower than expected, which would have an adverse effect on our business, financial condition, results of operations, and prospects.
Our business is typically affected by seasonality, which results in fluctuations in our operating results.
Historically, we have been affected by seasonality, with our business historically having higher revenues in the fourth quarter of each fiscal year, mirroring that of consumer retail and e-commerce markets, where demand increases during the fourth quarter holiday season and decreases in the first quarter. We typically see high redemption volume in the second half of the year where a larger number of offers being redeemed have lower redemption revenue per redemption. However, there can be no assurances such seasonal trends will consistently repeat each year. Also, the mix of product sales may vary considerably from time to time. As a result of quarterly fluctuations caused by these and other factors, comparisons of our operating results across different fiscal quarters may not be accurate
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indicators of our future performance and we may not be able to accurately predict our quarterly sales. Accordingly, our results of operations are likely to fluctuate significantly from period to period.
Internet search engines drive traffic to our network, and our new consumer growth could decline. Our business, financial condition, results of operations, and prospects would be adversely affected if we fail to appear prominently in search results.
Our success depends in part on our ability to attract consumers through unpaid internet search results on search engines like Google, Yahoo!, and Bing. The number of consumers we attract to our network from search engines is due in large part to how and where our website ranks in unpaid search results. These rankings can be affected by a number of factors, many of which are not under our direct control and may change frequently. For example, a search engine may change its ranking algorithms, methodologies, or design layouts. As a result, links to our website may not be prominent enough to drive traffic to our website, and we may not know how or otherwise be in a position to influence the results. In some instances, search engine companies may change these rankings in a way that promotes their own competing products or services or the products or services of one or more of our competitors. Search engines may also adopt a more aggressive auction-pricing system for keywords that would cause us to incur higher advertising costs or reduce our market visibility to prospective consumers. Our website has experienced fluctuations in search result rankings in the past, and we anticipate similar fluctuations in the future. Any reduction in the number of consumers directed to our network could adversely affect our business, financial condition, results of operations, and prospects.
We rely on mobile operating systems and app marketplaces to make our app available to consumers, and if we do not effectively operate with or receive favorable placements within such app marketplaces and maintain reviews from consumers, our usage or brand recognition could decline and our business, financial results, and results of operations could be adversely affected.
We depend in part on mobile operating systems, such as Android and iOS, as well as Google, and their respective app marketplaces to make our app and browser extension available to consumers on our network. Any changes in such systems and app marketplaces that degrade the presentation or functionality of our app and/or browser extension or give preferential treatment to our competitors’ apps or browser extensions could adversely affect our platform’s usage on mobile and desktop devices. If such mobile operating systems or app marketplaces limit or prohibit us from making our app or browser extension available to consumers, make changes that degrade the functionality of our app or browser extension, increase the cost of using our products and offerings, impose terms of use unsatisfactory to us or modify their search or ratings algorithms in ways that are detrimental to us, or if our competitors’ placement in such app marketplace is more prominent than the placement of our app or browser extension, overall growth of consumers could slow. Our app and browser extension have experienced fluctuations in the number of downloads in the past, and we anticipate similar fluctuations in the future. Additionally, we are subject to requirements imposed by app marketplaces such as those operated by Apple and Google, who may change their technical requirements or policies in a manner that adversely impacts the way in which we collect, use, and share data from users. For example, Apple requires mobile apps using its iOS mobile operating system to obtain a user’s permission to track them or access their device’s advertising identifier for certain purposes. The long-term impact of these and any other changes remains uncertain. If we do not comply with applicable requirements imposed by app marketplaces, we could lose access to the app marketplaces and users, and our business would be harmed. Any of the foregoing risks could adversely affect our business, financial condition, results of operations, and prospects.
As new mobile devices and mobile platforms are released, there is no guarantee that certain mobile devices will continue to support our platform or effectively roll out updates to our apps. Additionally, in order to deliver high-quality apps, we need to ensure that our solutions are designed to work effectively with a range of mobile technologies, systems, networks, and standards. If consumers in our network encounter any difficulty accessing or using our apps on their mobile devices or if we are unable to adapt
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to changes in popular mobile operating systems, our business, financial condition, results of operations, and prospects could be adversely affected.
Restrictions imposed by our outstanding indebtedness and any future indebtedness may limit our ability to operate our business and to finance our future operations or capital needs or to engage in acquisitions or other business activities necessary to achieve growth.
We have a senior secured revolving loan facility in place with Silicon Valley Bank, a division of First-Citizens Bank and Trust Company (successor by purchase to the Federal Deposit Insurance Corporation as receiver for Silicon Valley Bridge Bank, N.A. (as successor to Silicon Valley Bank)). Our revolving loan facility includes a number of covenants that limit our ability to, among other things, incur additional indebtedness, incur liens on our assets, engage in consolidations, amalgamations, mergers, liquidations, dissolutions or dispositions, sell or otherwise dispose of our assets, pay dividends or distributions on, or make repurchases or redemptions of, our capital stock, acquire other businesses (by way of asset purchase, stock purchase, or otherwise), or make loans, capital contributions, or other investments. The revolving loan facility also includes a springing financial covenant that would require us to maintain a minimum liquidity ratio of 1.50x, depending on our average liquidity position. The terms of our revolving loan facility may restrict our current and future operations and could adversely affect our ability to finance our future operations or capital needs or take advantage of financing opportunities, mergers, acquisitions, investments, and other corporate opportunities that may be beneficial to our business. In addition, complying with these covenants may make it more difficult for us to successfully execute our business strategy and compete against companies which are not subject to such restrictions.
We cannot guarantee that we will be able to maintain compliance with the covenants in our revolving loan facility or, if we fail to do so, that we will be able to obtain waivers from the lender and/or amend the covenants. A failure by us to comply with the covenants specified in our revolving loan facility would, absent cure or waiver, result in an event of default under the agreement, which would give the lender the right to declare all outstanding obligations, including accrued and unpaid interest and fees, immediately due and payable. If our obligations under our revolving loan facility were to be accelerated, we may not have sufficient cash or be able to borrow sufficient funds to refinance the obligations or sell sufficient assets to repay the obligations, which could adversely affect our business, financial condition, results of operations, and prospects. Even if we were able to obtain new financing, it may not be on commercially reasonable terms or on terms that are acceptable to us. Any event of default could also result in an increase in the interest rates applicable to our revolving loan facility, and may result in the acceleration of or default under any other indebtedness we may incur in the future to which a cross-acceleration or cross-default provision applies. In addition, we have granted a security interest of substantially all our assets to secure our obligations under our revolving loan facility. During the existence of an event of default under our revolving loan facility, the lender could exercise its rights and remedies thereunder, including by way of initiating foreclosure proceedings against any of our assets constituting collateral for our obligations.
The loss of Bryan Leach, our Founder, Chief Executive Officer, President, and Chairman of our board of directors; or one or more of our senior management team or key personnel; or our failure to attract new or replacement members of our senior management team or other key personnel in the future, could significantly harm our business.
We depend on the continued services and performance of our Founder, Chief Executive Officer, President, and Chairman of our board of directors, Bryan Leach; members of our senior management team; and other key personnel. Mr. Leach has been responsible for setting our strategic vision, and should he stop working for us for any reason, it is unlikely that we would be able to immediately find a suitable replacement. We do not maintain key man life insurance for Mr. Leach and do not believe any amount of key man insurance would allow us to recover from the harm to our business if Mr. Leach were to leave the Company for any reason. Similarly, members of our senior management team and key employees are highly sought after, and others may attempt to encourage these executives to leave the Company. The loss of one or more of the members of the senior management team or other key
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personnel for any reason could disrupt our operations, create uncertainty among investors, adversely impact employee retention and morale, and significantly harm our business.
An inability to attract and retain highly qualified employees, including as a result of restrictive changes to immigration laws or the varying application of immigration laws, may hamper our growth and cause our revenues to decline, adversely affecting our business.
To execute our growth plan, we anticipate hiring additional employees over the next few years. In addition, we need to retain our highly qualified employees. Competition for these recruits and employees is intense from other internet and high growth publicly-traded and private companies, especially with respect to engineers with high levels of experience in our industry. Further, in order to continue to grow our business, it is important that we continue to grow our sales force.
We have, from time to time, experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with the appropriate level of qualifications. Many of the companies with which we compete for qualified employees have greater resources than we have and may offer compensation packages that are perceived to be better than ours. For example, we often offer equity awards to our job candidates and existing employees as part of their overall compensation package. If the perceived value of our equity awards declines, including as a result of volatility or declines in the market price of our Class A common stock or changes in perception about our future prospects (including as valuations of companies comparable to us decline due to overall market trends, inflation and related market effects or otherwise), it may adversely affect our ability to recruit and retain highly qualified employees. Additionally, changes in our compensation structure may be negatively received by employees and result in attrition or cause difficulty in the recruiting process. Further, inflationary pressure may result in employee attrition to the extent our compensation does not keep up with inflation. Finally, we are committed to a hybrid workforce which prioritizes hiring employees in Denver. This could slow hiring if we are unable to attract talent in the Denver market. If we fail to attract new employees or fail to retain and motivate our current employees, our business and future growth prospects could be adversely affected.
Changes in immigration laws or varying applications of immigration laws to limit the availability of certain work visas or increase visa fees in the United States may impact our ability to hire the engineering and other talent that we need to continue to enhance our platform, which could have an adverse impact on our business, financial condition, results of operations, and prospects. It is difficult to predict the political and economic events that could affect immigration laws, or the restrictive impact they could have on obtaining or renewing work visas for our technology professionals.
Failure to deal effectively with fraudulent or other improper transactions could harm our business.
It is possible that third parties may commit fraudulent activities such as improperly claiming referral rewards, account takeover attacks, or submitting counterfeit receipts to improperly offer stack and/or claim rewards or discounts. While we use anti-fraud systems, it is possible that individuals will circumvent them using increasingly sophisticated methods or methods that our anti-fraud systems are not able to counteract. Further, we may not detect any of these unauthorized activities in a timely manner. The legal measures we take or attempt to take against third parties who succeed in circumventing our anti-fraud systems may be costly and may not be ultimately successful. While we have taken measures to detect and reduce the risk of fraud, these measures need to be continually improved and may not be effective against new and continually evolving forms of fraud or in connection with new offerings. If these measures do not succeed, our business will be negatively impacted.
We may incur losses if we are required to reimburse CPG brands and retailers for any funds stolen or revenues lost as a result of such incidents. Our CPG brands and retailers could also request reimbursement, or stop using our solutions, if they are affected by buyer fraud or other types of fraud. Furthermore, such instances of fraud may damage our reputation and affect our ability to attract new publishers, CPG brands, retailers, and consumers to our D2C properties and may undermine confidence in the IPN, which could cause our business to suffer.
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We rely in part on licensed money transmitters to enable consumers to cash out their earned rewards from our D2C properties, and the failure to manage our relationships with such third parties could impact our platform and adversely affect our business.
We rely in part on licensed money transmitters to enable consumers to cash out their earned rewards from our D2C properties. If any of our licensed money transmitters terminate their relationship with us or refuse to renew their agreements with us on commercially reasonable terms, we would need to find alternative licensed money transmitters to support our platform, and may not be able to secure similar terms or replace such licensed money transmitters in an acceptable time frame. Any of these risks could result in significant legal, financial, and reputational costs to our business.
We rely primarily on third-party insurance policies to insure our operations-related risks. If our insurance coverage is insufficient for the needs of our business or our insurance providers are unable to meet their obligations, we may not be able to mitigate the risks facing our business, which could adversely affect our business, financial condition, results of operations, and prospects.
We procure third-party insurance policies to cover various operations-related risks including employment practices liability, workers’ compensation, business interruptions, errors and omissions, cybersecurity and data breaches, crime, directors’ and officers’ liability, and general business liabilities. For certain types of operations-related risks or future risks related to our new and evolving offerings, we are not able to, or may not be able to, acquire insurance. In addition, we may not obtain enough insurance to adequately mitigate such operations-related risks or risks related to our new and evolving offerings, and we may have to pay high premiums, co-insurance, self-insured retentions, or deductibles for the coverage we do obtain. We rely on a limited number of insurance providers, and should such providers discontinue or increase the cost of coverage, we cannot guarantee that we would be able to secure replacement coverage on reasonable terms or at all. If our insurance carriers change the terms of our policies in a manner not favorable to us, our insurance costs could increase. Further, if the insurance coverage we maintain is not adequate to cover losses that occur, or if we are required to purchase additional insurance for other aspects of our business, we could be liable for significant additional costs. Additionally, if any of our insurance providers becomes insolvent, it would be unable to pay any operations-related claims that we make.
If the amount of one or more operations-related claims were to exceed our applicable aggregate coverage limits, we would bear the excess, in addition to amounts already incurred in connection with deductibles, self- insured retentions, co-insurance, or otherwise paid by our insurance policy. Insurance providers have raised premiums and deductibles for many businesses and may do so in the future. As a result, our insurance costs and claims expense could increase, or we may decide to raise our deductibles or self-insured retentions when our policies are renewed or replaced. Our business, financial condition, results of operations, and prospects could be adversely affected if the cost per claim, premiums, the severity of claims, or the number of claims significantly exceeds our historical experience and coverage limits; we experience a claim in excess of our coverage limits; our insurance providers fail to pay on our insurance claims; we experience a claim for which coverage is not provided; or the severity or number of claims under our deductibles or self-insured retentions differs from historical averages.
We are also subject to certain contractual requirements to obtain insurance. For example, some of our agreements with retailers require that we procure certain types of insurance, and if we are unable to obtain and maintain such insurance, we may be in violation of the terms of these retailer agreements. In addition, we are subject to local laws, rules, and regulations relating to insurance coverage which could result in proceedings or actions against us by governmental entities or others. Any failure, or perceived failure, by us to comply with existing or future local laws, rules and regulations, or contractual obligations relating to insurance coverage could result in proceedings or actions against us by governmental entities or others. Additionally, anticipated or future local laws, rules, and regulations relating to insurance coverage, could require additional fees and costs. Compliance with these rules and any related lawsuits, proceedings, or actions may subject us to significant penalties and negative publicity, require us to
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increase our insurance coverage, require us to amend our insurance policy disclosure, increase our costs, and disrupt our business.
If we cannot maintain our company culture as we grow, our business and competitive position may be harmed.
We believe our culture fosters an inclusive environment that welcomes diverse experience, backgrounds, lifestyles, and perspectives, and is a key contributor to our success to date. Any failure to preserve our culture could negatively affect our ability to retain and recruit personnel, which is critical to our growth, and to effectively focus on and pursue our corporate objectives. As we grow and develop the infrastructure of a public company, we may find it difficult to maintain these important aspects of our culture. In addition, with many of our employees working remotely, we may find it harder in certain respects to maintain our company culture. Remote work may negatively impact employee morale, productivity, and culture, and may also harm collaboration and innovation. We also have a policy of hiring new employees in Denver, whenever possible, and of requiring these new employees to come into the office a certain number of days per week. This policy may make it hard for us to identify the talent we need to grow our business. If we are not able to maintain our culture, we could lose the innovation, passion, and dedication of our team and as a result, our business, financial condition, results of operations, and prospects could be adversely affected.
Even if this offering is successful, operating and growing our business may require additional capital, and if capital is not available to us, our business, financial condition, results of operations, and prospects, may suffer.
Operating and growing our business is expected to require further investments in our technology and operations. We may be presented with opportunities that we want to pursue, and unforeseen challenges may present themselves, any of which could cause us to require additional capital. If our cash needs exceed our expectations or we continue to experience rapid growth, we could experience strain in our cash flow, which could adversely affect our operations in the event we are unable to obtain other sources of liquidity. If, in the future, we aim to rely on funds raised through equity or debt financing, those funds may prove to be unavailable, may only be available on terms that are not acceptable to us or may result in significant dilution to you or higher levels of leverage, which will expose our business to additional risks. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to pursue our business objectives and to respond to business opportunities, challenges, or unforeseen circumstances could be significantly limited, and our business, financial condition, results of operations, and prospects could be materially and adversely affected.
Acquisitions and strategic alliances could distract management and expose us to financial, execution, and operational risks that could materially and adversely affect our business, financial condition, results of operations, and prospects.
We have in the past, and may in the future, acquire or make investments in complementary or what we view as strategic businesses, technologies, services, or products. For example, in 2021, we acquired Instok LLC (d/b/a/ Octoshop), an all-in-one shopping browser extension, which required management to focus efforts on integrating this acquisition with us. The risks associated with acquisitions include, without limitation, difficulty assimilating and integrating the acquired company’s personnel, operations, technology, services, products and software, the inability to retain key team members, the disruption of our ongoing business and increases in our expenses, and the diversion of management’s attention from core business concerns. Through acquisitions, we may enter into business lines in which we have not previously operated, which could expose us to new risks, additional licensing requirements and regulatory oversight and require additional integration and attention of management.
Any businesses and assets we might acquire might not perform at levels we expect and we may not be able to achieve the anticipated synergies, if any. We may find that we overpaid for the acquired business or assets, or that the economic conditions underlying our acquisition decision have changed. It
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may also take time to fully integrate newly acquired businesses and assets into our business, during which time our business could suffer from inefficiency. Furthermore, we may incur indebtedness to pay for acquisitions, thereby increasing our leverage and diminishing our liquidity.
The effects of health epidemics, including COVID-19, have had, and may in the future have, an adverse impact on our business, operations, and the markets and communities in which we and our partners operate.
Our business and operations have had, and may in the future be, adversely affected by health epidemics, including COVID-19, impacting the markets and communities in which we and our partners operate. For example, the COVID-19 pandemic negatively impacted both consumer spending and marketers’ ability to spend advertising budgets on our solution. Quarantine orders, business closures, work stoppages, slowdowns and delays, work from home policies, travel restrictions, and cancellations of events negatively impacted productivity and disrupted our operations and those of our partners. The COVID-19 pandemic negatively impacted both consumer discretionary spending and marketers’ ability to spend advertising budgets on our solution. This had an adverse impact on our revenue, results of operations, and cash flows primarily in the second quarter of the year ended December 31, 2020.
We will continue to monitor the COVID-19 situation closely. The ultimate impact of COVID-19 or a similar health epidemic is highly uncertain and subject to change. We do not know the full extent of COVID-19 on our business, operations or the global economy as a whole. COVID-19 and the various responses to it, may also have the effect of heightening many of the other risks discussed in this “Risk Factors” section.
Our collection cycles can vary and we may experience difficulty collecting accounts receivable that could adversely affect our business, financial condition, results of operations, and prospects.
Our collection cycles can vary based on payment practices from our clients, and we are required to pay our third-party publishers within a contractual timeframe, regardless of whether we have collected payment from our clients. As a result, timing of cash receipts related to accounts receivable and due to third-party publishers can significantly impact our cash provided by (used in) operating activities for any period.
In addition, we have in the past, and may in the future, encounter difficulty collecting our accounts receivable and could be exposed to risks associated with uncollectible accounts receivables, particularly since some of our customers are emerging brands. Also, our larger clients generally have longer payment terms which impact the timing of our collections. Economic conditions may impact some of our customers’ ability to pay their accounts payable. While we will attempt to monitor our accounts receivable carefully and try to take appropriate measures to collect accounts receivable balances, we have written down accounts receivable and written off doubtful accounts in prior periods and may be unable to avoid accounts receivable write-downs or write-offs of doubtful accounts in the future. Such write-downs or write-offs could negatively affect our operating results for the period in which they occur. Should more customers than we anticipate experience liquidity issues or if payment is not received on a timely basis or at all, our business, financial condition, results of operations, and prospects could be adversely affected.
We may become involved in litigation that may materially adversely affect us.
From time to time, we may become involved in legal proceedings relating to matters incidental to the ordinary course of our business, including patent, copyright, commercial, product liability, consumer protection, employment, class action, whistleblower and other litigation, in addition to governmental and other regulatory investigations and proceedings. Such matters can be time-consuming, divert management’s attention and resources, cause us to incur significant expenses or liability and/or require us to change our business practices. Because of the potential risks, expenses, and uncertainties of litigation, we may, from time to time, settle disputes, even where we have meritorious claims or defenses. Although we have insurance which may provide coverage for some kinds of claims we may face, that insurance may not cover some kinds of claims or types of relief and may not be adequate in a particular
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case. Because litigation is inherently unpredictable, we cannot assure you that the results of any of these actions will not have a material adverse effect on our business, financial condition, results of operations, and prospects.
Rising interest rates may adversely impact our business.
On November 3, 2021, we executed the Third Amended and Restated Loan and Security Agreement with Silicon Valley Bank, now a division of First-Citizens Bank & Trust Company, which consists of a $50.0 million revolving line of credit with a maturity date of November 3, 2024 (as amended, the 2021 Credit Facility). The 2021 Credit Facility bears interest at a floating annual rate equal to the greater of (i) an applicable floor rate that ranges from 2.25% to 3.0% based on our average liquidity position as defined in the 2021 Credit Facility and (ii) the prime rate less a margin that ranges from 0.25% to 1.0% based on our average liquidity position as defined in the 2021 Credit Facility.
The U.S. Federal Reserve has significantly raised, and may continue to raise, its benchmark interest rates. An increase in the federal benchmark rate has resulted in an increase in market interest rates. Although we do not have any outstanding borrowings under the 2021 Credit Facility or under any other debt agreement (other than convertible notes that will automatically be converted into common stock upon the completion of this offering), because our interest rate is tied to market rates, if we incur debt in the future, including under the 2021 Credit Facility, rising interest rates could increase our borrowing costs on any future borrowings. In addition, operating and growing our business may require additional capital, which could include equity or debt financing. Rising interest rates could negatively impact our ability to obtain such financing on commercially reasonable terms or at all. Further, to the extent we are required to obtain financing at higher borrowing costs to support our operations, we may be unable to offset such costs through price increases to our clients, other cost control measures, or other means. Any attempts to offset cost increases with price increases may result in reduced sales, increased client dissatisfaction, or otherwise harm our reputation.
Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses, including unauthorized use or disclosure of consumer data.
Our agreements with publishers, CPG brands, retailers, and other third-parties may include indemnification provisions under which we agree to indemnify them for losses suffered or incurred as a result of claims of intellectual property infringement or other liabilities relating to or arising from our solutions or other contractual obligations including those relating to data use and consumer consent. The term of these indemnity provisions generally survives termination or expiration of the applicable agreement. Large indemnity payments, individually or in the aggregate across third-parties, could harm our business.
Although we do not currently have any plans to expand our operations outside of the United States, if we attempt to and fail to expand effectively in international markets, our revenues and our business may be negatively affected.
We currently generate all of our revenues from the United States and we do not currently have any plans to expand our operations outside of the United States. Many publishers, CPG brands, and retailers on our platform have global operations, and we may in the future grow our operations and solutions through expansion in international markets and by partnering with our publishers, CPG brands, and retailers to enter new geographies that are important to them. Expansion into international markets will require management attention and resources, and we have limited experience entering new geographic markets. Expansion into international markets will also require us to form partnerships with new publishers, retailers and CPG brands and effectively compete with any competitors in new geographic markets. Entering new foreign markets will require us to localize our solutions to conform to a wide variety of local cultures, business practices, laws, and policies. The different commercial and internet infrastructure in other countries may make it more difficult for us to replicate our business model. In some
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countries, we will compete with local companies that understand the local market better than we do, and we may not benefit from first-to-market advantages. We may not be successful in expanding into particular international markets or in generating revenues from foreign operations.
Risks Related to our Platform
We are making substantial investments in our technologies, and if we do not continue to innovate and further develop our platform, our platform developments do not perform, or we are not able to keep pace with technological developments, we may not remain competitive, and our business and results of operations could suffer.
We have made substantial investments in our technologies to capitalize on new and unproven business opportunities. Our future performance is dependent on continued investments in technology and our ability to innovate, reduce friction, and introduce compelling new product features for each participant in our network. We intend to make continued investments in these areas through hiring and ongoing technology transformation. We plan to further invest in AI-powered capabilities and leverage our unique data set to further improve the client, publisher, and consumer experience. If competitors introduce new offerings embodying new technologies, or if new industry standards and practices emerge, our existing technology, solutions, website, browser extension, and mobile apps may become obsolete. Our future success could depend on our ability to respond to technological advances and emerging industry standards and practices in a cost-effective and timely manner. These initiatives also have a high degree of risk, as they involve unproven business strategies and technologies with which we have limited development or operating experience. Further, our development efforts with respect to new technologies could distract management from current operations and divert capital and other resources from other initiatives.
We have scaled our business rapidly, and significant new platform features and solutions have in the past resulted in, and in the future may continue to result in, operational challenges affecting our business. Developing and launching enhancements to our platform and new solutions on our platform may involve significant technical risks and upfront capital investments that may not generate return on investment. We may use new technologies ineffectively, or we may fail to adapt to emerging industry standards. If we face material delays in introducing new or enhanced platform features and solutions or if our recently introduced solutions do not perform in accordance with our expectations, the publishers, CPG brands, retailers, and consumers that use our platform may forego the use of our solutions in favor of those of our competitors.
If our security measures or information we collect and maintain are compromised or publicly exposed, publishers, CPG brands, retailers, and consumers may curtail or stop using our platform, and we could be subject to claims, penalties and fines.
We collect, receive, store, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, share, and otherwise process (Process or Processing) data about consumers, including personal information or personal data, as well as other confidential or proprietary information, for various purposes, including legal, marketing, and other business-related purposes.
While we and our third-party service providers have implemented security measures designed to protect against security breaches and incidents, like all businesses that use computer systems and the internet, our security measures, as well as those of companies we may acquire and our third-party service providers and partners, could fail or may be insufficient, resulting in loss of, or unauthorized disclosure, modification, misuse, unavailability, destruction, or other Processing of our or our customers’ data or other data we or our service providers or partners maintain or otherwise Process. Any security breach or incident impacting our operational systems or physical facilities, those of our third-party partners, or the perception that one has occurred, could result in claims, demands, litigation, indemnity obligations, regulatory enforcement actions, investigations and other proceedings, fines, penalties, mitigation and remediation costs, disputes, reputational harm, diversion of management’s attention, and other liabilities
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and damage to our business. There also have been and may continue to be significant attacks on supply chains and on third-party service providers. Even though we do not control the security measures of third parties, we may be, or face assertions that we are, responsible for any breach of such third parties’ security measures or for any exploitable defects, vulnerabilities, or bugs in third-party components or services that we make use of or suffer reputational or other harm even where we do not have recourse against the third-party. In addition, any failure by our publishers, CPG brands, retailers, or other third-party partners to comply with applicable law or regulations could result in investigations, claims, proceedings, and litigation against us by governmental entities or others.
Cyberattacks, denial-of-service attacks, ransomware attacks, business email compromises, computer malware, viruses, social engineering (including phishing), and other malicious internet-based activity are prevalent in our industry and our customers and partners’ industries and continue to increase. In addition, we may experience attacks, unavailable or degraded systems, and unauthorized access to or disclosure or other Processing of data due to employee or other theft or misuse, denial-of-service attacks, sophisticated attacks by nation-state and nation-state supported actors, and advanced persistent threat intrusions. Despite our efforts to ensure the security, privacy, integrity, confidentiality, and availability of our information technology networks and systems, Processing and information, we may not be able to anticipate or to implement effective preventive and remedial measures against all data security and privacy threats. We cannot guarantee that the recovery systems, security protocols, network protection mechanisms, and other security measures that we have integrated into our systems, networks, and physical facilities, which are designed to protect against, detect, and minimize security breaches, will be adequate to prevent or detect security breaches or incidents, service interruption, system failures, data loss or theft, or other material adverse consequences. No security solution, strategy, or measures can address all possible security threats or effectively deter or prevent all methods of penetrating a network or otherwise perpetrating a security breach or incident. The risk of unauthorized circumvention of our security measures or those of our third-party providers, clients, and partners has been heightened by advances in computer and software capabilities and the increasing sophistication of hackers who employ complex techniques, including without limitation, the theft or misuse of personal and financial information, counterfeiting, “phishing” or social engineering incidents, ransomware, extortion, publicly announcing security breaches, account takeover attacks, denial or degradation of service attacks, malware, fraudulent payment, and identity theft. The techniques used to sabotage, disrupt, or to obtain unauthorized access to our apps, systems, networks, or physical facilities in which data is stored or through which data is transmitted change frequently, and we may be unable to implement adequate preventative measures or stop security breaches and incidents while they are occurring, and may face difficulties or delays in identifying or otherwise responding to breaches or incidents. The recovery systems, security protocols, network protection mechanisms, and other security measures that we have integrated into our apps, systems, networks, and physical facilities, which are designed to protect against, detect, and minimize security breaches, may not be adequate to prevent or detect service interruption, system failure, or data loss. Our apps, systems, networks, and physical facilities could be breached or otherwise compromised, or personal data or information, confidential information, or other data misused or otherwise Processed in an unauthorized manner, due to employee error or malfeasance, if, for example, third-parties fraudulently induce our employees, redeemers, clients, publishers, or partners to disclose information or user names and/or passwords, or otherwise compromise the security of our networks, systems, and/or physical facilities. Third parties may also exploit vulnerabilities in, or obtain unauthorized access to, platforms, apps, systems, networks, and/or physical facilities used by our vendors. We have been and may in the future become the target of cyber-attacks by third parties seeking unauthorized access to our or our employees. redeemers, clients, publishers, or partners’ data or to disrupt our operations or ability to provide our solutions. Many of our employees work remotely, which may pose additional data security risks. We also have incorporated AI and machine learning (AIML), solutions and features into our platform, and may continue to incorporate additional AIML solutions and features into our platform in the future. The use of AIML solutions may result in security incidents and our use of AIML solutions and features may create additional cybersecurity risks or increase cybersecurity risks, including risks of security breaches and incidents. Further, AIML technologies may be used in connection with certain cybersecurity attacks, resulting in heightened risks of security breaches and incidents.
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If we or our service providers or partners experience compromises to security that result in performance or availability problems, the complete shutdown of one or more of our platform, digital properties, or mobile apps or other solutions, or unauthorized access to or unauthorized use, disclosure, or other Processing of confidential information, personal information, or other data, publishers, CPG brands, retailers, and consumers may lose trust and confidence in us and decrease their use of our platform or stop using our platform entirely. Such compromises to personal or sensitive information or proprietary data could lead to claims, litigation or other adversarial actions by publishers, CPG brands, retailers, consumers, or others.
The time, expense and resources required to respond to a security breach or incident and/or to mitigate any security vulnerabilities that may be identified could be significant, our efforts to address these problems may not be successful, and these problems could result in unexpected interruptions, delays, cessation of service, negative publicity, and other harm to our business and our competitive position. We could be required to implement additional security measures or to fundamentally change our business activities and practices in response to a security breach or incident or related claims, investigations, actions, or litigation by private actors or regulatory bodies, which could require us to incur substantial additional costs and which may have an adverse effect on our business.
We have contractual and legal obligations to notify relevant stakeholders of security breaches. Most jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities, and others of security breaches involving certain types of data. In addition, our agreements with certain customers and partners may require us to notify them in the event of a security breach or certain security incidents involving customer or partner data on our systems or those of subcontractors Processing client or partner data on our behalf. Any such mandatory disclosures and any other disclosures we may find appropriate can be costly, could lead to negative publicity, may cause our customers to lose confidence in the effectiveness of our security measures, and require us to expend significant capital and other resources to respond to or alleviate problems caused by the actual or perceived security breach or incident. Depending on the facts and circumstances of such an incident, these damages, penalties and costs could be significant and may not be covered by insurance or could exceed our applicable insurance coverage limits. Such an event also could harm our reputation and result in claims, litigation and other proceedings against us. Any of these results could materially adversely affect our financial performance. Our agreements with certain customers may obligate us to use industry-standard, reasonable, or other specified measures to safeguard sensitive personal information or confidential information, and any actual or perceived breach of such obligations, or actual or perceived incident relevant to such measures may increase the likelihood and frequency of client audits under our agreements, which is likely to increase our costs of doing business and may disrupt our operations. An actual or perceived security breach or incident could lead to claims by our customers or other relevant stakeholders that we have failed to comply with legal or contractual obligations to them and may result in customers ending their relationships with us and claims, demands, and other proceedings. Any limitations of liability, which we have in certain agreements, may not be enforceable or adequate or otherwise protect us from liabilities or damages.
Claims, litigation, investigations, and proceedings relating to security breaches and incidents, including any resulting in unauthorized access to our applications, systems, networks, or physical facilities may result in fines, penalties, and other liabilities, and otherwise adversely affect our business. These proceedings and other actions could force us to spend money in defense or settlement, divert management’s time and attention, increase our costs of doing business, and adversely affect our reputation and market position. We could be required to fundamentally change our business activities and practices or modify our business and operational capabilities in response to such claims, litigation, and other proceedings, which could have an adverse effect on our business and result of operations. If a security breach or incident were to occur, and the confidentiality, integrity, or availability of our data or the data of our partners or our customers was, or was believed to be, disrupted or compromised, we could incur significant liability, or our platform, solutions, apps, systems, or networks may be perceived as less desirable, which could negatively affect our business and damage our reputation.
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If a breach or incident impacts a large amount of our data or data of one or more customers, clients, or partners, if we fail to detect or remediate an actual or perceived security breach or incident in a timely manner, or if we suffer a cyberattack or other disruption that impacts our ability to operate our apps, systems, or networks, we may suffer material damage to our reputation, business, financial condition, results of operations, and prospects. Further, we may not have adequate insurance coverage for security incidents or breaches, including fines, judgments, settlements, penalties, costs, attorney fees, and other impacts that arise out of incidents or breaches. Depending on the facts and circumstances of such an incident, the damages, penalties, and costs could be significant and may not be covered by insurance or could exceed our applicable insurance coverage limits. Cyberattacks and other means of disrupting systems, and security breaches and incidents, whether actual or perceived, may cause material adverse effects upon our business, financial condition, results of operations, and prospects. For example, if the impacts of a security incident or breach, or the successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), it could have an adverse effect on our business, financial condition, results of operations, and prospects. In addition, we cannot be sure that our existing insurance coverage will continue to be available on acceptable terms or that our insurers will not deny coverage as to all or part of any future claim or loss. Our risks are likely to increase as we continue to expand our apps, systems or networks, grow our customer base, and Process, store, and transmit increasingly large amounts of proprietary and sensitive data.
Our ability to generate revenue depends on the collection, reliability, and use of significant amounts of data from various sources, which may be restricted by consumer choice, restrictions imposed by publishers, browsers, integrated retailers, or software developers, changes in technology, and new developments in laws, regulations, and industry requirements or standards.
Our ability to deliver our solutions depends on our ability to successfully leverage data, including data that we collect from consumers, data we receive from integrated retailers and other parties, and data from our own operating history. Using device identifiers (including Google AdID and Apple IDFA), cookies, and other tracking technologies, we, our integrated retailers and other data providers collect information about the interactions of consumers with our integrated retailers’ digital properties and in-store, our owned and operated properties, and certain other publisher sites and mobile apps, as well as other data such as location. We may enhance this data with other data, such as demographic information that we obtain from data providers. Our ability to successfully leverage such data depends on our continued ability to access, use, and share such data, which can be restricted by a number of factors, including consumer choice; the success in obtaining consumer consent; restrictions imposed by our integrated retailers and other data partners or other third parties, publishers, and web browser developers or other software developers, or operating system platforms; changes in technology, including changes in web browser technology; and new developments in, or new interpretations of laws, regulations, and industry standards. Resistance to the collection and sharing of the data used to deliver targeted advertising, increased visibility of consent or “do not track” mechanisms as a result of industry regulatory and/or legal developments, the adoption by consumers of browsers settings or “ad-blocking” software, and the development and deployment of new technologies could materially impact our ability to collect, use, and share data or reduce our ability to deliver relevant promotions or media, which could materially impair the results of our operations. See the risk factor below titled “Our business is subject to complex and evolving laws, regulations, and industry standards, and unfavorable interpretations of, or changes in, or our actual and perceived failure to comply with these laws, regulations, and industry standards could substantially harm our business and results of operations” for additional information.
In addition, unfavorable publicity and negative public perception about our industry or data collection and use could adversely affect our business and operating results. With the growth of online advertising and eCommerce, there is increasing awareness and concern among the general public, privacy advocates, mainstream media, governmental bodies, and others regarding marketing, advertising, and privacy matters, particularly as they relate to individual privacy interests. Any unfavorable publicity or
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negative public perception about our use of data or other data focused industries could affect our business and results of operations and may lead digital publishers like Facebook to change their business practices, or trigger additional regulatory scrutiny or lawmaking that affects us. Negative public attention could cause publishers, CPG brands, and retailers to discontinue using our targeted advertising solutions and limit our ability to measure campaigns delivered through our platform. This public scrutiny may also lead to general distrust of data and marketing companies, consumer reluctance to share and permit use of personal data and increased consumer opt-out rates, any of which could negatively influence, change or reduce our current and prospective customers’ demand for our solutions and adversely affect our business and operating results.
Our business depends on our ability to maintain and scale the network infrastructure necessary to operate our platform, including our websites and mobile apps, and any significant disruption in service could result in a loss of publishers, CPG brands, retailers, and consumers.
We deliver our solutions through our website, browser extension, and mobile apps, as well as through those of our publishers. Our reputation and ability to acquire, retain, and serve publishers, CPG brands, retailers, and consumers are dependent upon the reliable performance of our platform. As the number of our publishers, CPG brands, retailers, and consumers grows, and as the information shared through our platform continues to grow, we will need an increasing amount of network capacity and computing power. In the event that the number of transactions or the amount of traffic on our platform grows more quickly than anticipated, we may be required to incur significant additional costs. In addition, as we scale, we must continually invest in our information technology, and continue to invest in information security, infrastructure, and automation. Deployment of new software or processes may adversely affect the performance of our solutions and harm the customer experience. If we fail to support our platform or provide a strong customer experience, our ability to retain and attract customers may be negatively affected. In particular, our consumers depend on our support organization to resolve any issues relating to our platform. We rely on third parties to provide some support services and our ability to provide effective support is partially dependent on our ability to attract and retain third-party service providers who are not only qualified to support users of our platform but are also well versed in our platform. As we continue to grow our business and improve our solutions, we will face challenges related to providing high-quality support services at-scale. Any failure to maintain high-quality support, or a market perception that we do not maintain high-quality support, could harm our reputation and adversely affect our ability to scale our platform and business, our financial condition, results of operations, and prospects.
Interruptions in these systems or service disruptions, whether due to system failures, computer viruses, malware, ransomware, denial of service attacks, attempts to degrade or disrupt services, or physical or electronic break-ins, could affect the security or availability of our websites and mobile apps, and prevent publishers, CPG brands, retailers, and/or consumers from accessing our platform. Our network infrastructure is hosted by third-party providers. Any disruption in these services or any failure of these providers to handle existing or increased traffic could significantly harm our business. Any financial or other difficulties these providers face may adversely affect our business, and we exercise little control over these providers, which increases our vulnerability to problems with the services they provide. If we do not maintain or expand our network infrastructure successfully or if we experience operational failures, we could lose current and potential publishers, CPG brands, retailers, and/or consumers, which could harm our business, financial condition, results of operations, and prospects.
We are dependent on technology systems and electronic communications networks that are supplied and managed by third parties, which could result in increased expenses and an inability to prevent or respond to disruptions in our solutions.
Our ability to provide solutions to consumers depends on our ability to communicate with our consumers and through the internet and electronic networks that are owned and operated by third parties. We rely on third-party providers for computing infrastructure, network connectivity, and other technology-related services needed to deliver our solutions. Some of our other vendor agreements may be unilaterally terminated by the counterparty for convenience. Our computing infrastructure service
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providers have no obligation to renew their agreements with us on commercially reasonable terms or at all and the terms of our agreements with such providers can change for reasons that are outside of our control and as we increase our usage of such providers, any of which, could increase our expenses. If we are unable to renew these agreements on commercially reasonable terms or prices, or for any other reason, our expenses could increase. Also, if we are required to transition to a new provider, it could result in significant costs and possible service interruption or an impaired ability to access or save data stored to the cloud until equivalent services, if available, are identified, obtained, and implemented, all of which could harm our business, financial condition, results of operations, and prospects.
Our solutions also depend on the ability of our users to access the public internet. In addition, in order to provide our solutions promptly, our computer equipment and network servers must be functional 24 hours per day, which requires services from telecommunications facilities managed by third parties and the availability of electricity, which we do not control. Severe disruptions, outages, defects, or other security performance and quality problems with one or more of these networks, including as a result of utility or third-party system interruptions, or any material change in our contractual and other business relationships with third-party providers could impair our ability to Process information, which could impede our ability to provide our solutions to consumers, harm our reputation, increase expenses, including significant, unplanned capital investments and/or contractual obligations, result in a loss of publishers, CPG brands, retailers, and consumers, any of which could adversely affect our business, financial condition, results of operations, and prospects.
Our failure to upgrade our technology or network infrastructure effectively to support our growth could result in unanticipated system disruptions, slow response times, or poor experiences for consumers. To manage the growth of our operations and personnel and improve the technology that supports our business operations, as well as our financial and management systems, disclosure controls and procedures, and internal controls over financial reporting, we will be required to commit substantial financial, operational, and technical resources. In particular, we will need to improve our transaction processing and reporting, operational and financial systems, procedures, and controls. Our current and planned personnel, systems, procedures, and controls may not be adequate to support our future operations. We will require additional capital and management resources to grow and mature in these areas. Such investments may also require diversion of financial resources from other projects, such as the development of Ibotta and related offerings. If we are unable to manage our rapid growth effectively, it could have a material adverse effect on our business, financial condition, results of operations, and prospects.
We allow our clients and publishers to use application programming interfaces (APIs) with our platform, which could result in outages or security breaches and negatively impact our business, financial condition, results of operations, and prospects.
The use of APIs by our clients and publishers have significantly increased in recent years. Our APIs allow our clients and publishers to integrate their own business system with our platform. The increased use of APIs increases security and operational risks to our systems, including the risk for intrusion attacks, data theft, or denial of service attacks. Furthermore, while APIs allow greater ease and power in accessing our platform, they also increase the risk of overusing our systems, potentially causing outages. While we have taken measures intended to decrease security and outage risks associated with the use of APIs, we cannot guarantee that such measures will be successful. Our failure to prevent outages or security breaches or incidents resulting from API use could result in governmental enforcement actions and other proceedings against us, claims, demands, and litigation against us by consumers and other affected individuals, costs associated with investigation and remediation damage to our reputation and loss of goodwill, any of which could harm our business, financial condition, results of operations, and prospects.
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If the use of mobile device identifiers, third-party cookies or other tracking technology or location information is rejected by consumers, restricted by third parties outside of our control, or otherwise subject to unfavorable regulation, our performance could decline and we could lose customers and revenue.
We and our third-party partners use a number of technologies to collect information used to deliver our solutions. For instance, we and our third-party partners use mobile device identifiers such as Apple IDFA and Google AdID to identify, target and measure relevant promotions to consumers. These promotions and advertising that we show on mobile apps could be affected by mobile operating systems blocking or restricting use of mobile device identifiers. Our promotions and advertisements could also be negatively impacted by mobile operating systems implementing more restrictive privacy settings and choices. For example, in April 2021, Apple commenced implementation of an app transparency framework in which, among other things, mobile apps are required to obtain the user’s opt-in consent for certain types of tracking, including by a user’s unique advertising identifier, or IDFA. Additionally, Apple implemented new requirements for consumer disclosures regarding privacy and data processing practices in December 2020, which has resulted in increased compliance requirements and could result in decreased usage of our app and the IPN. In June 2023, Apple announced new SDK privacy controls that are part of iOS 17, released in September 2023, including new protections designed to limit tracking or identification of user devices. In February 2022, Google announced its Privacy Sandbox initiative for Android, a multi-year effort expected to restrict tracking activity and limit advertisers' ability to collect app and user data across Android devices. These or any similar changes to the policies of Apple or Google may materially and adversely affect our business, financial condition, results of operations, and prospects. This shift from enabling user opt-out to an opt-in requirement is likely to have a substantial impact on the mobile advertising ecosystem and could harm our growth in this channel.
We also use small text files (referred to as cookies), placed through an internet browser on a consumer’s machine which corresponds to a data set that we keep on our servers, to gather important data to help deliver our solutions and market our products and offerings. Certain of our cookies, including those that we predominantly use in delivering our solutions through internet browsers, are known as “third-party” cookies because they are delivered by third parties rather than by us. Our cookies collect information, such as when a consumer views an advertisement, clicks on an advertisement, or visits one of our advertisers’ websites. In certain states within the United States, such as California, this information may be considered personal information under applicable data protection laws. We also obtain location-based information about users or their devices in certain circumstances, including when a consumer interacts with our solutions on a mobile device. We use these technologies to achieve our customers’ campaign goals, to ensure that the same consumer does not unintentionally see the same media too frequently, to report aggregate information to our customers regarding the performance of their digital promotions and marketing campaigns, and to detect and prevent fraudulent activity throughout our network. We also use data from cookies to help us decide whether and how much to bid on an opportunity to place an advertisement in a certain internet location and at a given time in front of a particular consumer, and we also use location information to customize marketing campaigns and to target certain offers or personalize content. A lack of data associated with or obtained from cookies, including third-party cookies or other tracking technologies may detract from our ability to make decisions about which inventory to purchase for a customer’s campaign and may adversely affect the effectiveness of our solution and harm our business. Additionally, any limitations on our ability to obtain location information regarding consumers or devices, whether as a result of technological limitations or changes or consumers not being willing to allow us to obtain location information, we may face limitations on our ability to customize marketing campaigns, target offers, or personalize content, to detect and prevent fraudulent activity, and to engage in other aspects of our operations. These could reduce the effectiveness of our solution and harm our revenues and profitability.
Cookies may be deleted or blocked by consumers. The most commonly used internet browsers (including Chrome, Firefox, and Safari) allow their users to prevent cookies from being accepted by their browsers. Consumers can also delete cookies from their computers. Some consumers also download “ad
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blocking” software that prevents cookies from being stored on a user’s computer. If more consumers adopt these settings or delete their cookies more frequently than they currently do, our business could be negatively affected. In addition, certain web browsers may block third-party cookies by default, and other browsers may do so in the future. Unless such default settings in browsers are altered by consumers to permit the placement of third-party cookies, we would be able to set fewer of our cookies in users’ browsers, which could adversely affect our business. In addition, companies such as Google have publicly disclosed their intention to move away from cookies to one or more other forms of persistent unique identifier, or ID, to identify individual consumers or internet-connected devices in the bidding process on advertising exchanges. If companies do not use shared IDs across the entire ecosystem, this could have a negative impact on our ability to find the same user across different web properties, and reduce the effectiveness of our solution.
Our business relies in part on electronic messaging, including emails and SMS text messages, and any technical, legal, or other restrictions on the sending of electronic messages or an inability to timely deliver such communications could harm our business.
Our business is in part dependent upon electronic messaging. We provide emails, mobile alerts, and other messages to consumers informing them of the digital promotions on our apps and websites, and we believe these communications help generate a significant portion of our revenues. We also use electronic messaging, in part, as part of the consumer sign-up and verification process. Because electronic messaging services are important to our business, if we are unable to successfully deliver electronic messages to consumers, if there are legal restrictions on delivering these messages to consumers, or if consumers do not or cannot open our messages, our revenues and profitability could be adversely affected. Changes in how webmail apps or other email management tools organize and prioritize email may result in our emails being delivered or routed to a less prominent location in a consumer’s inbox or viewed as “spam” by consumers and may reduce the likelihood of that consumer opening our emails. Actions taken by third parties that block, impose restrictions on or charge for the delivery of electronic messages could also harm our business. From time to time, internet service providers or other third parties may block bulk email transmissions or otherwise experience technical difficulties that result in our inability to successfully deliver emails or other messages to consumers.
Changes in laws or regulations, or changes in interpretations of existing laws or regulations, including the Telephone Consumer Protection Act (TCPA) in the United States and laws regarding commercial electronic messaging in other jurisdictions, that would limit our ability to send such communications or impose additional requirements upon us in connection with sending such communications could also adversely impact our business. For example, the Federal Communications Commission amended certain of its regulations under the TCPA in recent years in a manner that could increase our exposure to liability for certain types of telephonic communication with customers, including but not limited to text messages to mobile phones. Under the TCPA, plaintiffs may seek actual monetary loss or statutory damages per violation, whichever is greater, and courts may treble the damage award for willful or knowing violations. Given the enormous number of communications we send to consumers, the actual or perceived improper sending of communications or a determination that there have been violations of the TCPA or other communications-based statutes could subject us to potential risks including liabilities or claims relating to consumer protection laws and expose us to significant damage awards that could, individually or in the aggregate, materially harm our business. Moreover, even if we prevail, such litigation against us could impose substantial costs and divert our management’s attention and resources.
We also rely on social networking messaging services to send communications. Changes to these social networking services’ terms of use or terms of service that limit promotional communications, restrictions that would limit our ability or our customers’ ability to send communications through their services, disruptions or downtime experienced by these social networking services or reductions in the use of or engagement with social networking services by consumers and potential customers could also harm our business.
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We rely on a third-party service for the delivery of daily emails and other forms of electronic communication, and delay or errors in the delivery of such emails or other messaging we send may occur and be beyond our control, which could damage our reputation or harm our business, financial condition, results of operations, and prospects. If we were unable to use our current electronic messaging services, alternate services are available; however, we believe our sales could be impacted for some period as we transition to a new provider, and the new provider may be unable to provide equivalent or satisfactory electronic messaging service. Any disruption or restriction on the distribution of our electronic messages, termination or disruption of our relationship with our messaging service providers, including our third-party service that delivers our daily emails, or any increase in our costs associated with our email and other messaging activities could harm our business.
We depend on the interoperability of our platform across third-party apps and services that we do not control.
We have integrations with a variety of technology vendors. As our solutions expand and evolve, we may have an increasing number of integrations with other third-party apps, products, and services. Third-party apps, products, and services are constantly evolving, and we may not be able to maintain or modify our platform to ensure its compatibility with our publishers following development changes. In addition, some of our competitors or technology partners may take actions that disrupt the interoperability of our platform with their own products or services, or exert strong business influence on our ability to, and the terms on which we operate. As our respective solutions evolve, we expect the types and levels of competition to increase. Should any of our competitors or technology partners modify their solutions, standards, or terms of use in a manner that degrades the functionality or performance of our platform or is otherwise unsatisfactory to us or gives preferential treatment to competitive solutions or services, our solutions, platform, business, financial condition, results of operations, and prospects could be adversely affected.
Risks Related to our Intellectual Property
We may not be able to adequately protect our intellectual property rights or may be accused of infringing intellectual property rights of third parties.
We regard our trademarks, service marks, copyrights, patents, trade dress, trade secrets, proprietary technology, merchant lists, subscriber lists, sales methodology, and similar intellectual property as critical to our success, and we rely on trademark, copyright and patent law, trade secret protection and confidentiality, and/or license agreements with our employees and others to protect our proprietary rights. Effective intellectual property protection may not be available in every country in which our deals are made available.
We may not be able to discover or determine the extent of any unauthorized use of our proprietary rights. Third parties that license our intellectual property rights also may take actions that diminish the value of our proprietary rights or reputation. The protection of our intellectual property may require the expenditure of significant financial and managerial resources. Moreover, the steps we take to protect our intellectual property may not adequately protect our rights or prevent third parties from infringing or misappropriating our proprietary rights. We may in the future be subject to litigation and disputes. The costs of engaging in such litigation and disputes are considerable, and there can be no assurances that favorable outcomes will be obtained.
Furthermore, we may in the future be subject to third-party claims that we infringe upon proprietary rights or trademarks and expect to be subject to additional claims in the future. Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial resources, injunctions against us or the payment of damages by us. We may need to obtain licenses from third parties who allege that we have infringed their rights, but such licenses may not be available on terms acceptable to us or at all. These risks have been amplified by the increase in third parties whose sole or primary business is to assert such claims.
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To the extent we gain greater market visibility or face increasing competition, we face a higher risk of being the subject of intellectual property infringement claims. In addition, we may in the future be subject to claims that employees or contractors, or we, have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of our competitors or other parties. Because patent applications can take years to issue and are often afforded confidentiality for some period of time, there may currently be pending applications, unknown to us, that later result in issued patents that could cover one or more of our products.
We have registered, among other trademarks, the term “Ibotta” in the United States. Competitors may adopt service names similar to ours, thereby harming our ability to build brand identity and possibly leading to user confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other trademarks that are similar to our trademarks. Litigation or proceedings before the U.S. Patent and Trademark Office or other governmental authorities and administrative bodies in the United States and abroad may be necessary in the future to enforce our intellectual property rights and to determine the validity and scope of the proprietary rights of others. Further, we may not timely or successfully apply for a patent or register our trademarks or otherwise secure our intellectual property. Our efforts to protect, maintain, or enforce our proprietary rights may be ineffective and could result in substantial costs and diversion of resources, which could adversely affect our business, financial condition, results of operations, and prospects.
We may become subject to intellectual property disputes, which are costly and may subject us to significant liability and increased costs of doing business.
Third parties may in the future claim that our operations infringe their intellectual property rights, and such claims may result in legal claims against our customers and us. These claims may damage our brand and reputation, harm our customer relationships, and result in liability for us. Any intellectual property claims, with or without merit, could be very time-consuming, could be expensive to settle or litigate, and could divert our management’s attention and other resources. These claims could also subject us to significant liability for damages, potentially including treble damages if we are found to have willfully infringed patents or copyrights, and may require us to indemnify our customers for liabilities they incur as a result of such claims. These claims could also result in our having to stop using technology found to be in violation of a third-party’s rights. We might be required to seek a license for the intellectual property, which may not be available on reasonable terms or at all. Even if a license were available, we could be required to pay significant royalties, which would increase our operating expenses. Alternatively, we could be required to develop alternative non-infringing technology, which could require significant time, effort, and expense, and may affect the performance or features of our solution. If we cannot license or develop alternative non-infringing substitutes for any infringing technology used in any aspect of our business, we would be forced to limit or stop sales of our solution and may be unable to compete effectively. Any of these results would adversely affect our business, financial condition, results of operations, and prospects.
Some of our solutions contain open source software, which may pose particular risks to our proprietary software and solutions.
We use open source software in our solutions and will use open source software in the future. Few of the licenses applicable to open source software have been interpreted by courts, and there is a risk that these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our products and offerings or to maintain the confidentiality of our proprietary source code. Moreover, we may encounter instances in which we have incorporated additional open source software in our proprietary software in a manner that is inconsistent with the terms of the applicable license or our current policies and procedures. While we have adopted guidelines for the appropriate use of, and regularly audit our use of, open source software, these measures may not always be effective. We may face claims from third parties claiming ownership of, or demanding release of, the open source software and/or works that we developed using such software (which could include our proprietary source code), or otherwise seeking to enforce the terms of the applicable open source license.
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These claims could result in litigation and could require us to comply with onerous conditions or restrictions on these solutions, purchase a costly license, or cease offering the implicated solutions unless and until we can re-engineer them to avoid infringement. This re-engineering process could require significant additional research and development resources. In addition to risks related to license requirements, use of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties, updates, error corrections, or controls on the origin of software. Any of these risks could be difficult to eliminate or manage, and, if not addressed, could have a negative effect on our business and operating results.
We may be unable to continue to use the domain names that we use in our business or prevent third parties from acquiring and using domain names that infringe on, are similar to, or otherwise decrease the value of our brand, trademarks, or service marks.
We have registered domain names that we use in, or are related to, our business, most importantly www.ibotta.com. If we lose the ability to use a domain name, whether due to trademark claims, failure to renew the applicable registration, or any other cause, we may be forced to market our solutions under a new domain name, which could cause us substantial harm, or to incur significant expense in order to purchase rights to the domain name in question. We may not be able to obtain preferred domain names outside the United States due to a variety of reasons. In addition, our competitors and others could attempt to capitalize on our brand recognition by using domain names similar to ours. We may be unable to prevent third parties from acquiring and using domain names that infringe on, are similar to, or otherwise decrease the value of our brand or our trademarks or service marks. Protecting, maintaining, and enforcing our rights in our domain names may require litigation, which could result in substantial costs and diversion of resources, which could in turn adversely affect our business, financial condition, results of operations, and prospects.
The use of AIML technologies in our platform and in our business may result in reputational harm or liability.
We have incorporated and may continue to incorporate additional AIML solutions and features into our platform and business, including those based on large language models, and these solutions and features may become more important to our operations or to our future growth over time. We expect to rely on AIML solutions and features to help drive future growth in our business, but there can be no assurance that we will realize the desired or anticipated benefits from AIML or at all. We may also fail to properly implement or market our AIML solutions and features. Our competitors or other third parties may incorporate AIML into their products, offerings, and solutions more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations. Additionally, our products and offerings based on AIML may expose us to additional claims, demands, and proceedings by private parties and regulatory authorities and subject us to legal liability as well as brand and reputational harm. For example, if the content, analyses or recommendations that AIML solutions or features assist in producing are or are alleged to be deficient, inaccurate or biased, or for such content, analyses, recommendations, or for such solutions or features or their development or deployment, including the collection, use, or other Processing of data used to train or create such AIML solutions or features, to infringe upon or to have misappropriated third-party intellectual property rights or to violate applicable laws, regulations, or other actual or asserted legal obligations to which we are or may become subject, then our business, financial condition, results of operations, and prospects may be adversely affected. The legal, regulatory, and policy environments around AIML are evolving rapidly, and we may become subject to new and evolving legal and other obligations. These and other developments may require us to make significant changes to our use of AIML, including by limiting or restricting our use of AIML, and which may require us to make significant changes to our policies and practices, which may necessitate expenditure of significant time, expense, and other resources. AIML also presents emerging ethical issues, and if our use of AIML becomes controversial, we may experience brand or reputational harm.
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Risks Related to Government Regulation, Tax or Accounting Standards
Our business is subject to complex and evolving laws, regulations, and industry standards, and unfavorable interpretations of, or changes in, or our actual and perceived failure to comply with these laws, regulations, and industry standards could substantially harm our business and results of operations.
We are subject to a variety of federal, state, local and municipal laws, regulations and industry standards that relate to privacy, electronic communications, data protection, AI, intellectual property, eCommerce, the internet, mobile devices, competition, consumer protection, taxation, escheatment, social media marketing, and advertising practices. In particular, existing and future laws and regulations, or changes thereto, may impede the growth of the internet, mobile devices, e-commerce, or other online services, and increase the cost of providing online services, require us to change our business practices, or raise compliance costs or other costs of doing business.
Many of these laws, regulations, and standards are complex and subject to varying interpretations or still evolving and being tested in courts and industry standards are still developing. Our business, including our ability to operate and expand, could be adversely affected if legislation, regulations, or industry standards are adopted, interpreted, or implemented in a manner that is inconsistent with our current business practices and that require changes to these practices or the design of our platform. Existing and future laws, regulations, and industry standards could restrict our operations, making it difficult to retain our publishers, CPG brands, retailers, and consumers, and preventing us from maintaining or growing our revenues as anticipated.
Compliance with these and any other applicable privacy, data protection, data security, marketing, and consumer protection guidelines, laws, and regulations is a rigorous and time-intensive process, and we may be required to put in place additional mechanisms to ensure compliance with them. We believe our policies and practices comply in material respects with these guidelines, laws, and regulations. However, if our belief is incorrect, or if these guidelines, laws, or regulations or their interpretation change or new legislation or regulations are enacted, we may face significant fines, penalties, or injunctive restrictions that could adversely affect our business, financial condition, result of operations, and results of operations. Further, we could be compelled to provide additional disclosures to our consumers, obtain additional consents from our consumers before collecting, using, or disclosing their information, delete information collected, or implement new safeguards or business processes to help individuals manage our use of their information, among other changes.
Failure to comply with federal and state privacy, data protection, marketing and consumer protection laws, regulations and industry standards, or the expansion of current or the enactment or adoption of new privacy, data protection, marketing and consumer protection laws, regulations or industry standards, could adversely affect our business.
We Process data about consumers, including personal information or personal data, as well as other confidential or proprietary information, for numerous purposes, including legal, marketing, and other business-related purposes. The legal and regulatory framework for privacy and security issues is rapidly evolving, and is expected to increase our compliance costs and exposure to liability. We and our service providers and partners are subject to a variety of federal and state laws, regulations, and industry standards regarding privacy, data protection, data security, marketing, and consumer protection, which address the collection, storage, sharing, use, disclosure, protection, sale, and other Processing of data relating to individuals, as well as the tracking of consumer behavior and other consumer data (Data Protection Laws). We are also subject to laws, regulations, and industry standards relating to endorsements and influencer marketing. Many of these laws, regulations and industry standards are changing, may be subject to differing interpretations, may be inconsistent among countries, or conflict with other rules, and may be costly to comply with or inconsistent among jurisdictions.
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In the United States, Data Protection Laws include rules and regulations promulgated under the authority of the Federal Trade Commission, the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the California Consumer Privacy Act of 2018 (CCPA), and other state and federal laws relating to privacy and data security. The CCPA requires covered companies to make certain disclosures to California consumers about their data collection, use, and sharing practices, and allows consumers to opt out of the sale of personal information with third parties and provides a private right of action and statutory damages for data breaches. In addition, the California Privacy Rights Act of 2020 (CPRA), which took effect on January 1, 2023, amended the CCPA and among other things, gives California residents the ability to limit the use of their sensitive information, provides for penalties for CPRA violations concerning California residents under the age of 16, and established a new California Privacy Protection Agency to implement and enforce the law. The CCPA and CPRA have new regulations that are only partially complete and have been subject to legal challenge, creating uncertainty and compliance challenges. The enactment of the CCPA has prompted a wave of similar legislative developments in other states in the United States, which creates the potential for a patchwork of overlapping but different state laws and could mark the beginning of a trend toward more stringent privacy legislation in the United States, which could increase our potential liability and adversely affect our business, financial condition, results of operations, and prospects. For example, Connecticut, Virginia, and Colorado each has enacted legislation similar to the CCPA and CPRA that has taken effect in 2023; Utah has enacted such legislation that will take effect on December 31, 2023; Florida, Montana, Oregon, and Texas each has enacted similar legislation that will become effective in 2024; Tennessee, and Iowa, and Delaware each has enacted similar legislation that will take effect in 2025; and Indiana has enacted similar legislation that will become effective in 2026. The CCPA, as modified by the CPRA, and certain other state laws, have increased our compliance costs and potential liability. Some countries also are considering or have passed legislation requiring local storage and Processing of data, or other requirements that may be, or may be asserted to be, applicable to our operations, which could increase the cost and complexity of providing our solutions and other aspects of our business.
Various industry standards on privacy, data protection, and data security also have been developed and are expected to continue to develop and may be adopted by industry participants at any time. We endeavor to comply with industry standards relating to targeted advertising. Any actual or alleged mistakes by us in the implementation of these principles, any expansion by self-regulatory bodies of these guidelines, any different or various guidelines regarding internet-based advertising issued by government authorities, any actual or alleged failure of opt out mechanisms fail to work as designed, or any misunderstanding by internet users of our technology or our commitments with respect to these principles, may subject us to negative publicity, government investigation, government or private litigation or other proceedings, or investigation or other proceedings by or in connection with self- regulatory bodies or other accountability groups. Any such investigations, proceedings or other actions against or involving us, even if meritless, could be costly and time consuming, cause it to be necessary or appropriate for us to change our business practices, cause us to divert management’s attention and our resources, and be damaging to our brand, reputation, and business. In addition, privacy advocates and industry groups may propose new and different self-regulatory standards that legally or contractually apply to us or that may be asserted to apply to us. We cannot yet determine the impact such future standards may have on our business.
We are subject to the terms of our external and internal privacy and security policies (Privacy Policies), certain codes, representations, certifications, industry standards, publications and frameworks, and contractual obligations to third parties related to privacy, data protection, and information security and Processing, including contractual obligations to indemnify and hold harmless third parties from the costs or consequences of non-compliance with Data Protection Laws or other obligations (collectively, including Privacy Policies, Data Protection Obligations). Our solutions depend in part on our ability to use data that we obtain in connection with our solutions, and our ability to use this data may be subject to restrictions in our commercial agreements, privacy policies of the entities that provide us with this data, and other Data Protection Obligations.
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Compliance with Data Protection Laws and Data Protection Obligations is, and is likely to remain, uncertain for the foreseeable future, and our actual or perceived failure to address or comply with them could increase our compliance and operational costs; limit our ability to market our solutions and attract new and retain current publishers, CPG brands, retailers, and consumers; limit or eliminate our ability to Process data; require us to modify our platform or our solutions; require us to delete data; expose us to regulatory scrutiny, actions, investigations, fines and penalties; result in reputational harm, lead to a loss of business; result in claims, litigation and liability, including class action litigation; cause us to incur significant costs, expenses, and fees (including attorney fees); cause a material adverse impact to business operations or financial results; and otherwise result in other material harm to our reputation and business (Adverse Data Protection Impact).
We may be subject to and suffer an Adverse Data Protection Impact if we fail (or are perceived to have failed) to comply with applicable Data Protection Laws or Data Protection Obligations, or if our Privacy Policies are, in whole or part, found or alleged to be inaccurate, incomplete, deceptive, unfair, or misrepresentative of our actual practices. In addition, any such failure or perceived failure could result in public statements against us by consumer advocacy groups, the media or others, which may cause us material reputational harm and harm to our market position. Our actual or perceived failure to comply with Data Protection Laws and Data Protection Obligations could also subject us to litigation, claims, proceedings, actions, or investigations by governmental entities, authorities, or regulators, which could result in an Adverse Data Protection Impact, including required changes to our business practices, the diversion of resources and the attention of management from our business, regulatory oversights and audits, discontinuance of necessary Processing, or other remedies that adversely affect our business and results of operations. Moreover, despite our efforts, we may not be successful in achieving compliance if our employees, partners, or vendors do not comply with applicable Data Protection Laws and Data Protection Obligations. Our service providers or our partners’ failure to adhere to these third-party restrictions on data use or other Data Protection Obligations also may result in claims, proceedings, or actions against us by our business counterparties or other parties, government investigation, government litigation or other proceedings, or other liabilities, including loss of business, reputational damage, and remediation costs, which could adversely affect our business and have an Adverse Data Protection Impact.
We expect that there will continue to be new proposed laws, regulations, and industry standards concerning privacy, data protection, and information security in the United States and we cannot yet determine the impact such future laws, regulations, and standards may have on our business. With laws and regulations in the United States imposing new and relatively burdensome obligations, and with substantial uncertainty over the interpretation and application of these and other laws and regulations, there is a risk that the requirements of these laws, regulations, and standards, or of contractual or other obligations relating to privacy, data protection, or information security, are interpreted or applied in a manner that is, or is alleged to be, inconsistent with our data collection, management and Processing practices, our policies or procedures, or our solutions. For instance, with the increased focus on the use of data for advertising, the anticipation and expectation of future laws, regulations, standards, and other obligations could impact us and our existing and potential business partners and delay certain business partnerships or deals until there is greater certainty. In addition, as we expand our data analytics and other data-related product solutions, there may be increased scrutiny on our use, disclosure, or other Processing of data and we may be subject to new and unexpected regulations. Future laws, regulations, standards, and other obligations could, for example, impair our ability to collect, use or otherwise Process information that we use to provide targeted digital promotions and media to consumers on behalf of CPG brands and retailers, thereby impairing our ability to maintain and grow our total customers and increase revenues. Future restrictions on the collection, use, sharing, disclosure, or other Processing of data or content or additional requirements associated with data Processing, including any requirements for express or implied consent for the use, retention, disclosure or other Processing of data or content, could require us to modify our solutions, possibly in a material manner, which we may be unable to complete in a commercially reasonable manner or at all, could prohibit new or potential solutions and features, and could limit our ability to store and Process data or to develop new solutions and features.
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We may face challenges in addressing the requirements of any such new laws, regulations, other legal obligations or industry standards, or any changed interpretation of existing laws, regulations, or other standards or obligations and making necessary changes to our policies and practices, and such changes may require us to incur additional costs and restrict our business operations. Although we endeavor to comply with our Privacy Policies and Data Protection Obligations, we may at times fail, or be perceived to fail, to do so or to have previously done so. These laws, regulations, and other Data Protection Obligations often are complex, vague, and difficult to comply with fully, and it is possible that these laws, regulations, and other actual or asserted Data Protection Obligations may be interpreted and applied in new ways and/or in a manner that is inconsistent with each other or that new laws, regulations, or other Data Protection Obligations may be enacted. Moreover, despite our efforts, we may not be successful in achieving or maintaining compliance if our employees or vendors fail to comply with applicable obligations under our Privacy Policies and other privacy-, data protection-, or information security-related laws, regulations, standards, or other actual or alleged Data Protection Obligations.
Our failure or perceived failure to comply with Data Protection Laws, our Privacy Policies, and Data Protection Obligations or any of our other actual or asserted legal obligations or industry standards relating to privacy, data protection, information security, AI, marketing or consumer protection, electronic communications, intellectual property, eCommerce, competition, price discrimination, taxation, or the use of promotions, may subject us to claims, litigation, regulatory investigations and proceedings, fines, or other liabilities, as well as negative publicity or public statements against us by consumer advocacy groups or others. Any such actual or perceived failure to comply with Data Protection Laws, Data Protection Obligations, or other such laws, obligations, or standards could result in significant liability or cause a loss of trust in us, which could cause us to have difficulties attracting new or retaining existing publishers, CPG brands, retailers, and consumers, which could have an adverse effect on our reputation and business. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations, and policies that are applicable to the businesses of our customers may limit the adoption and use of, and reduce the overall demand for, our solutions. Moreover, if future laws, regulations, other legal obligations or industry standards, or any changed interpretations of the foregoing limit our publishers’, CPG brands’, retailers’, and consumers’ ability to use, share, or otherwise Process data or our ability to store, share, or otherwise Process data, demand for our solutions could decrease, our costs could increase, our revenue growth could slow, and our business, financial condition, results of operations, and prospects could be harmed. Additionally, any actual or perceived violation by third parties we work with, such as publishers, CPG brands, and retailers, of Data Protection Laws, Privacy Policies, or other Data Protection Obligations, may put our customers’ data or other content at risk, may result in negative publicity, and could have an Adverse Data Protection Impact.
Interpretations of federal and state laws by relevant authorities regarding money services businesses and money transmitters could impact our rebates solutions.
Various federal laws, such as the Bank Secrecy Act, as amended, impose registration and certain other obligations on companies that are financial institutions, which are broadly defined to include money services businesses (MSBs), such as money transmitters. In addition, many states impose license obligations on those companies that are engaged in the business of money transmission, with varying definitions of what constitutes money transmission. We do not believe we are a money transmitter subject to these laws based, in part, upon the characteristics of and our role with respect to our rewards programs and other offerings. Questions of whether and to what extent our products and offerings require licensure and constitute money transmission are subject to regulatory interpretation and could change over time. If any of our products and offerings were deemed by relevant authorities to subject us to regulation as an MSB or state money transmitter licensure in any state, our regulatory compliance costs would likely increase to meet those requirements and we could be forced to cease conducting certain aspects of our business in certain jurisdictions pending receipt of any necessary licenses, which could negatively impact our business. There can be no assurance that we will be able to obtain any such licenses, and, even if we were able to do so, there could be substantial costs and potential product or operational changes involved
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in maintaining such licenses and meeting other relevant regulatory obligations, which could have a material and adverse effect on our business.
If we do not comply with the specialized regulations and laws in the United States that regulate marketing and promotions, our business could be materially adversely affected.
Marketing and promotions in the United States are regulated extensively by federal and state agencies. These regulations and laws change frequently, differ from state to state, and present a complex and sometimes inconsistent regulatory environment. There is no assurance that we will always be in compliance with these regulations and laws or that we will be able to comply with all future versions of such regulations and laws. We rely on various internal and external personnel with relevant experience complying with legal requirements applicable to marketing and promotions in the United States, and the loss of personnel with such expertise could adversely affect our business.
The federal and state “tied-house” laws governing ownership interests in alcoholic beverage manufacturers, wholesalers, and retailers may impact our business.
Alcoholic beverage manufacturers, wholesalers, retailers and their investors are subject to federal and state “tied-house” laws (Tied-House Laws) that restrict investments between the three tiers of the alcoholic beverage industry (the manufacturing tier, the wholesale tier, and the retail tier). Tied-House Laws change frequently, differ from state to state, and present a complex and inconsistent regulatory environment. Tied-House Laws may impact how alcoholic beverage manufacturers and retailers work together and with us, and these impacts could adversely affect our business.
Changes in laws and regulations related to the internet or changes to internet infrastructure may diminish the demand for our solutions, and could have a negative impact on our business.
The future success of our business depends upon the continued use of the internet as a primary medium for commerce, communication, and business applications. Federal, state, or foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the use of the internet as a commercial medium. Changes in these laws or regulations could require us to modify our solutions in order to comply with these changes. In addition, government agencies or private organizations have imposed and may impose additional taxes, fees, or other charges for accessing the internet or commerce conducted via the internet. These laws or charges could limit the growth of internet-related commerce or communications generally, or result in reductions in the demand for internet-based solutions and services such as ours. The performance of the internet has been adversely affected by “viruses,” “worms,” and similar malicious programs and the internet has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure. If the use of the internet is adversely affected by these issues, demand for our solutions could decline.
The current legislative and regulatory landscape regarding the regulation of the Internet is subject to uncertainty. For example, in January 2018, the Federal Communications Commission, or FCC, released an order that repealed the “open internet rules,” often known as “net neutrality,” which prohibit internet service providers in the United States from impeding access to most content, or otherwise unfairly discriminating against content providers like us and also prohibit internet service providers from entering into arrangements with specific content providers for faster or better access over their data networks. In response to this decision California and a number of states implemented their own net neutrality rules which mirrored parts of the repealed federal regulations. In October 2023, the FCC voted to begin the process of reinstating substantially all of the net neutrality rules that had been in place prior to the 2018 repeal. We cannot predict the outcome of any litigation or whether any new FCC order or existing state initiatives regulating providers will be modified, overturned, or vacated by legal action, federal legislation, or the FCC, or the degree to which further regulatory action – or inaction – would adversely affect our business, if at all. If the FCC does not reinstate net neutrality or if state initiatives are modified, overturned, or vacated, internet service providers may be able to limit our users’ ability to access our platform or make our platform a less attractive alternative to our competitors’ applications. In a related
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regulatory context, while the EU requires equal access to internet content, under its Digital Single Market initiative the EU may impose additional requirements that could increase our costs. If new FCC, EU, or other rules directly or inadvertently impose costs on online providers like our business, our expenses may rise. Were any of these outcomes to occur, our ability to retain existing users or attract new users may be impaired, our costs may increase, and our business may be significantly harmed.
We have previously identified material weaknesses in our internal controls over financial reporting and if we are unable to maintain effective internal controls or if we identify additional material weaknesses in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business, financial condition, and results of operations, and prospects.
We have previously identified material weaknesses in our internal controls over financial reporting. For example, in connection with the audit of our financial statements as of and for the year ended December 31, 2022, we identified one material weakness in our internal controls over financial reporting that existed as of December 31, 2021 and was remediated as of December 31, 2022. A material weakness is a deficiency, or combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis. The material weakness related to our risk assessment process and resulted in the ineffective design of process level controls to address the impact on revenue, specifically breakage revenue, of changes made to our platform related to the user redemption liability, and the impact of those changes on reports used in determining breakage revenue.
Although our material weaknesses have been remediated, as further described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” if we are unable to successfully maintain internal controls over financial reporting, or identify any additional material weaknesses, the accuracy and timing of our financial reporting may be adversely affected. In addition, if we are unable to assert that our internal controls over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting, when required, investors may lose confidence in the accuracy and completeness of our financial reports, we may face restricted access to the capital markets, and our stock price may be materially adversely affected. Moreover, we could become subject to investigations by regulatory authorities, which could require additional financial and management resources.
If we fail to maintain an effective system of internal controls, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934 (Exchange Act), the Sarbanes-Oxley Act, and the rules and regulations of the listing standards of the                     . We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming, and costly, and place significant strain on our personnel, systems, and resources. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the Securities and Exchange Commission (SEC) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. We are also continuing to improve our internal controls over financial reporting. Some members of our management team have limited or no experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws pertaining to public companies, and we have limited accounting and financial reporting personnel and other resources with which to address our internal controls and related procedures, including complying with the auditor attestation requirements of Section
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404 of the Sarbanes-Oxley Act that we will eventually be required to include in our annual reports filed with the SEC. We will need to hire and successfully integrate additional accounting and financial staff with appropriate company experience and technical accounting knowledge. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal controls over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight.
Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, we have identified in the past, and may identify in the future, deficiencies in our controls. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal controls over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports. Ineffective disclosure controls and procedures and internal controls over financial reporting could also cause investors to lose confidence in our reported financial and other information, which could have a negative effect on the trading price of our Class A common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the                     . We are not currently required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal controls over financial reporting for that purpose. As a public company, we will be required to provide an annual management report on the effectiveness of our internal controls over financial reporting commencing with our second Annual Report on Form 10-K.
Our independent registered public accounting firm is not required to attest to the effectiveness of our internal controls over financial reporting until after we are no longer an “emerging growth company” as defined in the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal controls over financial reporting is documented, designed, or operating. Any failure to maintain effective disclosure controls and internal controls over financial reporting could have a material and adverse effect on our business and results of operations and could cause a decline in the price of our Class A common stock.
We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, particularly after we are no longer an “emerging growth company,” which could adversely affect our business, financial condition, results of operations, and prospects.
As a public company, and particularly after we cease to be an “emerging growth company,” we will incur greater legal, accounting, finance, and other expenses than we incurred as a private company. We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act), and the rules and regulations of the                     . These requirements have increased and will continue to increase our legal, accounting, and financial compliance costs and have made, and will continue to make, some activities more time-consuming and costly. For example, the Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and results of operations. As a result of the complexity involved in complying with the rules and regulations applicable to public companies, our management’s attention may be diverted from the day-to-day management of our business, which could harm our business, financial condition, results of operations, and prospects. Although we have already hired additional employees to assist us in complying with these requirements, we may need to hire more employees in the future or engage outside consultants, which will increase our operating expenses. Additionally, as a public company subject to additional rules and regulations and oversight, we may not have the same flexibility we had as a private company.
In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs,
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and making some activities more time-consuming. These laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest substantial resources to comply with evolving laws, regulations, and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from business operations to compliance activities. If our efforts to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.
We also expect these rules and regulations to make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to maintain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers.
As a result of disclosure of information in this prospectus and in filings required of a public company, our business and financial condition will become more visible, which may result in an increased risk of threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business, financial condition, results of operations, and prospects could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business, financial condition, results of operations, and prospects.
Our ability to use our net operating loss carryforwards and certain other tax attributes to offset future taxable income may be limited.
Our net operating loss carryforwards (NOLs) may be unavailable to offset future taxable income because of restrictions under U.S. tax law. Our NOLs generated in taxable years ending on or prior to December 31, 2017 are only permitted to be carried forward for 20 taxable years under applicable U.S. federal tax law, and therefore could expire unused. Under tax legislation commonly referred to as the Tax Cuts and Jobs Act (Tax Act), as amended by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), our federal NOLs generated in taxable years beginning after December 31, 2017 may be carried forward indefinitely, but is limited to 80% of our taxable income annually for tax years beginning after December 31, 2020. For state income tax purposes, there may be periods during which the use of net operating loss carryforwards is limited, which could accelerate or permanently increase state taxes owed. As of December 31, 2022, we had available NOLs of approximately $153.9 million ($78.9 million net of uncertain tax positions), of which $67.1 million ($44.4 million net of uncertain tax positions) do not expire.
In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), if a corporation undergoes an “ownership change” (generally defined as a cumulative change in the corporation’s ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period), the corporation’s ability to use its pre-change NOLs and certain other pre-change tax attributes to offset its post-change taxable income may be limited. Similar rules may apply under state tax laws. We believe that we have undergone ownership changes in the past, and we may experience ownership changes in the future as a result of this offering or subsequent shifts in our stock ownership, some of which are outside our control. Our ability to use our pre-change NOLs and certain other pre-change tax attributes may be limited by such ownership changes as described above and consequently, we may not be able to use a material portion of our NOLs and certain other tax attributes to offset our taxable income, which could have a material adverse effect on our cash flows and results of operations.
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If our estimates or judgements relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments about the recognition and measurement of certain assets and liabilities and revenue and expenses that is not readily apparent from other sources. Our accounting policies that involve judgment include, but are not limited to, revenue recognition, breakage, allowances for credit losses, income taxes and associated valuation allowances, leases, stock-based compensation, contingent liabilities, impairment of the equity investment, convertible notes derivative liability, software development costs, including capitalization and the allocation of labor costs between cost of revenue and research and development expense, and the useful lives and impairment of long-lived assets. If our assumptions change or if actual circumstances differ from those in our assumptions, our results of operations could be adversely affected, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock.
Failure to comply with anti-bribery and anti-corruption laws and anti-money laundering laws, and similar laws, could subject us to penalties and other adverse consequences.
We are subject to the U.S. Foreign Corrupt Practices Act (the FCPA), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, and if we expand our operations internationally, possibly other anti-bribery and anti-corruption laws and anti-money laundering laws in countries outside of the United States. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and interpreted broadly to generally prohibit companies, their employees, agents, representatives, business partners, and third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public and private sector.
We may in the future leverage third parties to sell our products and offerings and conduct our business abroad. We and our employees, agents, representatives, business partners, or third-party intermediaries may therefore have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and may be held liable for the corrupt or other illegal activities of these employees, agents, representatives, business partners, or third-party intermediaries even if we do not explicitly authorize such activities. We cannot assure you that all of our employees, agents, representatives, business partners, or third-party intermediaries will not take actions in violation of applicable law, for which we may be ultimately held responsible. As we expand into and increase our international sales and business, our risks under these laws may increase.
These laws also require that we keep accurate books and records and maintain internal accounting controls and compliance procedures designed to prevent any such actions. We cannot assure you that our employees, agents, representatives, business partners, or third-party intermediaries will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible.
Any allegations or violations of the FCPA or other applicable anti-bribery and anti-corruption laws or anti-money laundering laws could result in whistleblower complaints, sanctions, settlements, prosecutions, enforcement actions, fines, damages, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions, or suspension or debarment from U.S. or foreign government contracts, all of which may have an adverse effect on our reputation, business, results of operations, and prospects. Responding to any investigation or action will likely result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees.
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Risks Related to Ownership of our Class A Common Stock and the Offering
The dual class stock structure of our common stock will have the effect of concentrating voting control with Bryan Leach, our Founder, Chief Executive Officer and President and a member of our board of directors, which will generally preclude your ability to influence the outcome of matters submitted to our stockholders for approval, subject to limited exceptions, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and bylaws (where adopted by stockholders), and the approval of any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transactions.
Our Class B common stock has twenty votes per share, and our Class A common stock, which is the stock we are offering in this initial public offering, has one vote per share. Upon the closing of this offering, Mr. Leach and entities affiliated with Mr. Leach will hold all of the issued and outstanding shares of our Class B common stock. Accordingly, upon the closing of this offering, Mr. Leach will hold approximately             % of the voting power of our outstanding capital stock in the aggregate, which voting power may increase over time as Mr. Leach’s equity awards (including in connection with the Equity Award Exchange) outstanding at the time of the completion of this offering are exercised or vested. If all such equity awards held by Mr. Leach had been exercised or vested as of the date of the completion of this offering, Mr. Leach and entities affiliated with Mr. Leach would collectively hold % of the voting power of our outstanding capital stock. As a result, Mr. Leach will generally be able to determine any action requiring the approval of our stockholders, subject to limited exceptions, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and bylaws (where adopted by stockholders), and the approval of any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transactions. Mr. Leach may have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. This concentrated control may have the effect of delaying, preventing, or deterring a change in control of our Company, could deprive our stockholders of an opportunity to receive a premium for their capital stock as part of a sale of our Company, and might ultimately affect the market price of our Class A common stock.
Future transfers by the holders of Class B common stock will generally result in those shares automatically converting into shares of Class A common stock, subject to limited exceptions, such as certain transfers effected for estate planning or other transfers among Mr. Leach and his family members and affiliates. In addition, each share of Class B common stock will convert automatically into one share of Class A common stock upon the earliest of (i) the date fixed by the board of directors that is no less than 61 days and no more than 180 days following the first time after 11:59 p.m. Eastern Time on the date of the effectiveness of the filing of our amended and restated certificate of incorporation with the Secretary of State of the State of Delaware in connection with this initial public offering that the number of outstanding shares of Class B common stock is less than five percent (5%) of the total outstanding shares of our capital stock, (ii) 5:00 p.m. Eastern Time on the date that is seven years from the date of the effectiveness of the filing of our amended and restated certificate of incorporation with the Secretary of State of the State of Delaware in connection with this initial public offering, (iii) the date fixed by the board of directors that is no less than 61 days and no more than 180 days following the first time after 11:59 p.m. Eastern Time on the date of the effectiveness of the filing of our amended and restated certificate of incorporation with the Secretary of State of the State of Delaware in connection with this initial public offering that Mr. Leach is no longer providing services to the corporation as chief executive officer or president, and (iv) the date of the death or permanent disability of Mr. Leach. We refer to the date on which such final conversion of all outstanding shares of Class B common stock pursuant to the terms of our amended and restated certificate of incorporation occurs as the Final Conversion Date. For information about our dual class structure, see the section titled “Description of Capital Stock.”
We cannot predict the effect our dual class structure may have on the trading price of our Class A common stock.
We cannot predict whether our dual class structure will result in a lower or more volatile trading price of our Class A common stock, adverse publicity, or other adverse consequences. For example, certain
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index providers have announced restrictions affecting companies with multiple-class share structures in certain of their indices. In July 2017, FTSE Russell announced that it would require new constituents of its indices to have greater than 5% of a company’s voting rights in the hands of public stockholders. Under this policy, the dual class structure of our common stock could make us ineligible for inclusion in certain indices and, as a result, mutual funds, exchange-traded funds, and other investment vehicles that attempt to passively track those indices would not invest in our Class A common stock. These policies are relatively new and it is unclear what effect, if any, they will have or continue to have on the valuations of publicly-traded companies excluded from such indices, but it is possible that they may depress valuations, as compared to similar companies that are included. Because of the dual class structure of our common stock, we may be excluded from certain indices, and other stock indices may take similar actions. Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from certain stock indices could preclude investment by many of these funds and could make our Class A common stock less attractive to other investors. As a result, the trading price of our Class A common stock could be adversely affected.
The public trading price of our Class A common stock may be volatile, and the value of our Class A common stock may decline.
We cannot predict the prices at which our Class A common stock will trade. The initial public offering price of our Class A common stock will be determined by negotiations between us and the underwriters and may not bear any relationship to the market price at which our Class A common stock will trade after this offering or to any other established criteria of the value of our business and prospects, and the market price of our Class A common stock following this offering may fluctuate substantially and may be lower than the initial public offering price. In addition, the trading price of our Class A common stock following this offering is likely to be volatile and could be subject to fluctuations in response to various factors, some of which are beyond our control. These fluctuations could cause you to lose all or part of your investment in our Class A common stock as you might be unable to sell your shares at or above the price you paid in this offering. Factors that could cause fluctuations in the trading price of our Class A common stock include the following:
price and volume fluctuations in the overall stock market from time to time;
volatility in the trading prices and trading volumes of technology stocks;
changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;
sales or expected sales of shares of our Class A common stock by us or our stockholders;
failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow us or our failure to meet these estimates or the expectations of investors;
any plans we may have to provide or not to provide financial guidance or projections, which may increase the probability that our financial results are perceived as not in line with analysts’ expectations;
if we do provide financial guidance or projections, any changes in those projections or our failure to meet those projections;
changes in the anticipated future size or growth rate of our addressable markets;
announcements by us or our competitors of new solutions or platform features;
the public’s reaction to our press releases, other public announcements and filings with the SEC;
rumors and market speculation involving us or other companies in our industry;
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actual or anticipated changes in our results of operations or fluctuations in our results of operations;
actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally;
litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors;
actual or perceived privacy or security breaches or other incidents;
developments or disputes concerning our intellectual property or other proprietary rights;
announced or completed acquisitions of businesses, services, or technologies by us or our competitors;
new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
changes in accounting standards, policies, guidelines, interpretations, or principles;
any additions or departures of board members, management, or key personnel;
expiration of lock-up agreements and market stand-off provisions;
the impact of seasonality;
other events or factors, including those resulting from war, incidents of terrorism, or pandemics including the COVID-19 pandemic; and
general economic conditions and slow or negative growth of our markets.
In addition, stock markets, and the market for technology companies in particular, have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies, including technology companies, have fluctuated in a manner often unrelated to the operating performance of those companies. In the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.
No public market for our Class A common stock currently exists, and an active public trading market may not develop or be sustained following this offering.
No public market for our Class A common stock currently exists. An active public trading market for our Class A common stock may not develop following the completion of this offering or, if developed, it may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair value of your shares. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.
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Although we do not expect to rely on the “controlled company” exemption under the listing standards of the             , we expect to have the right to use such exemption and therefore we could in the future avail ourselves of certain reduced corporate governance requirements.
As a result of our dual class common stock structure, Mr. Leach and entities affiliated with Mr. Leach will hold a majority of the voting power of our outstanding capital stock following the completion of this offering and Mr. Leach will have the authority to vote the shares of Class B common stock at his discretion on all matters to be voted upon by stockholders. Therefore, we will be considered a “controlled company” as that term is set forth in the listing standards of the       . Under these listing standards, a company in which over 50% of the voting power for the election of directors is held by an individual, a group, or another company is a “controlled company” and may elect not to comply with certain listing standards of the          regarding corporate governance, including:
the requirement that a majority of its board of directors consist of independent directors;
the requirement that its nominating or corporate governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities and an annual performance evaluation of the committee; and
the requirement that its compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities, an annual performance evaluation of the committee, and the rights and responsibilities of the committee related to any compensation consultant, independent legal counsel, or any other advisor retained by the committee.
These requirements would not apply to us if, in the future, we choose to avail ourselves of the “controlled company” exemption. Although we qualify as a “controlled company,” we do not currently expect to rely on these exemptions and intend to fully comply with all corporate governance requirements under the listing standards of the            . However, if we were to utilize some or all of these exemptions, we would not comply with certain of the corporate governance standards of the              , which could adversely affect the protections for other stockholders.
Future sales of our Class A common stock in the public market could cause the market price of our Class A common stock to decline.
Additional sales of a substantial number of shares of our Class A common stock in the public market after this offering, or the perception that such sales may occur, could have an adverse effect on our stock price and could impair our ability to raise capital through the sale of additional stock. In the future, we may attempt to obtain financing or to further increase our capital resources by issuing additional shares of our Class A common stock. Issuing additional shares of our common stock or other equity securities or securities convertible into equity may dilute the economic and voting rights of our existing stockholders or reduce the market price of our Class A common stock or both.
Upon the completion of this offering, we will have                      shares of Class A common stock issued and outstanding (or                      shares of Class A common stock if the underwriters exercise their option to purchase additional shares). The Class A common stock offered hereby will be freely tradable without restriction under the Securities Act of 1933, as amended (the Securities Act), except for any shares of Class A common stock that may be held or acquired by our directors, executive officers and other affiliates (as that term is defined in the Securities Act), which will be restricted securities under the Securities Act.
All of our directors and officers and the holders of substantially all of our capital stock and securities convertible into our capital stock are or will be subject to lock-up agreements that restrict their ability to transfer shares of our capital stock as detailed in the section titled “Shares Eligible for Future Sale.”
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Upon the expiration of the restricted period described above, substantially all of the securities subject to such lock-up and market standoff restrictions will become eligible for sale, subject to compliance with applicable securities laws. Furthermore, Goldman Sachs & Co. LLC, Citigroup Global Markets Inc., and BofA Securities, Inc. may waive the lock-up agreements and market standoff agreements entered into by our executive officers, directors, and record holders of our securities before they expire.
We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Class A common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and have the option to use certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the earlier of (i) the last day of the fiscal year (A) following the fifth anniversary of this offering, (B) in which we have total annual revenue of at least $1.235 billion, or (C) in which we are deemed to be a large accelerated filer, with at least $700 million of equity securities held by non-affiliates as of the prior June 30th, and (ii) the date on which we have issued more than $1 billion in non-convertible debt during the prior three-year period.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. Further, we may take advantage of some of the other reduced regulatory and reporting requirements that will be available to us so long as we qualify as an “emerging growth company.”
Among other things, this means that our independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of our internal controls over financial reporting so long as we qualify as an emerging growth company, which may increase the risk that weaknesses or deficiencies in our internal controls over financial reporting go undetected. Likewise, so long as we qualify as an emerging growth company, we may elect not to provide you with certain information, including certain financial information and certain information regarding compensation of our executive officers, that we would otherwise have been required to provide in filings we make with the SEC, which may make it more difficult for investors and securities analysts to evaluate our Company. As a result, investor confidence in our Company and the market price of our Class A common stock may be adversely affected. Further, we cannot predict if investors will find our Class A common stock less attractive because we will rely on these exemptions. If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock and our stock price may be more volatile.
Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the market price of our Class A common stock.
Our status as a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law (DGCL) may discourage, delay, or prevent a change in control by prohibiting us from engaging in certain business combinations with an interested stockholder for a period of three years after
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the date of the transaction in which the person became an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our amended and restated certificate of incorporation and amended and restated bylaws will contain provisions that may make the acquisition of our Company more difficult, including the following:
certain amendments to our amended and restated certificate of incorporation or our amended and restated bylaws will require the approval of at least 66 2/3% of the voting power of our then-outstanding and issued capital stock;
our board of directors is classified into three classes of directors with staggered three-year terms and stockholders will only be permitted to remove directors from office for cause from and after the Voting Threshold Date (as defined in our amended and restated certificate of incorporation) and for so long as the board is classified;
our dual class common stock structure generally will provide Bryan Leach, our Founder, Chief Executive Officer and President and member of our board of directors, with the ability to determine the outcome of matters requiring stockholder approval, subject to limited exceptions, even if he owns significantly less than a majority of the shares of our outstanding capital stock;
from and after the Voting Threshold Date (as defined in our amended and restated certificate of incorporation), our stockholders will only be able to take action at a meeting of stockholders and will not be able to take action by written consent for any matter;
our amended and restated certificate of incorporation will not provide for cumulative voting;
vacancies and other unfilled seats on our board of directors will be able to be filled only by our board of directors and not by stockholders;
a special meeting of our stockholders may only be called by the chairperson of our board of directors, our Chief Executive Officer, our President, or the board acting pursuant to a resolution adopted by a majority of the total number of authorized directors whether or not there exist any vacancies or unfilled seats in previously authorized directorships on our board of directors;
unless we consent in writing to the selection of an alternative forum, certain litigation against us or our directors, officers, stockholders, or employees can only be brought in Delaware;
our amended and restated certificate of incorporation will authorize                     million shares of undesignated preferred stock, the terms of which may be established and shares of which may be issued by the board of directors without further action by our stockholders, except that the approval of a majority of the outstanding shares of Class B common stock is required for the issuance of any shares of capital stock having the right to more than one vote per share; and
advance notice procedures apply for stockholders to nominate candidates for election as directors at an annual or special meeting of stockholders or to propose business before an annual meeting of stockholders.
These provisions, alone or together, could discourage, delay or prevent a transaction involving a change in control of our Company. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions they desire, any of which, under certain circumstances, could limit the opportunity for our stockholders to receive a premium for their shares of our Class A common stock, and could also affect the price that some investors are willing to pay for our Class A common stock.
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Our amended and restated bylaws that will become effective in connection with this offering will generally provide that the Court of Chancery of the State of Delaware and the federal district courts of the United States will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, stockholders or employees.
Our amended and restated bylaws that will become effective in connection with this offering generally provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for the following types of proceedings:
any derivative action or proceeding brought on behalf of us;
any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, stockholders, or other employees to us or our stockholders;
any action asserting a claim arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or our amended and restated bylaws (as either may be amended from time to time); or
any action asserting a claim governed by the internal affairs doctrine.
Our amended and restated bylaws further provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
Although we believe these provisions benefit us by providing increased consistency in the application of Delaware law for the specified types of actions and proceedings, these exclusive-forum provisions may make it more expensive for stockholders to bring a claim than if the stockholders were permitted to select another jurisdiction and may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, stockholders, or other employees, which may discourage lawsuits against us and our directors, officers, stockholders, and other employees. Our amended and restated bylaws also limit the ability of a person to bring a claim in a judicial forum that it finds favorable for disputes arising under the Securities Act against any person in connection with any offering of the Company’s securities, including any auditor, underwriter, expert, control person, or other defendant. Any person or entity purchasing, holding, or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to these provisions. The enforceability of similar choice of forum provisions in other companies’ governing documents has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable. We also note that stockholders cannot waive compliance (or consent to noncompliance) with the federal securities laws and the rules and regulations thereunder. If a court were to find either exclusive-forum provision in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could significantly harm our business.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about us, our business or our market, or if they change their recommendation regarding our Class A common stock adversely, the market price and trading volume of our Class A common stock could decline.
The market price and trading volume for our Class A common stock will depend in part on the research and reports that securities or industry analysts publish about us, our business, our market, or our competitors. The analysts’ estimates are based upon their own opinions and are often different from our estimates or expectations. If any of the analysts who cover us change their recommendation regarding our Class A common stock adversely, provide more favorable relative recommendations about our competitors or publish inaccurate or unfavorable research about our business, the price of our securities would likely decline. If few securities analysts commence coverage of us, or if one or more of
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these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets and demand for our securities could decrease, which could cause the price and trading volume of our Class A common stock to decline.
We will have broad discretion in the use of the net proceeds to us from this offering and may not use them effectively.
We will have broad discretion in the application of the net proceeds to us from this offering, including for any of the purposes described in the section titled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, our ultimate use may vary substantially from our currently intended use. Investors will need to rely upon the judgment of our management with respect to the use of proceeds. Pending use, we may invest the net proceeds from this offering in investment-grade, interest-bearing securities, such as money market accounts, certificates of deposit, commercial paper, and guaranteed obligations of the U.S. government that may not generate a high yield for our stockholders. If we do not use the net proceeds that we receive in this offering effectively, our business, financial condition, results of operations, and prospects could be harmed, and the market price of our common stock could decline.
You will experience immediate and substantial dilution in the net tangible book value of the shares of Class A common stock you purchase in this offering.
The initial public offering price of our Class A common stock is substantially higher than the pro forma net tangible book value per share of our Class A common stock immediately after this offering. If you purchase shares of our Class A common stock in this offering, you will suffer immediate dilution of                      $           per share, or $     per share if the underwriters exercise their over-allotment option in full, representing the difference between our pro forma as adjusted net tangible book value per share after giving effect to the sale of Class A common stock in this offering and an assumed initial public offering price of $                     per share, the midpoint of the estimated price range set forth on the cover page of this prospectus. See the section titled “Dilution.”
Additional issuances of our stock could result in significant dilution to our stockholders.
Additional issuances of our stock will result in dilution to existing holders of our capital stock. Also, to the extent outstanding additional shares subject to options and warrants to purchase our capital stock are authorized and exercised, there will be further dilution. The amount of dilution could be substantial depending upon the size of the issuance or exercise. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our shares. In addition, the perceived risk of dilution as a result of the significant number of outstanding warrants may cause our common stockholders to be more inclined to sell their shares, which would contribute to a downward movement in the price of our common stock. Moreover, the perceived risk of dilution and the resulting downward pressure on our common stock price could encourage investors to engage in short sales of our Class A common stock, which could further contribute to price declines in our common stock. The fact that our warrant holders can sell substantial amounts of our Class A common stock in the public market could make it more difficult for us to raise additional funds through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate, or at all.
To the extent we issue shares of our capital stock to effect a business combination, the potential for the issuance of a substantial number of additional shares upon exercise of our warrants could make us a less attractive acquisition vehicle in the eyes of a target business since the exercise of warrants could reduce the value of the shares issued to complete the business combination. Accordingly, our warrants may make it more difficult to effectuate a business combination or increase the cost of acquiring the target business. Further, our warrants could make the structuring of any strategic transaction more complex and affect the terms of any such strategic transaction.
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For example, as further described in the section titled “Certain Relationships and Related Party Transactions—Agreements with Walmart”, on May 17, 2021, we issued a common stock purchase warrant (the Walmart Warrant) to Walmart in connection with a multi-year strategic relationship that makes Ibotta the exclusive provider of digital item-level rebate offer content for Walmart U.S.
Pursuant to the terms of the Walmart Warrant, Walmart has the right to purchase up to 3,528,577 shares of our Class A common stock, subject to a non-discretionary anti-dilution provision, at an exercise price of $70.12 per share, except that if our stock is priced in our initial public offering at less than $                per share (taking into account any adjustments for stock splits and similar measure), the exercise price will be decreased to a price that is           % below the price specified for our initial public offering.
As part of our business strategy, we may acquire or make investments in companies, products or technologies and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital stock may cause stockholders to experience significant dilution of their ownership interests and the per share value of our common stock to decline.
General Risks
Natural disasters and other events beyond our control could harm our business.
Natural disasters or other catastrophic events may cause damage or disruption to our operations, non-U.S. commerce and the global economy, and thus could have a negative effect on us. Our facilities are located in Denver, Colorado. Our business operations are subject to interruption by natural disasters, blizzards, flooding, fire, power shortages, pandemics, terrorism, political unrest, telecommunications failure, vandalism, cyberattacks, geopolitical instability, war, the effects of climate change, and other events beyond our control. Although we maintain crisis management and disaster response plans, such events could make it difficult or impossible for us to deliver our solutions to our customers, could decrease demand for our solutions, could make existing customers unable or unwilling to fulfill their contractual requirements to us, including their payment obligations, and could cause us to incur substantial expense, including expenses or liabilities arising from potential litigation. Our insurance may not be sufficient to cover losses or additional expense that we may sustain. Customer data could be lost, significant recovery time could be required to resume operations and our business, financial condition, results of operations, and prospects could be adversely affected in the event of a major natural disaster or catastrophic event. The occurrence of any of these business disruptions could seriously harm our business, financial condition, results of operations, and prospects.
We do not intend to pay dividends on our Class A common stock in the foreseeable future, so any returns will be limited to the value of our Class A common stock.
We have never declared nor paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not anticipate declaring or paying any dividends to holders of our capital stock in the foreseeable future. In addition, our credit agreement contains restrictions on our ability to pay dividends. Consequently, you may need to rely on sales of our Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on your investment.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of the federal securities laws, which involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “would,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “seek,” “aim,” “look,” “wish,” “hope,” “pursue,” “propose,” “design,” “forecast,” “try,” “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this prospectus include, but are not limited to, statements about:
our expectations regarding financial performance, including our operational and financial targets, key metrics, and our ability to achieve or increase future profitability and generate profitable growth over time;
our ability to successfully execute our business and growth strategy;
our expectations regarding the capabilities of our platform and technology;
the sufficiency of our cash, cash equivalents, and marketable securities to meet our liquidity needs;
the demand for the IPN including the size of our addressable market, market share, and market trends;
our ability to renew, maintain and expand our relationships with publishers, CPG brands, and retailers;
our ability to grow the number of redeemers that use our platform and the amount redeemed by our redeemers;
our expectations regarding the macroeconomic environment, including rising inflation and interest rates, and uncertainty in the global banking and financial services markets;
our ability to develop and protect our brand;
our ability to effectively manage costs;
our ability to develop new offerings, services, and features and bring them to market in a timely manner and make enhancements to our platform;
our ability to compete with existing and new competitors in existing and new markets and offerings;
our expectations regarding outstanding litigation and legal and regulatory matters;
our expectations regarding the effects of existing and developing laws and regulations and our ability to comply with such laws and regulations including privacy matters;
our ability to collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of and share data about redeemers and our publishers, CPG brands, and retailers;
our ability to manage and insure operations-related risk associated with our business;
our expectations regarding our market opportunity and new and evolving markets;
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our ability to maintain the security and availability of the IPN;
our expectations and management of future growth;
our expectations concerning relationships with third parties, including with Walmart and Dollar General;
our ability to expand into new verticals;
our ability to maintain, protect, and enhance our intellectual property;
the need to hire additional personnel and our ability to attract and retain such personnel;
our ability to obtain additional capital and maintain cash flow or obtain adequate financing or financing on terms satisfactory to us;
our expectations that we will not rely on the “controlled company” exemption under the listing standards of the         ;
the increased expenses associated with being a public company;
the future trading prices of our common stock;
the impact of the COVID-19 pandemic, or a similar public health threat, on global capital and financial markets, political events, general economic conditions in the United States, and our business and operations; and
our anticipated uses of net proceeds from this offering.
We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations, and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this prospectus and are subject to a number of risks, uncertainties, and assumptions described in the section titled “Risk Factors” and elsewhere in this prospectus. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein until after we distribute this prospectus, whether as a result of any new information, future events, or otherwise.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus. While we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.
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MARKET, INDUSTRY, AND OTHER DATA
Unless otherwise indicated, estimates and information contained in this prospectus concerning our industry and the market in which we operate, including our general expectations, market position, market opportunity, and market size, are based on industry publications and reports generated by third-party providers, other publicly available studies, and our internal sources and estimates. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. Although we are responsible for all of the disclosure contained in this prospectus and we believe the information from the industry publications and other third-party sources included in this prospectus is reliable, we have not independently verified the accuracy or completeness of the data contained in such sources. The content of, or accessibility through, the below sources, except to the extent specifically set forth in this prospectus, does not constitute a portion of this prospectus and is not incorporated herein and any websites are an inactive textual reference only.
The sources of the statistical data, estimates, and market and industry data contained in this prospectus are provided below:
Bamboo Rose, FMI Report: 41% of Shoppers are Buying More Private Brands, July 2022
Bankrate, LLC, Survey: The average American feels they’d need over $200K a year to be financial comfortable, July 2023
Bond Brand Loyalty Inc., Growth of Customer Loyalty Strategies Raises Bar on Innovation, June 2023
Built In, Inc., 2023 Best Places to Work, 2023
Built In, Inc., The Best Places to Work, 2022
Built In, Inc., The Best Places to Work, 2021
Cadent Consulting Group, 2022 Marketing Spending, Navigating CPG Marketing Spending in an Inflation Dominated World, December 2022
CapitalOne Shopping Research, Coupon Statistics, July 2023
Cision PR Newswire, EY announces Ibotta, Inc.'s Founder & CEO, Bryan Leach, is an EY Entrepreneur Of The Year® 2015 Award winner in the Mountain Desert Region, July 2015
Cision PR Newswire, Ibotta Recognized by The Denver Post as a Colorado “Top Workplace,” May 2019
ColoradoBiz Magazine, CEO of the Year: Colorado’s King of Couponing 2.0, November 2018
Competitive Media Report, LLC d/b/a VIVVIX, Promotion Trends 2022: A Mid-Year Catch-Up, July 2022
Coupons in the News, Plummeting Coupon Use May Finally Bounce Back, May 2020
Dollar General, Dollar General Named a Top 50 Fastest-Growing Retailer by Total Retail, January 2022
Forbes, How Dollar General Is Spreading Like Hot Gossip In Tiny Towns Across The Country, May 2022
Glassdoor LLC, Top CEOs 2018, Employees’ Choice, 2018
Inc., Best Workplaces 2023, 2023
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Incisiv Inc. and Mercatus Technologies Inc., Digital Maturity Benchmark, Grocery Industry 2022, 2022
McKinsey & Company, Commerce Media: The New Force Transforming Advertising, July 2022
The New York Times, As Prices Skyrocket, Coupons are Harder to Find Than Ever, June 2022
The NPD Group, L.P., The Shrinking Impact of Promotions, February 2023
PYMNTS, New Reality Check: The Paycheck-to-Paycheck Report, February 2023
Shopify, 7 Innovative Customer Loyalty Programs and How to Start, June 2022
Statista Inc., Consumers’ Weekly Grocery Shopping Trips in the United States from 2006 to 2022, May 2022
Statista Inc., How Important are the Following Aspects in Your Choice of Grocery Stores?, August 2023
Statista Inc., Leading Supermarkets in the United States in 2021, Based on Retail Sales, September 2022
Statista Inc., Number of Stores of Selected Mass Merchandise Retailers in the United States in 2022, July 2023
Statista Inc., Share of Consumers Using Physical and Online Coupons in the United States in 2023, June 2023
Statista Inc., U.S. Dollar Stores - Statistics & Facts, November 2022
Supermarket News, Price-Conscious Consumers Hunger for Lower Food Tab, June 2022
The Denver Post, Top Workplace 2021: The Best Large Companies to Work for in Colorado, 2021
The Denver Post, Top Workplaces 2018: List of Recognized Companies, 2018
The Denver Post, Top Workplaces 2017: List of Recognized Companies, 2017
The Wall Street Journal and Deloitte Touche Tohmatsu Limited, Overall Marketing Budget Growth Slows, Digital Spending Increases, August 2023
The Wall Street Journal, More Shoppers Buy Store Brands, Eating Into Big Food Companies’ Sales, July 2022
Winsight LLC, More Than Half Of Consumers Say Grocery Delivery Costs Too Much, August 2022
WordStream, Inc., 165 Strategy-Changing Digital Marketing Statistics for 2023, October 2023
yahoo!finance, Digital Coupons Market to Hit USD 6,837.16 Mn By 2030, A Detailed Analysis, August 2023
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USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of the shares of our Class A common stock in this offering will be approximately $          million, or approximately $          million if the underwriters exercise their option to purchase additional shares in full, based upon an assumed initial public offering price of $          per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Each $1.00 increase or decrease in the assumed initial public offering price of $          per share would increase or decrease, as applicable, the net proceeds to us from this offering by approximately $          million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each increase or decrease of 1.0 million shares in the number of shares offered by us in this offering would increase or decrease, as applicable, the net proceeds to us from this offering by approximately $          million, assuming that the assumed initial public offering price remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We do not expect that a change in the initial public offering price or the number of shares by these amounts would have a material effect on our uses of the proceeds from this offering, although it may change the time at which we will need to seek additional capital.
The principal purposes of this offering are to increase our capitalization and financial flexibility, create a public market for our common stock, and enable access to the public equity markets for us and our stockholders.
We intend to use the net proceeds we receive from this offering for general corporate purposes, including working capital, operating expenses, and capital expenditures. We cannot specify with certainty the particular uses of the net proceeds that we will receive from this offering. Accordingly, we will have broad discretion in using these proceeds. Pending the use of proceeds from this offering as described above, we may invest the net proceeds that we receive in this offering in short-term, investment grade, interest-bearing instruments.
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DIVIDEND POLICY
We have not declared or paid any cash dividends on our capital stock since our date of incorporation. We intend to retain future earnings, if any, to finance the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Payment of future cash dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, the requirements and contractual restrictions of any then-existing debt instruments, and other factors that our board of directors may deem relevant.
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CAPITALIZATION
The following table sets forth our cash, cash equivalents, and investments and capitalization as of December 31, 2023, as follows:
on an actual basis without any adjustments to reflect subsequent or anticipated events;
on a pro forma basis, giving effect to (i) the Capital Stock Conversion, as if such conversion had occurred on December 31, 2023, (ii)          the Notes Conversion, as if such conversion had occurred on December 31, 2023, (iii) the filing and effectiveness of our amended and restated certificate of incorporation in Delaware that will become effective prior to the completion of this offering and will effect the Reclassification as if it had occurred on December 31, 2023, and (iv) the Class B Stock Exchange, as if such exchange had occurred on December 31, 2023; and
on a pro forma as adjusted basis, giving effect to (i) the pro forma adjustments set forth above, and (ii) the sale and issuance by us of     shares of our Class A common stock in this offering, based upon the assumed initial public offering price of $      per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The pro forma as adjusted information set forth below is illustrative only and will depend on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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As of December 31, 2023
Actual Pro Forma
Pro Forma As Adjusted(1)
(unaudited) (in thousands, except share and per share data)
Cash, cash equivalents, and investments
$                    $                    $                   
Convertible notes
Stockholders’ equity (deficit):
Series Seed preferred stock, par value $0.00001 per share; 2,407,363 shares authorized, 2,407,363 shares issued and outstanding, actual; no shares issued and outstanding, pro forma and pro forma as adjusted
Series A preferred stock, par value $0.00001 per share; 1,984,186 shares authorized, 1,984,186 shares issued and outstanding, actual; no shares issued and outstanding, pro forma and pro forma as adjusted
Series B preferred stock, par value $0.00001 per share; 3,824,091 shares authorized, 3,824,091 shares issued and outstanding, actual; no shares issued and outstanding, pro forma and pro forma as adjusted
Series C preferred stock, par value $0.00001 per share; 3,300,548 shares authorized, 3,300,548 shares issued and outstanding, actual; no shares issued and outstanding, pro forma and pro forma as adjusted
Series C-1 preferred stock, par value $0.00001 per share; 1,578,552 shares authorized, 1,578,552 shares issued and outstanding, actual; no shares issued and outstanding, pro forma and pro forma as adjusted
Series D preferred stock, par value $0.00001 per share; 4,151,214 shares authorized, 4,151,214 shares issued and outstanding, actual; no shares issued and outstanding, pro forma and pro forma as adjusted
Class A common stock, par value $0.00001 per share; no shares authorized, issued and outstanding, actual;    shares authorized,          shares issued and outstanding, pro forma;             shares authorized,            shares issued and outstanding, pro forma as adjusted
Class B common stock, par value $0.00001 per share; no shares authorized, issued and outstanding, actual;            shares authorized,             shares issued and outstanding, pro forma;              shares authorized,           shares issued and outstanding, pro forma as adjusted
Common stock, par value $0.00001 per share; 40,000,000 shares authorized,               shares issued and outstanding, actual;               shares issued and outstanding, pro forma and                shares issued and outstanding pro forma as adjusted
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders’ equity (deficit)
Total capitalization
$                    $                    $                   
_______________
(1)Each $1.00 increase or decrease in the assumed initial public offering price of $     per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, each of our
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cash, cash equivalents, and investments, additional paid-in-capital, total stockholders’ equity (deficit), and total capitalization by $     million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us. Each increase or decrease of 1.0 million shares in the number of shares of common stock offered by us would increase or decrease, as applicable, each of our cash, cash equivalents, and investments, working capital, total assets, and total stockholders’ equity (deficit) by approximately $     million, assuming no change in the assumed initial public offering price of $     per share and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.
The pro forma and pro forma as adjusted columns in the table above are based on      shares of our Class A common stock and           shares of our Class B common stock outstanding as of December 31, 2023 (after giving effect to the Capital Stock Conversion, Notes Conversion, the Reclassification, and the Class B Stock Exchange), and exclude the following:
               shares of our Class A common stock issuable upon exercise of options to purchase shares of our Class A common stock outstanding as of December 31, 2023 under our 2011 Equity Incentive Plan (2011 Plan), at a weighted average exercise price of $     per share;
               shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock that we granted after December 31, 2023 under our 2011 Plan, at an exercise price of $     per share;
                   shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock that we granted after December 31, 2023 under our 2011 Plan, at an exercise price of $         per share to Bryan Leach that can be exchanged for an equivalent number of shares of Class B common stock pursuant to the Equity Award Exchange Agreement.
                    shares of Class A common stock reserved for future issuance under our 2011 Plan as of December 31, 2023, which shares will be added to the shares to be reserved for issuance under our 2024 Equity Incentive Plan (2024 Plan), which will become effective on the business day immediately prior to the date of effectiveness of the registration statement of which this prospectus forms a part;
                    shares of our Class A common stock reserved for future issuance under our 2024 Plan as well as any automatic increases in the number of shares of our Class A common stock reserved for future issuance under the 2024 Plan;
                    shares of our Class A common stock to be reserved for future issuance under our 2024 Employee Stock Purchase Plan (ESPP), which will become effective on the business day immediately prior to the date of effectiveness of the registration statement of which this prospectus forms a part, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under the ESPP; and
                    shares of Class A common stock, following the issuance of           shares of our Class A common stock upon the automatic conversion of the convertible notes, based upon an assumed initial public offering price of $          per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after taking into account option grants made following the issuance of the Walmart Warrant. The vesting and exercise terms of the Walmart Warrant are further described in the section titled “Certain Relationships and Related Party Transactions—Agreements with Walmart.”
In addition, following the completion of this offering, we may issue up to          shares of Class B common stock in exchange for an equivalent number of shares of Class A common stock pursuant to the Equity Award Exchange Agreement.
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DILUTION
If you invest in our Class A common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the pro forma net tangible book value per share of our Class A common stock after this offering.
Net tangible book value (deficit) per share is determined by dividing our total tangible assets less our total liabilities and convertible preferred stock by the number of shares of our common stock outstanding. Our historical net tangible book deficit as of was $               million, or $     per share. Our pro forma net tangible book value (deficit) as of           was $ million, or $          per share, based on the total number of shares of our Class A common stock and Class B common stock outstanding as of          , after giving effect to (i) the Capital Stock Conversion, (ii) the Notes Conversion (iii) the Reclassification, and (iv) the Class B Stock Exchange.
After giving further effect to the receipt of the net proceeds from our issuance and sale of shares of Class A common stock in this offering at an assumed initial public offering price of $          per share of Class A common stock, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of          would have been approximately $          million, or $          per share. This amount represents an immediate increase in pro forma as adjusted net tangible book value of $          per share to our existing stockholders and an immediate dilution in pro forma as adjusted net tangible book value of approximately $          per share to new investors purchasing shares of our Class A common stock in this offering. We determine dilution by subtracting the pro forma as adjusted net tangible book value per share after this offering from the estimated offering price that a new investor will pay for a share of Class A common stock. The following table illustrates this dilution:
Assumed initial public offering price per share $                   
Historical net tangible book value (deficit) per share as of
$
Pro forma increase in net tangible book value per share as of
Pro forma net tangible book value per share as of
Increase in pro forma net tangible book value per share attributable to new investors purchasing shares of Class A common stock in this offering
Pro forma as adjusted net tangible book value per share following this offering
Dilution per share to new investors purchasing shares in this offering
$                   
Each $1.00 increase (decrease) in the assumed initial public offering price of $          per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted net tangible book value per share after this offering by approximately $          per share, and dilution in pro forma as adjusted net tangible book value per share to new investors by approximately $          per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Each increase (decrease) of 1,000,000 shares in the number of shares offered in this offering, as set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value after this offering by approximately $          million, or $          per share, and would increase (decrease) the dilution per share to new investors by $          per share, assuming that the assumed initial public offering price of $          per share, which is the midpoint of the price range set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
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If the underwriters exercise their option to purchase additional shares in full, the pro forma as adjusted net tangible book value after the offering would be $          per share, the increase in pro forma as adjusted net tangible book value per share to existing stockholders would be $          per share and the dilution in pro forma as adjusted net tangible book value to new investors would be $          per share, in each case assuming an initial public offering price of $          per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The following table presents, as of          , after giving effect to (i) the Capital Stock Conversion as if such conversion had occurred on December 31, 2023, (ii) the Notes Conversion, as if such conversion had occurred on December 31, 2023, (iii) the Reclassification as if such Reclassification had had occurred on December 31, 2023, and (iv) the Class B Stock Exchange as if such stock exchange had occurred on December 31, 2023, the differences between the existing stockholders and the new investors purchasing shares of our Class A common stock in this offering with respect to the number of shares purchased from us, the total consideration paid, or to be paid, to us, and the average price per share paid, or to be paid. The calculation below is based on an assumed initial public offering price of $          per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Shares Purchased Total Consideration Average Price Per Share

Number Percent Amount Percent
Existing stockholders before this offering
% $                % $               
Investors purchasing shares in this offering
$               
Total
100  % $                100  %
Each $1.00 increase (decrease) in the assumed initial public offering price of $          per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by new investors by $          million, assuming the number of shares of Class A common stock offered by us remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The number of shares of our Class A common stock and Class B common stock to be outstanding after this offering is based on          shares of our Class A common stock and           shares of our Class B common stock outstanding as of          , after giving effect to the Capital Stock Conversion, the Notes Conversion, the Reclassification, and the Class B Stock Exchange as if each had occurred on December 31, 2023, and excludes the following:
               shares of our Class A common stock issuable upon exercise of options to purchase shares of our Class A common stock outstanding as of          under our 2011 Plan, at a weighted average exercise price of $          per share;
               shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock that we granted after          under our 2011 Plan, at an exercise price of $ per share;
            shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock that we granted after             under our 2011 Plan, at an exercise price of $           per share to Bryan Leach that can be exchanged for an equivalent number of shares of Class B common stock pursuant to the Equity Award Exchange Agreement;
              shares of Class A common stock reserved for future issuance under our 2011 Plan as of          , which shares will be added to the shares to be reserved for issuance under our 2024
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Plan, which will become effective on the business day immediately prior to the date of effectiveness of the registration statement of which this prospectus forms a part;
               shares of our Class A common stock reserved for future issuance under our 2024 Plan as well as any automatic increases in the number of shares of our Class A common stock reserved for future issuance under the 2024 Plan;
               shares of our Class A common stock to be reserved for future issuance under our ESPP, which will become effective on the business day immediately prior to the date of effectiveness of the registration statement of which this prospectus forms a part, as well as any automatic increases in the number of shares of our Class A common stock reserved for future issuance under the ESPP; and
               shares of Class A common stock, following the issuance of               shares of our Class A common stock upon the automatic conversion of the convertible notes, based upon an assumed initial public offering price of $              per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after taking into account option grants made following the issuance of the Walmart Warrant. The vesting and exercise terms of the Walmart Warrant are further described in the section titled “Certain Relationships and Related Party Transactions—Agreements with Walmart.”
In addition, following the completion of this offering, we may issue up to             shares of Class B common stock in exchange for an equivalent number of shares of Class A common stock pursuant to the Equity Award Exchange Agreement.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this prospectus. This discussion and other parts of this prospectus contain forward-looking statements, such as those relating to our plans, objectives, expectations, intentions, and beliefs, which involve risks and uncertainties. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the sections titled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Overview
Ibotta is a technology company that allows CPG brands to deliver digital promotions to over 200 million consumers through a single, convenient network called the Ibotta Performance Network (IPN). We are pioneers in success-based marketing; we only get paid when our client’s promotion results in a sale, not when a consumer merely views or clicks on the promotion. We have built the largest digital item-level promotions network in the United States by forming strategic relationships with major retailers such as Walmart Inc. (Walmart) and Dollar General Corporation (Dollar General), which use our digital offers to power their loyalty programs on a white-label basis. Through the IPN, our clients can also reach millions more consumers on our widely used rewards app digital properties, which include the Ibotta-branded cash back mobile app, website, and browser extension (collectively, Ibotta D2C).
We work directly with over 750 different clients, representing over 2,250 different CPG brands, to source exclusive offers. Most of our offers cover products in non-discretionary categories, such as grocery, but we also work with general merchandise manufacturers in categories such as toys, clothing, beauty, electronics, pet, home goods, and sporting goods. Over time, our clients have generally ramped up their spend with us, and they rarely drop off our network. In fact, of our top 100 clients, 99% were retained from 2021 to 2022.
We deliver success-based digital promotions at-scale because we manage a growing, open network of third-party publishers that host our offers. Retailers are among our most important publishers because their apps and websites are frequently visited by consumers with high purchase intent. A retailer may ingest digital offers from Ibotta’s Application Programming Interface (API) and present them to its consumers as part of its own branded loyalty program. We call these partners “retailer publishers.” In addition to providing digital offers for retailers, Ibotta also makes the same offers available on its own digital properties, which include Ibotta D2C. Since 2012, over 50 million Americans have registered for our free app. Ibotta D2C reaches a highly engaged audience of savings-conscious consumers who want a single digital starting point where they can find cash back offers across a variety of retailers. Many of these consumers decide where to shop based on the availability of deals in different retailers. Once the IPN launched, Ibotta D2C became a publisher on the IPN, meaning it is now one of many nodes through which our digital offers are delivered to the end consumer.
Impact of Macroeconomic Conditions
Our business and results of operations are subject to global economic conditions. Our revenue depends on the ability of consumers to buy products that are featured on the IPN. Deteriorating macroeconomic conditions, including slower growth or a recession, inflation, bank failures, supply chain disruption, increases in interest rates, increases to fuel and other energy costs or vehicle costs, geopolitical events, including the potential for new or unforeseen conflicts such as the impact of the Russia and Ukraine conflict and Hamas and Israel conflict, changes in the labor market, or decreases in consumer spending power or confidence, are likely to result in a decline in client spending which could adversely affect the number of offer redemptions.
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In the first half of 2022, our D2C redemptions per redeemer were negatively impacted by supply chain constraints, which made it difficult for our clients to keep their products on shelves and decreased promotions on products purchased with high frequency. Clients experienced decreased inventory levels, increased shipment delays, increased freight costs, and elevated levels of demand leading to decreased demand for our platform and decreased revenues as well as decreased earning opportunities. In the second half of 2022, our clients saw reduced supply chain constraints, resulting in increased redemptions and redemptions per redeemer. To mitigate the impact of any future supply chain disruptions, we are focused on diversifying the offers available on the Ibotta Performance Network by renewing, maintaining, and expanding our relationships with publishers and CPG brands. These mitigation efforts have thus far not introduced new material risks, including those related to product quality, reliability, or regulatory approval of services. However, we are unable to predict if there will be future deteriorating macroeconomic conditions that may harm growth and profits in future periods.
Management continues to actively monitor the impact of these macroeconomic factors on our financial condition, liquidity, operations, and workforce. For more information on risks associated with macroeconomic conditions, see the risk factor titled “Macroeconomic conditions, including slower growth or a recession and supply chain disruptions, have previously and could continue to adversely affect our business, financial condition, results of operations, and prospects.”
Our History and Key Milestones
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Our revenue growth significantly accelerated with the addition of new publishers to the IPN. Most recently, the rollout of our offers on the digital properties of Walmart and Dollar General has attracted larger audiences, and in turn, resulted in greater spend by CPG brands and a greater number of redeemed offers. These developments have increased our scale, growth, and profitability.
Total revenue grew from $210.7 million in 2022 to $          million in 2023, an increase of           %;
Redemption revenue grew from $138.7 million (or 66% of total revenue) in 2022 to $      million (or          % of total revenue) in 2023, an increase of          %;
Gross profit grew from $164.5 million in 2022 to $          million in 2023, an increase of           %;
Net loss decreased from $54.9 million in 2022 to $          million in 2023; and
Adjusted EBITDA margin improved from (13)% in 2022 to          % in 2023.
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Our Business Model
Our business model is driven by the success of CPG brands, publishers, and consumers on our platform. We operate a fee-per-sale digital promotions network called the IPN, which is widely used by CPG brands, third-party publishers, and consumers. Using the IPN, CPG brands deliver digital promotions to millions of consumers through third-party publishers that host our offers, such as retailers. In addition to providing digital offers for retailers, we also make the same offers available on our digital properties, which include Ibotta D2C.
As of          , 2023, the IPN connected over 750 different clients, representing over 2,250 CPG brands to reach over 200 million consumers making us the largest item-level network of CPG brands, publishers, and consumers in the digital promotion space in the United States. As of          , 2023 we had          million redeemers. Unlike our D2C properties where we previously focused our marketing investments on the acquisition and retention of redeemers, we do not have to allocate marketing budget on the acquisition or retention of redeemers for consumers who redeem our offers via third-party publishers. This drives ongoing efficiency in our business model.
CPG brands on our platform sell non-discretionary, high-frequency items that require routine replacement or replenishment. Consumers typically purchase these products weekly or on a recurring basis, which strengthens the value of the IPN for our clients. As CPG brands realize more success through the IPN, they tend to increase the offers they provide for distribution across our network, which in turn allows us to attract more consumers and drive more engagement, making the IPN more attractive to clients. In 2023,          % of our revenue resulted from campaigns from clients who ran at least one campaign in 2022.
For the year ended December 31, 2023,          % of our revenue was redemption revenue, which is generated from fees we charge our clients when a redeemer activates an offer on our platform. In addition,              % of our revenue in 2023 was generated from fees we charge clients for supporting their promotions through ads on our direct-to-consumer properties as well as from monetizing our data. In 2023, we generated revenue of $          million, representing growth of          % from $           million in 2022.
Redemption Revenue
A substantial share of our revenue is generated from redemptions of an offer across the IPN. In 2023, redemption revenue represented          % of total revenue. Redemptions generated revenues of approximately $          million and $138.7 million in 2023 and 2022, respectively.
To effect a transaction, we need three parties: clients, publishers, and redeemers. Our clients collaborate with Ibotta to run a campaign in the form of a digital offer for consumers. These offers incentivize consumers to purchase the items associated with the offer, turning these consumers into redeemers and driving incremental sales for CPG brands and publishers.
Relationship with clients. The IPN allows our clients to promote their brands’ products and services to consumers through cash back offers. Clients work with us to set up their offers for distribution on our publisher properties including third parties and D2C. Whenever a consumer redeems a client’s offer, we earn a fee.
Our fee is generally charged as a fixed dollar amount per redemption based on the retail price of the specific item being promoted. Our clients typically determine the value of the offer given to the consumer, and the total invoice amount we charge our client is the sum of our fee and the amount of the consumer offer. We recognize the fee as redemption revenue as we are the agent in the transaction. We do not recognize the consumer offer as revenue in our financial statements.
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Relationship with publishers. We work with publishers who make offers from our clients available to consumers. Such publishers include, but are not limited to, Ibotta D2C and third-party publishers. By making our offers available to consumers, publishers, including retailer publishers, are able to appeal to price sensitive consumers and drive loyalty. Additionally, for retailer publishers that choose to offer a closed-loop rewards program, savings are kept within their ecosystem, which incentivizes future purchases at that retailer.
Relationship with redeemers. Redeemers benefit from the quantity and quality of offers available on the IPN. Since our founding, we have given over $1.6 billion in cash back to U.S. consumers on their everyday purchases.
Illustrative example of a redemption
The chart below shows an illustrative redemption where we invoice the client for our fee and consumer offer. Generally, the consumer offer and our fee are based on product MSRP.
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Ad & Other Revenue
While redemption revenue is the largest component of our revenue, we also generate revenue by selling ad products on our Ibotta D2C properties, monetizing aggregated data collected by our platform, and providing CPG brands with marketing and consumer insights. In 2023, ad & other revenue represented          % of total revenue.
Our clients may place digital ads on our Ibotta D2C properties in support of their promotional campaigns. Ad products run in conjunction with the associated redemption campaign, either over the
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entire redemption campaign life or some portion of it. We typically charge fixed dollar amounts for our ad products.
Our data, media, and consumer insights revenue business generates revenue through sales of audience targeting, location and purchase targeting, and data licensing products. We charge partners a licensing fee to use our data in ways that help them enrich their promotions and better target their digital advertisements.
Ad & other revenue generated revenues of approximately $          million and $72.0 million in 2023 and 2022, respectively.
Key Factors Affecting Our Performance
Our current and future financial performance is primarily driven by the following factors:
Ability to grow redeemers. Our relevance and value to clients depends on our ability to reach a growing audience of consumers who have the potential to become redeemers. Growing our consumer base, whether on our third-party publishers or D2C properties, is dependent on our ability to provide an attractive set of offers within our ecosystem and support seamless redemption experiences. Our ability to deliver offers at-scale will continue to depend on maintaining and growing usage of offers within our existing publishers and adding new publishers to the IPN. For example, we added Walmart as a retailer publisher in August 2022. More recently, we formed strategic partnerships with other major retailers, such as Dollar General and Family Dollar. We have been able to foster and develop multi-year relationships with our retailer publishers, and we intend to further grow our audience by growing redeemers on existing third-party publisher properties, adding new third-party publishers in retail and grocery, and expanding into new categories of publishers such as delivery service providers and non-retailer publishers.
Ability to source offers. Securing offers from our CPG clients is critical to the ongoing success of our platform. We seek to grow the number of offers on our platform. We also focus on deepening each offer budget which allows that offer to remain active longer before reaching its budget cap, as well as broadening each offer’s parameters by including as many qualifying products as possible and imposing as few restrictions on offer distribution as possible, consistent with the marketing objectives the client has for any given campaign. These quantitative and qualitative dimensions of our offer inventory are highly correlated to our ability to attract and retain publishers and redeemers. As we add publishers, we reach a larger, more engaged audience, and as a result, we typically see higher redemptions. Increasing the number of offers on our platform is often the result of expanding budgets with existing clients and adding new clients or additional brands within an existing client’s portfolio. Winning more publishers presents more opportunities to increase our share of marketing budgets from more CPG brands. As we have proven our ability to deliver a high return on CPG brand ad spend, driven by our wide reach to millions of consumers through the IPN, efficient and measurable fee-per-sale campaigns, seamless campaign execution and management, and valuable item-level insights, CPG brands have expanded their spend with us. We may also expand our offer inventory by continuing to penetrate general merchandise categories such as toys, clothing, beauty, electronics, pet, home goods, and sporting goods. These non-grocery verticals contain some of the largest advertisers in the United States and a large portion of the shelf space and revenue at mass and specialty retailers, and yet have historically had few, if any, success-based marketing tactics available to them. We increase the number and quality of offers on our platform through the efforts of our client-focused sales teams and business-to-business focused marketing.
Continue to enhance the IPN through innovation. We will continue to invest in technology to further develop and accelerate the growth of the IPN for CPG brands, publishers, and consumers. As the data generated by the IPN grows, we believe Ibotta will generate more valuable insights about purchase behavior and market trends, and may be able to automatically optimize recommendations for consumers as well as campaigns for clients based on real-time data from across the network. We intend to enable CPG brands to leverage our Artificial Intelligence (AI)-powered tools to run success-based marketing
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programs that achieve their specific goals. CPG brands may also be able to create digital offer campaigns programmatically via other buying platforms.
Seasonality. Our business experiences seasonality as it is closely correlated with consumer spending on CPG goods over the course of the year. We have historically experienced heightened consumer activity during holidays, which results in higher redemptions on a relative basis. As a result, the fourth quarter represented 31% and          % of total revenue for the fiscal years ending 2022 and 2023, respectively. As our business continues to scale and growth stabilizes, we may experience other seasonal trends and existing seasonal trends may become more prominent and contribute to fluctuations in our results of operations.
Performance Metrics and Non-GAAP Measures
We use the following key performance metrics and non-GAAP measures to help us evaluate our business, identify trends affecting our performance, and make strategic decisions.
Performance Metrics
The performance metrics below are presented into two categories: D2C and third-party publishers, which sum to the total metric. The underlying trends and drivers of our D2C business often vary from those of our third-party publisher business. Our D2C business caters to consumers who are focused on savings, irrespective of the retailer. Our third-party publisher business tends to reach consumers who may be more loyal to a specific retailer and are engaging with offers powered by Ibotta’s technology platform. The explanation of the changes in the total metric can be found in the D2C and third-party publishers sections.
Redemptions
A redemption is a verified purchase of an item qualifying for an offer by a client on the IPN. The number of redemptions are an indicator of the scale and consumer engagement of our business as well as the value we bring to our clients and publishers. Generally, redemptions grow as we increase budget with existing clients and/or add new CPG brands as clients. In addition, redemptions grow from adding publishers, redeemers, and/or increase engagement from existing redeemers.
D2C redemptions are redemptions on any Ibotta D2C property. Third-party publisher redemptions are redemptions on all publishers excluding the Ibotta D2C properties, namely our retailer publishers.
Ibotta D2C redemptions
For 2023 and 2022, D2C redemptions were approximately          million and 127.6 million, respectively. The year-over-year increase was driven by an increase in the quantity and quality of offers available.
D2C redemptions (in millions)
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Third-party publisher redemptions
For 2023 and 2022, our third-party publisher redemptions were approximately          million and 13.8 million, respectively, primarily driven by the expansion of redemptions through Walmart, which initially launched in the third quarter of 2022 to members of Walmart’s paid membership program, Walmart+, and expanded to other Walmart customers in the third quarter of 2023.
Third-party publisher redemptions (in millions)*
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*Totals may not foot due to rounding.
Total redemptions
For 2023 and 2022, total redemptions were          million and 141.4 million.
Total redemptions (in millions)*
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*Totals may not foot due to rounding.
Redeemers
Redeemers are defined as consumers who have redeemed at least one digital offer within the quarter. If one consumer were to redeem on more than one publisher, they would be counted as a redeemer on each publisher. Annual redeemers are calculated as the average redeemers of the last four quarters. Redeemers are an indicator of the scale and growth of our business as the number of redeemers typically drives our revenue and is an indication of our ability to grow redemptions.
D2C redeemers are consumers who have redeemed at least one digital offer on any Ibotta property within the quarter. Third-party publisher redeemers are consumers who have redeemed at least one digital offer on any publisher property that is not an Ibotta property, namely our retailer publishers.
Ibotta D2C redeemers
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Number of D2C redeemers increases as rewards content available on Ibotta’s D2C platform increases. For 2023 and 2022, D2C redeemers were approximately     million and 2.0 million, respectively.
D2C redeemers (in millions)
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Third-party publisher redeemers
For 2023 and 2022, third-party publisher redeemers were approximately          million and 0.9 million, respectively. These redeemers grow as we add third-party publishers and as these publishers ramp up consumers on their properties. The primary driver of growth in 2023 is driven by the expansion of revenue related to Walmart, which initially launched in the third quarter of 2022 to members of Walmart’s paid membership program, Walmart+, and expanded to all Walmart customers with a Walmart.com account in the third quarter of 2023.
Third-party publisher redeemers (in millions)
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Total redeemers
For 2023 and 2022, total redeemers were approximately          million and 2.9 million, respectively.
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Total redeemers (in millions)
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Redemptions per redeemer
Redemptions per redeemer are the redemptions divided by the redeemers in that period. This metric is useful as redemptions per redeemer is an indication of our redeemers’ level of engagement with our platform. We aim to grow redemptions from our redeemers by expanding the breadth of offers available and increasing engagement by continuing to improve the consumer experience. In general, redemptions per redeemer are driven by rewards content. For new redeemers, redemption frequency initially increases before stabilizing. Our D2C business caters to consumers who are focused on savings, irrespective of the retailer. Our third-party publisher business tends to reach consumers who may be more loyal to a specific retailer and are engaging with offers powered by Ibotta’s technology platform.
Ibotta D2C redemptions per redeemer
For 2023 and 2022, D2C redemptions per redeemer were approximately          and 64.9, respectively, due to an increase in the quantity and quality of offers available.
D2C redemptions per redeemer
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Third-party publisher redemptions per redeemer
For 2023 and 2022, third-party publisher redemptions per redeemer were approximately          and 14.7, respectively. This year-over-year increase was driven primarily by the launch of additional publishers and the growth in existing publishers.
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Third-party publisher redemptions per redeemer
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Total redemptions per redeemer
For 2023 and 2022, total redemptions per redeemer were approximately          and 48.7, respectively.
Total redemptions per redeemer
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Redemption revenue per redemption
Redemption revenue per redemption is the redemption revenue divided by the number of redemptions. Redemption revenue per redemption is an indication of our fee, which is generally charged as a fixed dollar amount per redemption. In any period, our redemption revenue per redemption can fluctuate based on the category mix of offers being redeemed. Category mix can be impacted by factors such as seasonal promotions, such as back-to-school items in the third quarter or holiday promotions on grocery and food items in the fourth quarter of each year. Our fee is generally charged as a fixed dollar amount per redemption based on the retail price of the specific item being promoted.
D2C redemption revenue per redemption represents redemption revenue generated from offers on any Ibotta property divided by the redemptions on any Ibotta property in that period. Third-party publisher redemption revenue per redemption represents redemption revenue generated from offers on all publishers other than those on Ibotta properties divided by redemptions on all publishers other than those on Ibotta properties.
Ibotta D2C redemption revenue per redemption
For 2023 and 2022, D2C redemption revenue per redemption was $          , and $1.01, respectively, driven by a change in the mix of offers.
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D2C redemption revenue per D2C redemption
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Third-party publisher redemption revenue per redemption
For both 2023 and 2022, third-party publisher redemption revenue per redemption was $          , and $0.72, respectively.
Third-party publisher redemption revenue per redemption
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Total redemption revenue per redemption
For 2023 and 2022, total redemption revenue per redemption was $          , and $0.98, respectively.
Total redemption revenue per total redemption
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Non-GAAP Measures
To supplement our consolidated financial statements prepared and presented in accordance with U.S. generally accepted accounting policies (GAAP), we use certain non-GAAP financial measures, including Adjusted EBITDA and Adjusted EBITDA margin.
Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. These non-GAAP measures are not meant to be considered in isolation or as a substitute for the comparable GAAP measures, but are included solely for informational and comparative purposes. Non-GAAP financial measures are subject to limitations and should be read only in conjunction with the company's consolidated financial statements prepared in accordance with GAAP. In light of those limitations, management also reviews the specific items that are excluded from Adjusted EBITDA, but included in net loss, as well as trends in those items. Adjusted EBITDA should be viewed as supplemental to, but not as an alternative for, net loss calculated in accordance with GAAP.
Adjusted EBITDA and Adjusted EBITDA Margin
We define Adjusted EBITDA as net loss, adjusted to exclude interest expense, net, depreciation and amortization expense, stock-based compensation expense, change in fair value of derivative, loss on equity investment, provision for income taxes, and other expense, net. We define Adjusted EBITDA margin as Adjusted EBITDA as a percent of revenue.
Adjusted EBITDA and Adjusted EBITDA margin are used by our management team as additional measures of our performance for purposes of business decision-making, including managing expenditures and developing budgets. Period-over period comparisons of Adjusted EBITDA and Adjusted EBITDA margin help our management team identify additional trends in our financial results that may not be shown solely by comparisons of net loss and net loss as a percentage of revenue, respectively. In addition, we may use Adjusted EBITDA and Adjusted EBITDA margin in the incentive compensation programs applicable to some of our employees in order to evaluate our performance.
Adjusted EBITDA and Adjusted EBITDA margin for 2023 and 2022 were approximately $          million, or          %, and $(27.5) million, or          %, respectively. The following table provides our Adjusted EBITDA for 2023 and 2022, and a reconciliation of net loss to Adjusted EBITDA and net loss margin to Adjusted EBITDA Margin.
Year ended December 31,
2023
2022
(in thousands)
Net loss
$                   
$ (54,861)
Interest expense, net (1)
5,311 
Depreciation and amortization (2)
6,319 
Stock-based compensation (3)
6,500 
Change in fair value of derivative
4,300 
Loss on equity investment
4,532 
Provision for income taxes
262 
Other expense, net (4)
143 
Adjusted EBITDA
$                   
$ (27,493)
Revenue
$                   
$ 210,702 
Net loss as a percent of revenue
(26) %
Adjusted EBITDA margin
(13) %
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_______________
(1)Interest expense, net amounts presented in Other expense, net in Consolidated Statements of Operations “Index to Consolidated Financial Statements”
(2)Amortization of capitalized software development costs included in cost of revenue for the years ended December 31, 2023 and 2022 was $          million and $3.3 million, respectively.
(3)See Stock-based Compensation section in “Financial Condition and Results of Operations” for more information
(4)Other expense, net is comprised of realized gains and losses on the sale of short-term investments and penalties.
Components of Results of Operations
Revenue
The Company provides a platform to CPG brands to deliver digital promotions to consumers. The majority of our revenues are derived from the fees we charge to clients when consumers redeem offers on the IPN by purchasing promoted products. We also derive revenue from the sale of ad products to customers to promote their offers, as well as from data products.
We expect our redemption revenue to increase as a percentage of revenue for the foreseeable future as we continue to grow the IPN.
Cost of revenue
Cost of revenue consists primarily of personnel-related costs attributable to personnel in our engineering department who maintain our platform, data hosting costs, certain user award costs net of breakage, amortization of platform-related software development costs, revenue share with third-party publishers, software licensing costs, and processing fees. Personnel-related costs include salaries, benefits, bonuses, taxes, and stock-based compensation. User award costs net of breakage recorded in cost of revenue are associated with awards earned from gift card purchases and sponsored user awards earned from watching an advertising video. Breakage represents the undistributed earnings of consumers never expected to be cashed out due to inactivity. User award costs also include user awards that are cashed out and subsequently identified as fraudulent.
We expect that cost of revenue will increase as we continue to grow and vary from period to period as a percent of revenue.
Operating expenses
Sales and marketing
Sales and marketing expenses consists primarily of personnel-related costs for our sales and marketing departments, self-funded user awards, net of the related breakage, media spend, B2B marketing, public relations, software licensing costs, and market research. Self-funded user awards are awards related to campaigns and other incentive bonuses on our D2C properties that are funded directly by Ibotta as part of our customer acquisition and retention strategy. Personnel-related costs include salaries, bonuses, benefits, taxes, stock-based compensation, and travel.
We expect that sales and marketing will increase for the foreseeable future, primarily stemming from increased headcount and marketing efforts. However, we expect sales and marketing expenses to decrease as a percentage of total revenue over time due to growth in revenue from third-party publishers.
Research and development
Research and development expenses consist primarily of personnel-related costs for our technology departments, software licensing costs, professional fees, and impairment of certain capitalized software development costs. Personnel-related costs include salaries, bonuses, benefits, taxes, stock-based compensation, and travel. We capitalize certain software development costs that are attributable to developing new features and adding incremental functionality to our platform or infrastructure and
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amortize such costs over the estimated useful life of the software asset, which is typically three years. Costs incurred during the preliminary project stage and post-implementation operation stage are expensed as incurred in research and development expenses. In addition, impairment of in-progress software projects for which completion is subsequently determined not to be probable is recorded in research and development expenses.
We plan to increase our investment in research and development for the foreseeable future as we focus on further developing our platform and enhancing its use cases. However, we expect our research and development expenses to decrease as a percentage of total revenue over time, although they may fluctuate as a percentage of total revenue from period to period.
General and administrative
General and administrative expenses consist primarily of personnel-related costs for our administrative departments, software licensing costs, professional fees for external legal, accounting and other consulting services, facilities costs, taxes and licenses, bad debt, and corporate insurance. Personnel-related costs include salaries, benefits, taxes, bonuses, stock-based compensation, and travel.
We expect to increase the size of our general and administrative function to support the growth of our business. Following the completion of this offering, we expect to incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a U.S. securities exchange and costs related to compliance and reporting obligations pursuant to the rules and regulations of the Securities and Exchange Commission. In addition, as a public company, we expect to incur increased expenses such as insurance, investor relations, and professional services. As a result, we expect the dollar amount of our general and administrative expenses to increase for the foreseeable future. However, we expect our general and administrative expenses to decrease as a percentage of total revenue over time, although they may fluctuate as a percentage of total revenue from period to period.
We expect additional operating expenses during the period in which this registration statement becomes effective due to stock-based compensation expenses associated with stock options for which a liquidity event-based vesting condition will be satisfied upon such effectiveness.
Depreciation and amortization
Depreciation and amortization consists of depreciation of property and equipment and amortization of intangible assets, including infrastructure-related software development costs and acquired technology.
Other expense, net
Other expense, net consists primarily of interest expense incurred on outstanding debt instruments, net of interest income earned on cash, cash equivalents, and short-term investments, and gains and losses incurred on both the equity investment and the convertible notes derivative liability.
Provision for income taxes
Provision for income taxes consists primarily of income taxes related to state jurisdictions in which we conduct business. Due to uncertainty as to the realization of benefits from our deferred tax assets, we have a full valuation allowance reserved against such assets. We expect to maintain this full valuation allowance in the near term.
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Results of Operations
The following tables set forth our results of operations in dollars and as a percentage of total revenue for each of the periods presented (in thousands):
Year ended December 31,
2023
2022
Revenue
$                   
$ 210,702 
Cost of revenue(1)
46,176 
Gross profit
164,526 
Operating expenses(1):
Sales and marketing
110,069 
Research and development
42,558 
General and administrative
49,164 
Depreciation and amortization
3,048 
Total operating expenses
204,839 
Loss from operations
(40,313)
Other expense, net
(14,286)
Loss before provision for income taxes
(54,599)
Provision for income taxes
(262)
Net loss
$                   
$ (54,861)
_______________
(1)Amounts include stock-based compensation expense as follows:
Year ended December 31,
2023 2022
Cost of revenue
$                   
$ 854 
Sales and marketing 1,836 
Research and development 1,835 
General and administrative 1,975 
Total stock-based compensation
$                   
$ 6,500 
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Comparison of the year ended December 31, 2023 and 2022
Revenue
Year ended December 31,
Change
2023
2022
$
%
Direct-to-consumer revenue
Redemption revenue
$                   
$ 128,770 
$                   
%
Ad & other revenue
72,045 
%
Total direct-to-consumer revenue
200,815 
%
Third-party publishers revenue
Redemption revenue
9,887 
%
Ad & other revenue
— 
Total third-party publishers revenue
9,887 
%
Total
Redemption revenue
138,657 
%
Ad & other revenue
72,045 
%
$                   
$ 210,702 
$                   
%
Total redemption revenue increased $          million, or          %, during the year ended December 31, 2023 compared to the year ended December 31, 2022 due to a $          million increase in revenue from third-party publishers and a $          million increase in revenue from Ibotta D2C. The increase in revenue from third-party publishers is primarily driven by the expansion of revenue related to Walmart, which initially launched in the third quarter of 2022 to members of Walmart’s paid membership program, Walmart+, and expanded to all Walmart customers with a Walmart.com account in the third quarter of 2023.
Ad & other revenue decreased $          million, or          %, during the year ended December 31, 2023 compared to the year ended December 31, 2022.
Cost of Revenue
Year ended December 31,
Change
2023
2022
$
%
Cost of revenue
$
$ 46,176 
$
%
Percentage of revenue
%
22  %
Cost of revenue decreased $          million, or          %, during the year ended December 31, 2023 compared to the year ended December 31, 2022, due to a $          million decrease in data hosting costs, a $          million decrease in personnel-related costs due to increased capitalization, a $          million decrease in software licensing costs, and a $          million decrease in processing fees. The decrease in data hosting costs was driven by increased focus on vendor spend efficiency. These decreases were partially offset by a $          million increase in revenue share driven by growth in revenue from third-party publishers.
Sales and marketing
Year ended December 31,
Change
2023
2022
$
%
Sales and marketing
$
$ 110,069 
$
%
Percentage of revenue
%
52  %
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Sales and marketing decreased $          million, or          %, during the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to a $          million decrease in self-funded user awards, a $          million decrease in consumer acquisition costs, and a $          million decrease in consumer retention costs due to our shift in marketing strategy away from self-funded user awards and other D2C performance media, as well as increased focus on marketing spend efficiency. These decreases were partially offset by a $          million increase in personnel-related costs driven by an increase in headcount to support our growth and a $          million increase in trade shows.
Research and development
Year ended December 31,
Change
2023
2022
$
%
Research and development
$                   
$ 42,558 
$                   
%
Percentage of revenue
%
20  %
Research and development increased $          million, or          %, during the year ended December 31, 2023 compared to the year ended December 31, 2022, due to increases in personnel-related costs driven by an increase in headcount to support our growth. This increase was partially offset by a $          million decrease in impairment of capitalized software development costs.
General and administrative
Year ended December 31,
Change
2023
2022
$
%
General and administrative
$                   
$ 49,164 
$                   
%
Percentage of revenue
%
23  %
General and administrative increased $          million, or          %, during the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to a $          million increase in personnel-related costs driven by increases in travel and entertainment and employee benefits costs, a $          million increase in software licensing costs, and a $          million increase in professional fees. These increases were partially offset by a $          million decrease in facilities costs and a $          million decrease in taxes and licenses.
Depreciation and amortization
Year ended December 31,
Change
2023
2022
$
%
Depreciation and amortization
$                   
$ 3,048 
$                   
%
Percentage of revenue
%
%
Depreciation and amortization increased $          million, or          %, during the year ended December 31, 2023 compared to the year ended December 31, 2022 due to increases in capitalized software development costs.
Other expense, net
Year ended December 31,
Change
2023
2022
$
%
Other expense, net
$                   
$ (14,286)
$                   
%
Percentage of revenue
%
(7) %
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Other expense, net decreased $          million, or          %, during the year ended December 31, 2023 compared to the year ended December 31, 2022 due to a $          million impairment loss recorded on our equity investment during the year ended December 31, 2022, partially offset by a $          million increase in interest expense, net.
Provision for income taxes
Year ended December 31,
Change
2023
2022
$
%
Provision for income taxes
$                   
$ (262)
$                   
%
Percentage of revenue
%
—  %
Provision for income taxes increased $          million, or          %, during the year ended December 31, 2023 compared to the year ended December 31, 2022 due to required filings in additional state jurisdictions.
Liquidity and Capital Resources
Sources and Uses of Funds
We have primarily incurred losses since our inception, accumulating a deficit of $          million as of December 31, 2023. We have financed the majority of our operating and capital needs through private sales of equity securities and borrowings under credit facilities and convertible notes. As of December 31, 2023, our principal sources of liquidity included $          million of cash and cash equivalents, $          million of short-term investments, and $          million of available capacity under a revolving line of credit. Short-term investments consist of commercial paper, U.S. Treasury securities, investment grade corporate debt securities, and supranational securities with terms greater than three months but less than one year at the date of purchase.
Our primary cash needs are for personnel-related expenses, selling and marketing expenses, user award payables, data hosting costs, and software licensing costs. We believe our existing liquidity will be sufficient to meet our projected operating and capital requirements for at least the next 12 months. Our future cash requirements will depend on many factors, including our pace of growth, the timing and extent of spend to support research and development efforts, the timing of cash collected from clients, the expansion of sales and marketing activities, the introduction of new and enhanced platform offerings, and the continuing market acceptance of the platform. As a result of these and other factors, we may be required to seek additional equity or debt financing. If additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all. Further, recent volatility in the global financial markets due to heightened inflation, rising interest rates, and geopolitical events, could reduce our ability to access capital and negatively affect our liquidity in the future. If we are unable to raise additional capital when desired, our business, financial condition, results of operations, and prospects would be adversely affected.
Convertible Notes
On March 24, 2022 (the Initial Closing), the Company issued convertible unsecured subordinated promissory notes (the notes or convertible notes) to certain investors in an aggregate principal amount of $75.0 million with a maturity date of March 24, 2027. Up to but not including the date that is 18 months after the Initial Closing, the convertible notes bear interest at a rate of 6.00% per annum, payable quarterly in cash or as payment-in-kind at the Company’s election. Thereafter, subject to certain exceptions, the convertible notes bear interest at a rate of (A) the greater of (x) the three-month Secured Overnight Financing Rate and (y) 1.00% plus (B) 5.00%, payable quarterly in cash.
The outstanding amount of the notes will automatically convert into shares of the Company’s common stock upon the closing of the initial public offering. The conversion price is the lesser of a) $2.5 billion
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divided by the fully diluted capitalization of the Company immediately prior to the closing of the initial public offering and b) the “price to the public” in this offering multiplied by the applicable discount rate. The discount rate upon the closing of the initial public offering prior to or on the date 18 months after the Initial Closing is 77.5% and thereafter is 72.5%.
2021 Credit Facility
On November 3, 2021, the Company executed the Third Amended and Restated Loan and Security Agreement with Silicon Valley Bank, now a division of First-Citizens Bank & Trust Company (First Citizens Bank), which consists of a $50.0 million revolving line of credit with a maturity date of November 3, 2024 (as amended, the 2021 Credit Facility). In the event of a public offering, the maturity date of the 2021 Credit Facility will be extended to November 3, 2026.
Borrowings bear interest at a floating annual rate equal to the greater of (i) an applicable floor rate that ranges from 2.25% to 3.0% based on the Company’s average liquidity position as defined in the 2021 Credit Facility and (ii) the prime rate less a margin that ranges from 0.25% to 1.0% based on the Company’s average liquidity position as defined in the 2021 Credit Facility. On December 31, 2022, the interest rate was 6.75% per annum. In addition, the Company pays an unused revolving line facility fee of 0.25% per year on the average monthly unused amount under the 2021 Credit Facility. The Company is subject to a springing financial covenant to maintain a minimum liquidity ratio of 1.50x, depending on the Company’s average liquidity position as defined in the 2021 Credit Facility.
As of December 31, 2022, the Company had no outstanding borrowings under the 2021 Credit Facility and $50.0 million of unused borrowings available. The Company is in compliance with all financial covenants under the 2021 Credit Facility during all periods presented. All obligations under the 2021 Credit Facility are secured by substantially all of the assets of the Company, including intellectual property.
Common Stock Warrants
On May 17, 2021, we issued a common stock purchase warrant to Walmart (the Walmart Warrant) in connection with a multi-year strategic relationship that makes Ibotta the exclusive provider of digital item-level rebate offer content for Walmart U.S. The Walmart Warrant was issued in exchange for access to Walmart consumers. The Walmart Warrant, if fully exercised, could provide up to $          million in proceeds to us, subject to certain adjustments. However, the exercisability of a portion of the Walmart Warrant is subject to certain performance conditions and we cannot make assurance that any such warrant will be exercised. For further details regarding the Walmart warrants, see the section titled “Certain Relationships and Related Party Transactions—Agreements with Walmart” and Note 11 to our consolidated financial statements included elsewhere in this prospectus.
Cash Flows
The following table summarizes our cash flows for the periods presented:
Year ended December 31,
2023
2022
Net cash used in operating activities
$                   
$ (56,499)
Net cash used in investing activities

(35,676)
Net cash provided by financing activities

74,047 
Net change in cash and cash equivalents
$                   
$ (18,128)
Operating Activities
Our collection cycles can vary based on payment practices from our clients, and we are required to pay our third-party publishers within a contractual timeframe, regardless of whether we have collected
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payment from our client. As a result, timing of cash receipts related to accounts receivable and due to third-party publishers can significantly impact our cash provided by (used in) operating activities for any period.
Net cash used in operating activities decreased $            million during the year ended December 31, 2023 compared to the year ended December 31, 2022. The decrease was largely a result of a $           increase in net income, net of non-cash charges, partially offset by a $ million increase in net cash outflows from changes in operating assets and liabilities. The increase in net income was primarily driven by an increase in revenue. The increase in net cash outflows from changes in operating assets and liabilities were primarily due to a $            million increase in accounts receivable driven by increases in gross billings and a $            million decrease in the user redemption liability, partially offset by a $           million increase in the liabilities due to third-party publishers in connection with the growth of the IPN business.
Investing Activities
Net cash provided by investing activities increased $            million during the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by a $            million decrease in purchases of short-term investments and a $            million decrease in acquisition of technology, partially offset by a $              million decrease in sales and maturities of short-term investments.
Financing Activities
Net cash provided by financing activities decreased $             million during the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by a $ million decrease in net proceeds from the issuance of convertible promissory notes in 2022, partially offset by a $               million decrease in repayments, net of draws, on the revolving line of credit.
Material Cash Requirements
Operating leases
Our operating lease commitments include our corporate offices. As of December 31, 2023, we had noncancellable lease obligations of $          million, of which $          million is payable within 12 months. For additional discussion on our operating leases, see Note 10 - Operating Leases to our audited consolidated financial statements included elsewhere in this prospectus.
Other Planned Uses of Capital
We will continue to invest in sales and marketing, research and development, and our technology. We expect capital expenditures to increase in coming years to support our growth.
Internal Controls Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal controls over financial reporting. Internal controls over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. As a result of becoming a public company, we will be required, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended, to furnish a report by our management on, among other things, the effectiveness of our internal controls over financial reporting as of the end of the first fiscal year beginning after the effective date of the registration statement of which this prospectus is a part or the date we are no longer an EGC as defined in the JOBS Act, if we take advantage (as we expect to do) of the exemptions contained in the JOBS Act. This assessment will need to include disclosures of any material weaknesses identified by our management in our internal controls over financial reporting.
In connection with the audit of our financial statements as of and for the year ended December 31, 2022, we identified one material weakness in our internal controls over financial reporting that existed as
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of December 31, 2021 and was remediated as of December 31, 2022. A material weakness is a deficiency, or combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis. The material weakness we identified related to our risk assessment process and resulted in the ineffective design of process level. Controls to address the impact on revenue, specifically breakage revenue, of changes made to our platform related to the user redemption liability, and the impact of those changes on reports used in determining breakage revenue. The material weakness did not result in material misstatements to our financial statements.
For additional information on this material weakness, see “Risk Factors—Risks Related to Government Regulation, Tax or Accounting Standards.” If we are unable to maintain effective internal controls, or if we identify additional material weaknesses in the future, we may not be able to accurately or timely report our financial condition and results of operations.
Remediation of the Material Weakness
We have completed remediation efforts focused on improving our internal controls over financial reporting and to specifically address the control deficiencies that led to our material weakness. These efforts included implementing processes and controls associated with the Company’s breakage revenue and changes impacting reports used in related calculations.
Our failure to discover and address any other control deficiencies could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and make related regulatory filings on a timely basis. As a result, our business, financial condition, results of operations, and prospects, as well as the trading price and listing of our shares, may be materially and adversely affected. We cannot assure you that all material weaknesses have been identified, or that we will not in the future identify additional material weaknesses.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. In preparing the consolidated financial statements, we apply accounting policies and estimates that affect the reported amounts and related disclosures. Inherent in such policies are certain key assumptions and estimates made by management, which we believe best reflect the underlying business and economic events. Our estimates are based on historical experience and various other factors and assumptions that we believe are reasonable under the circumstances. We regularly re-evaluate our estimates used in the preparation of the consolidated financial statements based on our latest assessment of the current and projected business and economic environment. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty and actual results could differ materially from the amounts reported based on these estimates.
Our significant accounting policies and estimates are described in Note 2 to the consolidated financial statements, and of these, management believes the following accounting policies involve a greater degree of judgment and complexity and are therefore the most critical in determining the amounts reported in our consolidated financial statements.
Revenue Recognition
We recognize revenue in accordance with ASC 606, Revenue from Contracts with clients. We primarily derive revenues from the set-up and redemption of cash back rewards and digital media services on the IPN. Revenue is recognized when, or as, control of the promised goods or services is transferred to our clients, in an amount that represents the consideration we expect to be entitled to in exchange for those goods or services. The following is a description of principal activities from which we generate our revenue:
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Redemption Revenue
Consumers earn rewards on the IPN through loyalty account linking, receipt upload, or purchasing a gift card. As a result of the cash back reward being both client determined and funded, the cash back reward is passed through to the consumer. We earn a fee per redemption in the period in which the redemption occurs. We may also charge setup fees, which are deferred and recognized over the respective promotion period. Penalties or early terminations are recognized as revenue as the associated event occurs. We recognize revenues from redemptions net of consumer cash back rewards as we act as the agent in the transaction. Redemption campaigns are available on both Ibotta D2C and third-party publisher properties. We also contract with third-party gift card providers to facilitate the delivery of digital gift card codes and recognize revenue gross of user award but net of the cost of the gift card, at a point in time when the exchange occurs.
Ad & other Revenue
Our clients may also run advertisements (banners, tiles, newsletters, feature placements, etc.) on Ibotta D2C properties to promote their redemption campaigns. When a consumer clicks on an advertisement, they are linked directly to the associated campaign. Ad products are billed and revenue is recognized as the marketing services are performed. Ad products run in conjunction with the associated redemption campaign, either over the entire redemption campaign life or some portion of it. We recognize revenue from client run advertisements on a gross basis as we act as the principal in the transaction.
We also offer audience targeting and data licensing services to clients, which are primarily billed as a flat fee amount. Data revenue is recognized as it is delivered and on a gross basis as we act as the principal in the transaction.
Practical Expedients
Our contracts are primarily less than twelve months in duration. As a result, we have elected the following practical expedients:
incremental costs of obtaining a contract are recognized as an expense as incurred; and
consideration is not adjusted for the effects of any financing components.
Stock-Based Compensation
The Company grants stock options to employees and non-employee directors and measures the stock-based compensation based on the grant date fair value of the options using the Black-Scholes option-pricing model. Service-based awards are recognized as compensation expense, net of actual forfeitures, on a straight-line basis over the requisite service period, which is generally four years. Performance-based awards are recognized as compensation expense under the accelerated attribution method when performance conditions are considered probable of being achieved. The Black-Scholes option-pricing model requires the input of the following subjective assumptions:
Fair Value of Common Stock - Because our common stock is not yet publicly traded, we estimate the fair value of our common stock, as discussed in the section titled “Common Stock Valuations” below.
Expected Volatility - As we do not have a trading history for our common stock, we estimate the expected volatility based on historical volatilities of comparable guideline public companies.
Expected Term - The expected term is the period of time for which the award is expected to be outstanding assuming that the award vests. We estimate the expected term using the simplified method, calculated as the midpoint between the requisite service period and the contractual term of the award. The simplified approach is applied as we do not have sufficient historical
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information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior.
Risk-Free Interest Rate - The risk-free rate assumption is based on the U.S. Treasury yield that corresponds with the expected term.
Expected Dividend Rate - We use a dividend yield of zero, as we have not historically paid dividends, nor do we expect to do so in the future.
We will continue to use judgment in evaluating the assumptions related to our stock-based compensation on a prospective basis. As we continue to accumulate additional data related to our common stock, we may have refinements to our estimates, which could materially impact our future stock-based compensation expense.
Common Stock Valuations
The fair value of our common stock underlying our stock-based compensation awards is determined by our board of directors, with input from management and corroboration from an independent third-party valuation specialist, in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held- Company Equity Securities Issued as Compensation. In the absence of a public trading market, our board of directors exercises significant judgment and considers numerous objective and subjective factors to determine the fair value of our common stock as of the date of each grant, including the following factors:
contemporaneous valuations performed by third-party valuation firms;
the nature of the business, including its history;
the economic outlook in general and of the specific industry at the date of the valuation;
our book value and financial condition;
our earnings capacity;
the existence or lack of goodwill, or other intangible assets;
sales of stock and the size of the block to be valued;
the market prices of stocks of corporations engaged in the same or similar lines of business as the Company and whose stocks are activity traded in a free and open market, either on an exchange or over-the-counter;
the prices of convertible preferred stock sold by us to third-party investors in arms-length transactions;
the lack of marketability of our common stock; and
the likelihood of achieving a liquidity event, such as an initial public offering or a merger or acquisition of our business given prevailing market conditions.
In valuing our common stock, the board of directors uses the income and market approach valuation methods. The income approach values a company by estimating future cash flows that could potentially be taken out of the business without impairing future operations and profitability. These forecasted annual cash flows plus the terminal value are discounted to their present value to estimate the value. The discount rate is a rate of return which provides potential investors a sufficient return on their investment. The market approach estimates value by comparing the subject company to similar firms whose stocks are publicly-traded. A group of comparable publicly-traded companies are selected and market multiples are developed using each company’s stock price and other financial data. An estimate of value for the
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subject business is completed by applying selected market multiples to the subject company’s financial results.
After completing the income and market approaches, the enterprise value is allocated to our common stock using the Option Pricing Model, or OPM. Under this method, the common and preferred stock are treated as a series of call options on the enterprise’s value, with the exercise price reflecting a series of “break points” and where the different securities are allocated their respective value based on the specific characteristics and value participation features. The value of the common stock is then based on the allocation of the call options according to the specific facts and circumstances specific to our capital structure. The common stock is modeled as a call option that gives its owner the right, but not the obligation, to buy the underlying enterprise value at a predetermined or exercise price. In the model, the exercise price is based on a comparison with the enterprise value rather than, as in the case of a “regular” call option, a comparison with a per share price. Thus, the value of the common stock is considered to be a call option with a claim on the enterprise at an exercise price equal to the remaining value immediately after the preferred stock is liquidated. The OPM often uses the Black-Scholes Option Pricing Model to price the call option. After the value of the common stock is determined and allocated to the various classes of shares, a discount for lack of marketability, or DLOM, is applied to arrive at the fair value of the common stock. A DLOM is meant to account for the lack of marketability of a stock that is not traded on public exchanges.
Application of these valuation approaches involves the use of estimates, judgment, and assumptions that are highly complex and subjective, such as those regarding our expected future revenue, expenses, and future cash flows, discount rates, market multiples, the selection of comparable companies, and the probability of possible future events. Changes in any or all of these estimates and assumptions or the relationships between those assumptions impact our valuations as of each valuation date and may have a material impact on the valuation of our common stock. For valuations after the completion of this offering, we will use the closing price of our common stock as reported on the date of grant to determine the fair value of our common stock.
Emerging Company Status
We are an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended (the Securities Act) and have elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. The Company expects to remain an emerging growth company at least through the end of the 2023 fiscal year and expects to continue to take advantage of the benefits of the extended transition period, although it may decide to early adopt such new or revised accounting standards to the extent permitted by such standards. This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen to not take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.
Recent Accounting Pronouncements
See “Basis of Presentation and Summary of Significant Accounting Policies” in Note 2 of the notes to our consolidated financial statements included elsewhere in this prospectus for more information.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and inflation.
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Interest Rate Risk
Our cash, cash equivalents, and short-term investments are held for working capital purposes and primarily consist of cash on hand and highly liquid investments in money market instruments, commercial paper, U.S. Treasury securities, and investment grade corporate notes. As of December 31, 2022, we had cash and cash equivalents of $17.8 million and short-term investments of $27.7 million. We do not enter into investments for trading or speculative purposes. Our investments are exposed to market risk due to fluctuations in interest rates, which may affect our interest income and the fair market value of our investments. However, due to the short-term nature of our investment portfolio, we do not believe a hypothetical 10% increase or decrease in interest rates would have a material effect on the fair market value of our portfolio. We therefore do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates.
Our convertible notes and line of credit bear interest at floating interest rates. Accordingly, because our interest rate is tied to market rates, if we incur debt in the future, including under the 2021 Credit Facility, rising interest rates could increase our borrowing costs on any future borrowings. In addition, operating and growing our business may require additional capital, which could include equity or debt financing. Rising interest rates could negatively impact our ability to obtain such financing on commercially reasonable terms or at all.
Inflation Risk
We do not believe that inflation has had a material effect on our business, results of operations, or financial condition. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability or failure to do so could harm our business, financial condition, results of operations, or prospects.
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BUSINESS
Overview
Ibotta’s mission is to Make Every Purchase Rewarding. Our technology allows CPG brands to deliver digital promotions to over 200 million consumers through a single, convenient network called the Ibotta Performance Network (IPN). We are pioneers in success-based marketing: we only get paid when our client’s promotion results in a sale, not when a consumer merely views or clicks on the promotion. We have built the largest digital item-level promotions network in the United States by forming strategic relationships with major retailers such as Walmart Inc. (Walmart) and Dollar General Corporation (Dollar General), which use our digital offers to power their loyalty programs on a white-label basis. Through the IPN, our clients can also reach millions more consumers on our widely used rewards app digital properties, which include the Ibotta-branded cash back mobile app, website, and browser extension (collectively, Ibotta D2C).
We work directly with over 750 different clients, representing over 2,250 different CPG brands to source exclusive offers. Most of our offers cover products in non-discretionary categories, such as grocery, but we also work with general merchandise manufacturers in categories such as toys, clothing, beauty, electronics, pet, home goods, and sporting goods. Over time, our clients have generally ramped up their spend with us, and they rarely drop off our network. In fact, of our top 100 clients, 99% were retained from 2021 to 2022.
Our technology platform uses an Artificial Intelligence (AI)-enabled offer engine that is designed to match and distribute the right offer to the right consumer at the right time. This is possible because we receive a large volume of item-level purchase data through our secure point of sale (POS) integrations with 86 different retailers. Using this data, we form a profile of each consumer based on what they have bought in the past and how they have responded to various price promotions. From there, we build recommenders that are driven by machine learning and designed to create personalized savings experiences for each consumer. The more data we accumulate, the smarter our recommenders become. Whatever our clients’ specific objectives may be – such as encouraging brand switching, shortening purchase cycles, incentivizing consumers to stock up, or promoting around key seasonal events – our platform helps them design a promotional campaign to accomplish their goals.
Ibotta’s technology tracks which offers are selected by consumers, matches offers to the products that have been purchased, logs redemptions, handles the flow of funds, and takes care of all downstream billing and logistics. We perform the function of “air traffic control,” meaning our network enables offers to be matched, distributed, and redeemed across multiple large third-party publishers in a coordinated fashion. This minimizes the risks that offer budgets are exceeded and that consumers redeem the same offer several times for a single purchase (i.e., offer stacking). Our client tools allow CPG brands to set up campaigns, monitor redemption and budget levels, and analyze overall campaign performance – all in a single, convenient interface.
We deliver success-based digital promotions at-scale because we manage a growing, open network of third-party publishers that host our offers. Retailers are among our most important publishers because their apps and websites are frequently visited by consumers with high purchase intent. A retailer may ingest digital offers from Ibotta’s Application Programming Interface (API) and present them to its consumers as part of its own branded loyalty program. We call these partners “retailer publishers.” We believe retailer publishers choose to work with Ibotta because we are a trusted partner that can provide a large universe of exclusive offers coupled with a set of plug and play capabilities that would be difficult for them to create and scale on their own. For example, Ibotta and Walmart entered into a multi-year strategic relationship that makes Ibotta the exclusive provider of digital item-level rebate offer content for Walmart U.S., across all product categories, for online and offline shopping. Consumers redeem our offers on Walmart properties without ever creating an Ibotta account. Instead, they can select manufacturer offers from the Walmart website or app, buy the featured items in-store or online, and instantly earn Walmart Cash which can be applied to future purchases in a Walmart store or on
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Walmart.com. All CPG brands wishing to run digital item-level rebates on Walmart’s website can only do so through the IPN.
Ibotta also partners with several other leading retailer publishers. For example, Dollar General, the leader by market share in the dollar channel and one of the fastest growing retailers in the United States, began hosting Ibotta’s cash back offers in 2023. The DG Cash program represents Dollar General’s first foray into closed-loop item-level rewards, meaning offers, when redeemed, create a DG Cash currency that can be spent on future trips to Dollar General. The program is available to all users of the Dollar General mobile app and website, an audience that is price sensitive and focused on finding digital offers. Ibotta similarly partners with Family Dollar, a retail banner of Dollar Tree, Inc., who is in the process of becoming an IPN publisher. We also work indirectly to publish offers on certain retailer properties, including Kroger (powering Kroger Cash) and Shell (powering Shell Fuel Rewards).
In addition to providing digital offers for retailers, Ibotta also makes the same offers available on its own digital properties, which include Ibotta D2C. Since 2012, over 50 million Americans have registered for our free app. Ibotta D2C reaches a highly engaged audience of savings-conscious consumers who want a single digital starting point where they can find cash back offers across a variety of retailers. Many of these consumers decide where to shop based on the availability of deals in different retailers. Once the IPN launched, Ibotta D2C became a publisher on the IPN, meaning it is now one of many nodes through which our digital offers are delivered to the end consumer.
In the future, we believe the IPN may be extended to other publishers across a variety of new verticals. For example, new publishers could include delivery services, banks, or other apps and websites that want to give their consumers access to offers on popular everyday items without having to source those offers from thousands of different CPG brands or secure item-level data from multiple integrated retailers where the offers can be redeemed.
We believe Ibotta is well positioned to capitalize on a large and growing market opportunity. U.S. consumers spent an estimated $1.1 trillion dollars in the grocery sector in 2022. CPG brands compete fiercely to influence consumer spending habits, spending approximately $200 billion on marketing annually in the United States. In fact, no other industry spends more on marketing, as a percentage of overall budgets, than CPG.
Most of our revenue is redemption revenue which is generated from redemptions of offers across the IPN. A significant portion of that redemption revenue arises from offer redemptions on third-party publishers. We also generate revenue by selling ad products on our Ibotta D2C properties. Specifically, we allow CPG brands and retailers to enhance awareness of their offers by buying display ads, in-app videos, or email marketing campaigns. We also charge partners a licensing fee to leverage our aggregated data in ways that help them better understand their target consumers and improve their promotional activities. Finally, on Ibotta’s D2C properties, we also allow thousands of online retailers to advertise and present consumers with their own sitewide cash back offers. These clients benefit from the incremental sales generated by Ibotta’s savings-conscious audience.
Our revenue growth significantly accelerated with the addition of new publishers to the IPN. Most recently, the rollout of our offers on the digital properties of Walmart and Dollar General has attracted larger audiences, and in turn, resulted in greater spend by CPG brands and a greater number of redeemed offers. These developments have increased our scale, growth and profitability.
Total revenue grew from $210.7 million in 2022 to $       million in 2023, an increase of       %;
Redemption revenue grew from $138.7 million (or 66% of total revenue) in 2022 to $       million (or       % of total revenue) in 2023, an increase of       %;
Gross profit grew from $164.5 million in 2022 to $       million in 2023, an increase of       %;
Net loss decreased from $54.9 million in 2022 to $       million in 2023; and
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Adjusted EBITDA margin improved from (13)% in 2022 to        % in 2023.
Industry Background
CPG brands have long sought the ability to advertise or promote their products in a way that can be directly measured out to a sale and tied back to a known consumer. Having this capability would allow a CPG brand to prioritize investing in tactics with the highest observable conversion to sale in-store or online, present a different message or promotion to each segment of consumers, and pay only when the campaign succeeds in driving a sale. The advent of retail media in the world of digital display ads, and now the rapid growth of the IPN in the world of digital promotions, bring CPG brands closer than ever to being able to achieve these objectives. It has been over a century in the making.
As far back as 1880, CPG brands such as Coca-Cola looked for ways to entice consumers to try their products. They invented manufacturer coupons to address this challenge. Ever since, paper coupons and free-standing inserts (FSIs) have been printed and distributed in newspapers, cut out or “clipped” by consumers, presented at checkout in exchange for a discount on qualifying products, and then gathered up by retailers and shipped off to coupon clearinghouses. These clearinghouses tally everything and oversee a flow of remittance payments from thousands of CPG brands to hundreds of retailers, making each retailer whole for the value of the discounts provided, in some cases weeks or months after the coupons have been redeemed. Paper coupons were widely used by CPG brands because they were one of the only D2C marketing tactics that allowed them to reach tens of millions of households with a national promotion, meaning one that would simultaneously be available for redemption across all major retailers that carried the brands’ product. The use of paper coupons peaked in 1999, when approximately 340 billion of them were circulated in U.S. newspapers.
Paper coupons have several obvious drawbacks, however. First, rapidly declining newspaper circulation, particularly among younger consumers, has severely constrained their reach. Second, they often require CPG brands to take a one-size-fits-all approach by providing the same discount to everyone, regardless of their past purchase behaviors. Third, paper coupons suffer from very low redemption rates due to high friction in the redemption experience, including clipping a coupon, remembering to bring that coupon to the store, and presenting that coupon to the store clerk at checkout. Fourth, because of the cost to produce and distribute paper coupons, they are billed on a fee-per-print basis, meaning the brand is asked to pay a fixed rate based on the number of coupons circulated in print, regardless of whether conversion to sale ends up being low or high. This makes it hard to predict the total cost of a campaign and exposes brands to unexpected fluctuations in the effective cost per redemption. Lastly, paper coupons harm the environment by causing millions of trees to be cut down unnecessarily each year, only to have 99.5% of the coupons go unused. Despite these significant drawbacks, paper coupons account for almost all of promotion volume.
About 20 years ago, print-at-home and load-to-card digital coupons began to address certain deficiencies of paper coupons. Digital coupons could be delivered via more modern distribution channels such as email, websites, and mobile apps, and they could be tailored to individuals based on their specific purchase patterns. But digital coupons still left much to be desired. Most notably, they were still billed on a fee-per-clip basis, meaning the CPG brand was charged as soon as a consumer activated an offer, regardless of whether they went on to purchase anything. Once again, CPG brands bore the risk of fluctuating redemption rates. When redemption rates dropped, their effective cost per unit sold increased, and there was no way to predict or lock in upfront a desirable cost per incremental unit sold. The performance of these campaigns also often could not be measured by CPG brands in real-time, leaving them unable to optimize programs mid-flight. Equally problematic, digital coupon programs did not provide a way to deliver promotions nationally – i.e., across retailers – in the same way that paper manufacturer coupons had done. Instead, each retailer ran its own load-to-card program, and CPG brands could only run retailer-specific offers through those siloed programs.
Retailers also experienced challenges with digital coupons. Whenever a redemption occurred, they still had to forego the full retail price of a product and seek reimbursement via a clearinghouse. This
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maintained the negative working capital dynamics inherent in any discounting system. Additionally, digital coupons remained entirely open loop, meaning all the savings dissipated instead of being internalized in the form of positive currency that had to be spent back at the same retailer on a future trip. For example, a consumer who uses a digital coupon at Publix to save money may spend that savings on her next trip to Whole Foods. With the rise of Amazon Prime, retailer loyalty and membership programs have continued to gain importance, but retailers need strong promotional content to be provided to them, with funding coming from the national marketing budgets of CPG brands rather than themselves.
As the promotions industry has evolved, one feature has remained constant: the need for a third-party to manage offer distribution on behalf of all CPG brands and retailers in the ecosystem. This need persists for several reasons, including:
Efficiency. It is inefficient for a CPG brand to negotiate, set up, and coordinate delivery of offers with each retailer that carries its products or each publisher that hosts its content. Working with a single third-party provider allows CPG brands to quickly and efficiently launch offers on a nationwide scale and track their cross-retailer campaigns through a single interface.
Scale. CPG brands and retailers need to reach the widest possible audience, including potential new consumers who do not belong to their loyalty programs or visit their apps and websites. This is made possible by tapping into a broader promotions network that gives them access to over 200 million consumers through a large and diverse group of publishers.
National content. CPG brands generally have large national budgets that are reserved for platforms that can deliver promotions across multiple retailers. If a single retailer were to source its own offers, it would immediately be confined to the smaller retailer-exclusive marketing budgets set aside by a CPG brand for use with just that retailer. Moreover, a retailer sourcing offers through its merchandising operation risks diverting attention away from higher priority conversations regarding investments in price or higher margin products such as retail media.
Coordination. CPG brands must ensure that their offers cannot be stacked across multiple publishers. To achieve this, there needs to be a single third-party network administrator that performs an “air traffic control” function, keeping track of which offers have been used on which publishers, in what order, and where credit has already been awarded so that it cannot be given a second time for the same purchase.
Technological capability. CPG brands are experts in developing and marketing new products. Retailers are experts in merchandising, product placement, supply chain management, and retail operations. Neither is likely to have the time, expertise or desire to develop the necessary technology, including the tools to manage offer setup, design and optimization, AI-powered recommenders, digital wallet technology, billing, fraud prevention, and so forth. Leveraging a specialized third-party platform allows them to remain focused on what they do best.
Like promotions, advertising has also evolved to better meet the CPG brand’s needs over time. Traditional television, radio, and out of home are all tactics that reach a mass audience but do not enable precise targeting or direct measurement. Over time, new alternatives emerged which offered greater precision and measurability. Digital ad platforms, including walled gardens such as Google and Meta and independent demand-side platforms such as The Trade Desk, allow CPG brands to target ads primarily based on what websites a consumer has visited, online searches they have conducted, social pages they have liked, or connected television programs they have watched.
While the scale of these platforms is compelling, they continue to fall short in many regards. First, despite the growth of online grocery shopping, in-store sales still comprised 88% of grocery sales in 2022. Ad platforms optimized for online conversion work well where consumers frequently click through and buy products or services online. But in the CPG industry, where products are largely purchased in-store and transacted online far less frequently, these platforms are less effective. Put differently, most consumers do not frequently conduct online searches in relation to everyday items they buy in the grocery store.
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Second, CPG brands prefer to target ads using data about past purchases to measure the actual incremental sales lift generated by their ads. Digital ad platforms do not have access to cross-retailer, item-level purchase data that can be tied back to the individual consumer who viewed the ad to measure changes in purchase behavior over time. Lacking this information, ad platforms are forced to rely more heavily on media mix modeling, multi-touch attribution, and other probabilistic approaches to measuring true sales lift. Third, recent privacy policies implemented by Apple, along with the imminent phase out of third-party cookies on Google’s Chrome browser, threaten to constrain advertisers’ future ability to target ads as effectively because consumers have little incentive to opt into sharing their data for the purpose of receiving more targeted display ads. This anticipated loss of signal for ad platforms will likely lead CPG brands and their agencies to re-evaluate their alternatives and prioritize tactics that continue to offer robust targeting and measurement. Finally, and perhaps most importantly, digital ad platforms do not offer success-based billing in the sense that they charge for impressions and clicks rather than on a fee-per-sale basis.
Most CPG advertisers include a combination of display ads and digital promotions in their annual marketing budgets, and the two often work in concert. For many, their goal is “brandformance,” meaning they pursue a strategy of continuing to invest in upper funnel media to deliver an overarching brand message while increasingly connecting that media to direct response campaigns like digital promotions, which call for consumers to take a specific, measurable action in exchange for a benefit. This approach has become popular because it increases the likelihood of consumers trying their products while also providing CPGs with valuable data about who is buying their products, which products they are buying, and where. Many CPG brands prefer to shift spend lower down in the funnel toward fee-per-sale based tactics because they can guarantee a desired level of ROAS. Historically, the main limitation has been that CPG brands lacked a fee-per-sale platform that could deliver digital promotions nationally and at a massive consumer scale.
Market Opportunity
U.S. consumers spent an estimated $1.1 trillion in the grocery sector in 2022. American consumers purchased groceries 1.5 times per week spending $438 per month in 2021, on average. Despite the growth of online grocery shopping, 88% of all grocery sales were made in physical stores in 2022. This is partly due to the prohibitively high costs of grocery delivery; according to a recent study, though one in five U.S. households use an online grocery delivery service, over 62% of consumers say grocery delivery costs too much.
Because price is often the single most important determinant when making a purchase, there is a strong consumer appetite for savings. In the first half of 2023, 92% of U.S. shoppers used a coupon, and over three-quarters used a digital coupon. Notably, in 2021, shoppers who used coupons ended up spending 35% more than those who didn’t. For households earning the median income in the United States, saving several hundred dollars per year on non-discretionary purchases makes a meaningful contribution to household finances; all the more so in the current inflationary environment. Recent trends indicate that 68% of consumers have become more price-conscious when shopping for groceries, rising to 74% of 25-34 year olds, and 65% actively seek out promotions and discounts while doing so. With more than 90% of companies offering customer loyalty programs, the average U.S. consumer participates in not just a couple, but 18 such programs.
We began by focusing on grocery because consumers purchase groceries at a higher frequency, which gives us an opportunity to influence consumer purchase habits on a weekly basis. Companies in the CPG industry spend a higher percentage of their gross sales on marketing than companies in any other industry. In 2022, total annual CPG marketing spend reached approximately $200 billion in the United States, of which approximately $172.5 billion was spent on trade promotions, digital, consumer promotions, and retailer-exclusive marketing. As millions of consumers have begun buying generic store brands as a way to save money, many national brands have stepped up their marketing spend to protect their market share. In doing so, a growing proportion of dollars are being allocated to tactics that can be directly traced out to sales, such as digital promotions and retail media, with a recent study finding that
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marketers can net 50% more sales simply by optimizing rebates, without even increasing their overall promotions budget. Total spend on digital rebates grew 26% year-over-year in the first half of 2022, and the digital promotions market is projected to grow at an 18.5% compound annual growth rate from 2023 to 2030.
Starting in 2021, we brought our fee-per-sale promotional model to other manufacturers in non-food categories such as toys, clothing, beauty, electronics, pet, home goods, and sporting goods. Those categories often have higher purchase intent and higher price points, but promotions are no less important, particularly because of the higher cost, the discretionary nature of these purchases, and the decline in general merchandise sales over the past year. In response, according to the NPD Group, general merchandise manufacturers drove the largest increase in promotional activity in 2022 of any CPG category.
The Ibotta Performance Network
The IPN provides an at-scale success-based marketing solution for the CPG industry. By using the IPN, CPG brands and their media agencies can create digital offers and match and distribute them in a coordinated manner across multiple publisher properties. These publishers include large retailers, which display our offers on their websites, as well as Ibotta’s D2C properties, which consist of our mobile app, website, and browser extension, which are popular tools for savings-oriented consumers. The IPN is powered by our proprietary, AI-enabled technology platform, which takes advantage of a unique set of purchase data that we receive through POS integrations with retailers.
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The key components of our network are as follows:
Offer sourcing. Ibotta’s sales team directly sources digital offers from over 2,250 different CPG brands, and in some cases their media buying agencies. Each offer is loaded into our network along with key parameters such as the eligible products, total campaign budget, campaign expiration date (if any), and any targeting criteria specifying which consumer segments should receive the offer. Certain parts of this process can be done on a self-serve basis, without the involvement of our team, while others are accomplished with help from our account managers. Ibotta does not receive and redeploy CPG offers from any third-party source of offers; instead, we source it ourselves for exclusive distribution to
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publishers on the IPN. More recently, we have begun sourcing offers from CPG brands in general merchandise categories (i.e., non-grocery). Going forward, our aim is to increase investment levels from existing CPG brands, add new brands from within existing clients, and add new clients.
Technology platform. Our cloud-based, AI-driven technology platform is built on an open architecture that enables us to deliver millions of offers from CPG brands to consumers across our network of publishers. The key components of this platform include:
Purchase data. We receive and process a large amount of item-level consumer purchase data from our retailer POS integrations and use that data to process offer redemptions and help drive high return on investment outcomes for CPG brands.
AI offer engine. We help our clients determine the optimal offer value, offer cadence, offer breadth, and targeting criteria for a given campaign, based on their strategic objectives. Using AI, we build recommenders that are designed to match the right offers with the right consumers at the right time. With machine learning, our recommendation algorithms continuously improve, allowing us to drive higher conversion and cost efficiency for our clients.
Administration. We handle all aspects of billing and collections, as well as managing cash flows. We also provide our clients with a portal that allows them to set up and refine their offer parameters, as well as monitor and analyze their campaign performance.
Risk management. We help minimize offer stacking by ensuring that a consumer who earns a reward for redeeming an offer on Ibotta’s app cannot earn a second, redundant reward on a third-party publisher for the same underlying purchase. All this is done in a manner that complies with the relevant privacy rules concerning uses of consumer data.
Distribution via publishers. We match and distribute our digital offers through retailer publishers and Ibotta D2C properties, with additional distribution channels planned for the future. We have formed strategic, and in some cases, exclusive relationships with large retailers such as Walmart, Dollar General, and Family Dollar. In some cases, Ibotta has negotiated the right to become the exclusive provider of item-level offers for their digital properties. On these third-party publisher sites, consumers do not need an Ibotta account or mobile app to redeem offers. Ibotta’s own, D2C properties also publish our offers, under the Ibotta brand.
The above components of our network work together to create interconnected flywheels that can over time strengthen and accelerate the value of the IPN for our constituents.
CPG brand flywheel. The first flywheel effect relates to CPG brands. The more offers CPG brands sponsor, the greater value we are able to deliver to consumers, and the more likely that they continue to engage with and recommend our offers to friends. The more consumers engage, the more investment we receive from both new and existing CPG brands that are eager to influence the greater spending power of this audience. The more offers are redeemed on the IPN, the more redemption data we collect in relation to each consumer, and the better our AI models become at recommending personally relevant offers for each consumer.
Retailer flywheel. The second flywheel effect relates to retailers. The opportunity to entice more consumers into their stores and onto their websites motivates retailers to take steps that further increase consumer engagement. For instance, retailers can make it easier to redeem offers in their stores by integrating their POS with Ibotta or hosting our offers on their own apps and websites as part of their loyalty rewards programs. As offers become easier to redeem, more consumers use them, which in turn
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attracts greater investments in offers from CPG brands, which ultimately results in more consumers using the retailer’s loyalty program.
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The network dynamics inherent in Ibotta’s business create a strong competitive advantage. The more consumers we attract, the more CPG brands invest, and the more offers they provide for distribution across our network, the more consumers are likely to engage with our offers, increasing the value generated by each consumer. At the same time, the more content we add, both within grocery CPG and in new categories, the more attractive joining our network becomes to new publishers, enlarging the total audience and by attracting more CPG marketing investment. As the network grows, retailers are increasingly incentivized to integrate with our technology so they can incorporate our rewards into their own loyalty programs while allowing their consumers to redeem offers as seamlessly as possible.
Our Competitive Strengths
We believe the following attributes and capabilities represent our core strengths and provide us with valuable competitive advantages.
“One-stop shop” for national promotions. Ibotta provides CPG brands with a comprehensive solution that simplifies and streamlines the entire digital promotions process from end-to-end. Through the IPN, CPG brands can deliver offers across multiple large publishers at once, implementing a national promotional strategy in a way that would be practically unachievable in a world of siloed budgets stitched together retailer by retailer. Once clients become familiar with our technology platform, they can quickly and easily set up campaigns, monitor performance, and track budget levels, all without the hassle of managing offer administration themselves.
Shared success model that aligns our incentives with our clients’ incentives. Our innovative fee-per-sale model increases the cost efficiency of digital marketing within the CPG industry. Instead of paying for upper funnel metrics like clicks or impressions, which can be difficult to tie out deterministically to an in-store sale, many CPG brands prefer to invest in tactics that deliver bottom of funnel results, meaning verified sales. The IPN takes risk out of the equation because our clients know upfront what the cost per unit sold will be and do not bear the risk of lower than expected conversion. We only make money when CPG brands make money, and this alignment of incentives creates trust and encourages them to invest more on the IPN over time.
Audience scale capable of moving substantial sales volumes for clients. Built over a decade, the IPN represents the largest item-level network of CPG brands, publishers, and consumers in the digital
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promotion space. Some of the largest retailers in the CPG industry are third-party publishers on the IPN, and we expect to add new publishers in the future. The Ibotta app is a widely used shopping app that together, with the IPN, has given over $1.6 billion in cash back to U.S. consumers. Overall, the network reaches over 200 million U.S. consumers. We believe this scale positions the IPN as a viable alternative to top-of-funnel media tactics such as TV and programmatic media.
Ability to access national promotions budgets, leveraging our large D2C business. Ibotta’s sales team has over a decade of experience building relationships with thousands of CPG brands and sourcing offers for placement on our widely used app, and more recently for distribution across our broader network. Other digital promotions companies either do not have comparable D2C properties, or have properties that reach much smaller audiences. Without a meaningful D2C presence, competitors have difficulty securing cross-retailer, national offers. Instead, they are forced to rely heavily on the retailer’s own merchant teams to source offer content on their behalf. This gives Ibotta an advantage in winning business with new retailer publishers because our competitors cannot match the same volume of incremental, national offers.
Strong partner network that includes leading retailers. Our integrations and partnerships with large retailers give our CPG brands access to over 200 million U.S. consumers. With some retailer publishers, such as Walmart and Dollar General, we are the exclusive provider of all manufacturer-funded cash back offers. As CPG brands place promotions on the IPN, their products place pressure on those brands’ competitors to engage with Ibotta to help them remain competitive. We believe this bandwagon effect has and will continue to help Ibotta grow revenue with clients.
Single source of truth for coordinated offer delivery. Before the introduction of the IPN, CPG brands had to stagger their digital promotions to prevent them from overlapping or being stacked with each other. The IPN made it possible for CPG brands to deliver digital promotions across retailers without the risk that their promotions could be redeemed in more than one publisher environment, for a single purchase. Because Ibotta operates both the largest digital promotions D2C app and the largest digital promotions network of third-party publishers, we believe we are well situated to prevent consumers from stacking offers that are published on retailer publishers, such as Walmart, with those same offers presented on Ibotta’s app. We believe it would be difficult to replicate the “air traffic control” function that our network performs because Ibotta’s large retailer publishers, and the Ibotta D2C app, would not be part of any other solution.
Powerful AI-driven technology that leverages a highly differentiated data set. We use cloud-based, serverless technology to ingest and process vast amounts of cross-retailer, item-level purchase data. In 2022 alone, Ibotta ingested and stored over 3 billion lines of purchase data. This consists of structured data we receive directly from POS integrations with 86 retailer partners, as well as data we extract from consumer-provided receipt photos using optical character recognition (OCR) technology. This valuable dataset powers our proprietary AI models and helps us get better and better at recommending the right offers to consumers and creating the right types of offers for our clients.
Privacy-compliant approach to digital marketing. The core of Ibotta’s solution does not rely on third-party cookies for targeting and measurement. Instead, consumers voluntarily provide their purchase data in order to receive rewards and personalized offers. We believe this is a differentiated advantage relative to other digital advertising providers that target CPG advertisements based on past website and app usage patterns. As Google phases out third-party cookies in 2024 and assuming consumer opt-in rates for tracking on iOS remain low, we believe ad targeting and measurement capabilities in those environments will be further diminished, making our capabilities stand out more for CPG brands.
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Ibotta’s Value Proposition
Value for CPG brands
Grow market share efficiently through success-based marketing at-scale
CPG brands rely on Ibotta to help them change consumer purchase behaviors in a cost-efficient manner. Through the IPN, CPG brands can deliver offers to millions of consumers nationwide, reaching them during their purchase journey, either in-store or online. CPG brands only pay Ibotta when there is a sale directly attributable to their offers, which compares favorably to other advertising tactics such as TV or digital media, where CPG brands must pay for all impressions or clicks, regardless of whether they result in a sale. The IPN’s advertising scale and efficiency generates a more attractive and predictable ROAS for advertisers compared to other marketing tactics. On average, the IPN has delivered a 7x ROAS.
Drive verified incremental sales
One of the primary objectives of CPG brands is driving incremental sales, which can be done by attracting new consumers, reengaging lapsed consumers, or encouraging additional purchases from existing consumers. Our data-driven technology allows us to deliver offers in a way that increases the chances of incremental purchases. Once campaigns are launched, our clients have access to measurement solutions that isolate the true incremental impact of a campaign by comparing sales among the primary audience that is exposed to a campaign to a randomly selected control group that has not been exposed. This methodology is superior because it does not simply analyze sales lift, which may be influenced by variables such as seasonal behavioral shifts. CPG brands can easily monitor the efficiency and effectiveness of their spend through a dashboard that presents key performance indicators such as number of offers redeemed, number of units sold, and total ROAS, while their campaign is live. Brands can then use those indicators to optimize or grow the size of their campaigns with the goal of generating even more incremental sales. To illustrate, certain past CPG client campaigns on the IPN have seen 7x ROAS, over a 50% increase in their number of units sold to consumers who had access to the offer compared to consumers who did not have access to the offer, 42% new-to-brand conversions (meaning the percentage of consumers that purchased the CPG brand offered in the campaign that had not purchased any of the CPG brand offered in the campaign in the 365 days pre-campaign), and 70% shorter purchase cycles (meaning the average number of days between redemptions as compared to the 365 days pre-campaign).
Enable seamless, coordinated campaign execution and measurement
The IPN gives CPG brands a single offer management system to run a cross-retailer promotion across a broad network of publishers, without having to coordinate separate campaigns with each individual publisher. We provide our CPG brands with a platform called the Ibotta Partner Portal that enables them to set up and measure the performance of campaigns across our network in real-time. This makes the execution and measurement of campaigns simpler and more efficient for CPG brands, saving them time and increasing our client retention. Additionally, our central coordination of campaigns offers CPG brands additional benefits, such as anti-stacking, which allows offers to be delivered throughout the network in a manner that prevents them from being redeemed more than once for a single purchase.
Receive valuable data and insights
The IPN leverages our valuable collection of item-level purchase data. While we intentionally limit distribution of those data to protect consumer privacy, we frequently derive valuable insights from the aggregated data to help CPG brands to inform their marketing spend and promotional activities. As an example, through the Ibotta Partner Portal, we may share with a CPG brand aggregated data that illustrates loss of category share to private label competition, along with our recommendations for a specific promotional campaign to mitigate that lost share.
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Value for Publishers
Drive more revenue and consumer engagement through differentiated rewards content
Incorporating Ibotta’s offers helps publishers grow their revenue and consumer engagement. Ibotta sources digital offers from CPG brands’ national marketing budgets in ways that a single retailer generally cannot. The presence of these offers attracts consumers, leads to larger shopping baskets, and generates more sales for retailers. As the IPN grows, Ibotta becomes even better positioned to secure national budgets from CPG brands. The more offers Ibotta adds to its inventory, the greater the value proposition becomes for publishers to incorporate Ibotta’s offers into their loyalty programs.
Grow revenue from Retail Media Networks (RMNs)
Retail media networks, which monetize sponsored search and ad inventory on a retailer’s digital properties, are an increasingly important revenue stream for retailers. The growth of RMNs in the United States could represent as much as $100 billion in ad spending by 2026. Ibotta helps support the growth of retail media revenue for its publishers by increasing the number of consumers who identify themselves at checkout, such as by presenting a loyalty card, entering their phone number, or scanning a QR code. If consumers pay in cash or use a credit card not connected to an online account with the retailer, retailers cannot track their item-level purchases over time or determine which ads to present to them. The presence of a robust digital offers program gives consumers a compelling reason to self-identify at checkout because otherwise they cannot receive their rewards. Retailers use the resulting data to power targeted ads and measure sales lift. A second way in which our offers support the growth of retail media revenues is by increasing the amount of time consumers spend on a retailer’s digital properties, thereby creating more impressions to be sold by RMNs.
Build customer loyalty by enabling closed-loop rewards instead of discounts
Ibotta often recommends that its retailer publisher partners build closed-loop rewards programs in which consumers build positive currency in a digital wallet to be used on a future trip back at that retailer. The leaders, by market share, in mass retail (Walmart), grocery (Kroger), and dollar (Dollar General), have all chosen to deploy rewards programs with Ibotta. Our contracts with CPG brands have been designed to be flexible, enabling us to accommodate a diverse range of offer types based on each publisher’s preference. While Ibotta believes that there are strategic benefits to rewards, we may also work with publishers that choose to present our offers in the form of digital coupons, points, or other offer formats.
Reduce time and investment for building and maintaining a rewards infrastructure
Ibotta provides our publisher partners with a data-driven technology platform that supports their efforts to build and launch a customized rewards program. We provide everything from offer setup, offer ingestion, billing, budgeting, reporting/analytics, and fraud prevention – a set of all-in-one services that we collectively refer to as “rewards as a service.” Our offering gives publishers the ability to operate a technologically advanced digital offers program without undue investment to build and maintain their own rewards infrastructure.
Receive valuable ongoing consultation regarding rewards best practices
Ibotta has more than a decade of experience operating a leading digital offer program with the Ibotta D2C. We use our expertise to help publishers optimize their own programs to acquire new redeemers, retain existing redeemers, and increase the number of redemptions per redeemer. Our consultative services often include Ibotta subject matter experts providing recommendations on user experience design, technical enhancements to program infrastructure, and lifecycle marketing best practices.
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Value for Consumers
Receive savings on everyday items
We provide consumers with valuable offers that allow them to save money on their everyday purchases whether they use popular retailer loyalty programs or the Ibotta D2C properties. Consumers do not have to pay to gain access to these offers. We provide consumers with more than 7,000 offers on average per month. Since inception, we have given over $1.6 billion in cash back to U.S. consumers.
Earn rewards easily through seamless, convenient, and intuitive digital interfaces
Across all the publishers in our network, we strive to make it as easy as possible for consumers to find relevant offers, redeem those offers, and manage their rewards balances. Compared to a world of cutting out paper coupons from the newspapers, carrying them around in a purse or wallet and presenting them at checkout, we reduce the number of steps required to save by placing digital offers at the consumer’s fingertips. In the case of our third-party publishers, we provide ongoing advice designed to maximize ease of use. In the case of Ibotta’s D2C properties, we use direct feedback from our consumers to prioritize changes that simplify the offer discovery and redemption process, end-to-end.
Growth Strategies
We intend to capitalize on our large market opportunity with the following key growth strategies.
Grow our audience. To deliver more redemptions in the future, we plan to reach more consumers with our digital offers. Ibotta will seek to continue to grow the audience that we reach through the IPN through increased penetration at existing publishers and by adding to the network of third-party publishers.
Grow redeemers on existing third-party publisher properties. We believe there is significant opportunity to grow the audience at existing third-party publishers. Ibotta works closely with its publishers and serves as an advisor to enhance publisher programs from a technical and user experience perspective. Additionally, Ibotta provides publishers with advice on marketing best practices for digital offers programs, with a focus on reaching the maximum audience, building consumer engagement, and driving offer redemptions. Ibotta is uniquely positioned to provide this type of consultation to publishers, as it has spent more than a decade operating a widely used savings app in the CPG industry. For example, one large retailer publisher turned to Ibotta to help design the user experience for their new cash back program. They meet with us on a regular basis to incorporate new and improved techniques to improve the number of redemptions within their program. There has been significant growth in usage of Ibotta-powered rewards programs at current publishers, as measured by the number of redeemers and redemptions. Our goal is to continue this growth through our efforts and those of our partners.
Add new third-party publishers in grocery. We are focused on expanding our audience by building new partnerships with retailers that sell CPG products. Given Ibotta’s offer inventory advantage relative to competitors, we believe we provide a strong value proposition for retailers looking to work with a white-label provider of digital offers. We believe Ibotta’s decade of experience operating a popular D2C app further strengthens our go to market message with potential new partners.
Expand into new categories of publishers. In addition to expanding within the grocery channel, Ibotta may also seek to publish its content on the properties of delivery service providers, specialty retailers, and other, non-retailer publishers.
Delivery service providers. Companies that provide delivery services for grocery, mass retail, pharmacy, warehouse club, and dollar store retailers sell products that have a strong overlap with Ibotta’s offers. Without access to national offers, these service providers would
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have to execute separate digital offers for each individual retailer on their platform. Instead, Ibotta gives these companies a quick and easy way to incorporate a large number of national offers that work across different retailer environments. The benefits of doing so include boosting usage and repeat usage, offsetting the cost of delivery, and supporting the growth of their retail media businesses.
Non-retailer publishers. Ibotta intends to also make offers available on non-retailer websites and apps where consumers could benefit from interacting with our promotional content. Examples could include banking rewards programs, recipe sites, social networks, news sites, and other rewards ecosystems. For these publishers, Ibotta can provide easy access to thousands of different CPG brands and has the ability to verify purchases across multiple retailers where the rewards can be redeemed. Adding promotional content to a non-retailer publisher’s website or app creates an additional value proposition for consumers, driving additional time on property. Digital offers can also increase performance of media, increasing click through rates with a strong promotional call-to-action.
Add offers. We have observed a strong correlation between the offers we make available to consumers and the number of redemptions we generate. An expanded library of offers increases the odds that a consumer will find something he or she wants to buy, increasing redemptions per redeemer. At the same time, adding more attractive and more numerous offers grows the redeemer base because consumers who earn rewards are more likely to keep coming back to redeem offers in the future. Today, we capture less than one percent of the approximately $200 billion that CPG brands spent in 2022 marketing their products. In order to capture a larger portion of that market, we will seek to grow investment from our existing CPG brands, while also seeking to expand into new brands and categories.
Grow investment from current clients. Within each client that invests in Ibotta today, we believe there is a significant opportunity to grow their budget invested to keep up with the growth of our audience. Additionally, many of our clients have multiple brands within their portfolio, and we only service a subset of those brands today. As marketers with one brand in the portfolio have success, they often recommend our service to their counterparts, which gives us the opportunity to expand the breadth of our partnership within a given CPG company. For example, in 2022, we worked with 15 brands at a major food manufacturer. Through proof of concept and illustration of the incremental value of our growing network, we now work with 53 brands at that manufacturer.
Expand our client base. While we already work with many of the CPG companies in the United States, there are still many CPG companies that do not yet use our services. Armed with the scale of the IPN and the exclusive access to place promotions on key retailers, we hope to bring those companies onto our list of clients. Additionally, we have significant untapped opportunities in general merchandise categories such as toys, clothing, beauty, electronics, pet, home goods, and sporting goods. These non-grocery verticals contain some of the largest advertisers in the United States and a large portion of the shelf space and revenue at mass retailers, and yet have historically had limited success-based marketing tactics available to them. We began focusing on this market in earnest in 2022, and now work with over 100 general merchandise CPG brands. Examples include brands such as LEGO, Energizer, Samsung, and Conair. Participation from general merchandise CPG brands will likely make up a material portion of our revenue growth in future years.
Continue to enhance the IPN through innovation. We will continue to invest in technology to further develop and accelerate the growth of the IPN for CPG brands, publishers, and consumers. As the data generated by the IPN grows, we believe Ibotta will generate more valuable insights about purchase behavior and market trends and may be able to automatically optimize recommendations for consumers as well as campaigns for clients based on real-time data from across the network. We intend to enable CPG brands to leverage our AI-powered tools to run success-based marketing programs that achieve their specific goals. CPG brands may also be able to create digital offer campaigns programmatically via other buying platforms. For publishers, Ibotta will look to make integrating into the IPN even easier, and
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expects to add technologies such as a digital wallet capability which will facilitate retailers’ transitioning to closed-loop rewards systems. Ibotta will aim to continue to engage consumers on our D2C apps, website, and browser extension by integrating more deeply with our retailer publishers to make offer redemption as easy as possible. Wherever possible, consumers will be able to use their preferred payment instrument or loyalty program to redeem offers seamlessly on Ibotta D2C properties.
Our Products & Offerings
We provide a number of products and offerings to CPG brands, publishers, and consumers.
For CPG Brands
Our offerings for CPG brands are often coordinated and delivered via the Ibotta Partner Portal. The Ibotta Partner Portal is a single interface that centralizes our clients’ experience with Ibotta, starting from setting up an offer to analyzing the performance of a campaign. Our clients typically purchase a combination of the following products to meet their marketing objectives.
Promotions
We allow CPG brands to deliver digital promotions as a way of incentivizing changes in consumer behavior and inspiring incremental sales. Depending on their goals, they can choose a set of eligible products, set offer values, introduce any targeting criteria, and determine an overall budget for their campaign. Through our deep experience with clients of various sizes that sell a wide range of consumer products, we have developed a number of curated, strategic “playbooks” that offer guidance to our clients on how best to achieve their specific marketing objectives.
Measurement is also core to our promotions offering. We provide campaign performance analysis throughout the campaign and post-campaign via the Ibotta Partner Portal, visualizing data on total unit movement, demographic and geographic data, and ROAS for both in-store and online purchases down to the SKU level, arming our clients with the information they need to measure the ongoing efficacy of their campaigns. Additionally, we often provide CPG brands with insights derived from our robust item-level purchase data in order to improve their understanding of the consumer landscape and their associated promotional activities. Although we have sometimes sold these data and insights on an ad hoc basis, we are increasingly offering data and insights alongside our primary fee-per-sale promotions offering.
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*Illustrative Ibotta Partner Portal dashboard with mock data illustrating common metrics CPG brands are able to view within IPN reporting dashboards including impression counts, offer unlocks and offer redemptions.
Our flexible approach allows us to work with a broad base of clients in different arrangements. Larger brands increasingly commit to full-year contracts with a committed level of spend. Brands can also choose to contract with us on a campaign-by-campaign basis. Such campaigns vary in length and may be based on seasonal promotions, such as Back To School, which could be 6-8 weeks long, or Thanksgiving which could last a week.
Our system records the number of offers redeemed in any given campaign and invoices our clients for the total value of those offers, along with our agreed upon fee-per-sale commission. For most campaigns, we typically invoice our clients on a monthly basis.
Ad and other products
Within the Ibotta D2C properties, we offer a variety of digital ad products to help our clients boost visibility for their brands and increase the reach of their promotions, which typically translates into increased offer redemptions. In almost all cases, we only allow CPG brands to buy ad products within our D2C properties if they are also simultaneously running one or more live promotions. Ad products include targeted digital ads such as banners on our D2C properties or email newsletters, offer reengagement
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push notifications, and sponsored offers. We typically charge fixed dollar amounts for our ad products, based on the size of the audience that views each unit.
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We also provide data and insights to our clients which helps them enrich existing datasets to improve attribution tools and inform future marketing strategy. We have differentiated access to first-party data, which includes cross-retailer and item-level data on full baskets purchased by millions of consumers, through our integrations with retailers, receipts submitted to us via our D2C properties, and our ability to run surveys across our diverse consumer audience to gather qualitative insights. We deliver data and insights to our clients in the form of a license based on an agreement that specifies the nature and scope of the types of insights shared. As our client base grows, we are increasingly offering data and insights with our other client offerings.
For Publishers
Publishers benefit from Ibotta’s white-label technology, or the “rewards as a service” platform. Publishers can integrate with Ibotta’s APIs and Ibotta handles all aspects of offer sourcing, purchase verification, offer matching, offer crediting, billing, and other logistics. Ibotta also provides expertise on operating a top-tier rewards program based on more than a decade of operating the Ibotta D2C. This can include valuable advice on program design and user experience (UX), recommended tactics for effective lifecycle marketing strategies to acquire and retain users of the digital offers program, and other helpful information and best practices. We believe retailers value Ibotta’s expertise in designing and operating widely used digital offer programs.
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Example: Walmart Cash
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The Walmart example illustrates how Ibotta’s offers are integrated into Walmart’s in-store and eCommerce shopping experiences. Walmart consumers can select offers on the Walmart app or website, buy corresponding products in-store or online, earn Walmart Cash, and manage their earnings within their Walmart digital account.
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Example: Dollar General Cash
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Dollar General also enables a rewards flow, in which DG Cash accumulates to the consumer’s DG account for use on a future trip at DG.
Consumers can browse offers in the “Explore Deals” section, or can find offers as they search for specific products. If shopping in a physical DG location, consumers are prompted to enter their phone number on the DG POS terminal when checking out. This connects a consumer’s digital offer selections with their in-store purchase and provides them with any applicable earnings on this transaction.
For Consumers
Consumers redeem our offers either through our third-party publisher properties or directly on our D2C properties. Our third-party publisher properties include white-label retailer loyalty programs powered by Ibotta, while our D2C properties include our Ibotta-branded mobile app, website, and browser extension. Cash out options on our third-party publishers vary, but consumers can usually apply cash back rewards to future trips, either in-store or online. In some cases, they can also choose to cash out to Paypal or claim their rewards as cash in-store. On our D2C properties, consumers may cash out their rewards in the form of gift cards, a transfer to their Paypal account, or a deposit to their bank account.
Third-Party publisher properties
Consumers can access offers powered by Ibotta on third-party publishers’ digital properties. This creates a seamless experience for consumers through publishers, while allowing publishers to maintain a direct relationship with their consumer, keep their own brand front and center, and curate their own user experiences. There is no requirement for consumers to create an Ibotta account or download the Ibotta app; they can simply visit the publisher’s website or mobile app, select offers, buy featured products, and earn rewards or discounts, depending on how the publishers’ program is designed.
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D2C mobile app
We operate a free mobile app that is available on iOS and Android. With our mobile app, consumers can create an Ibotta account, browse and select offers at their favorite retailers, and receive cash back when they buy the featured items either in-store or online. Once an offer is redeemed, consumers can see and manage their cash back balance within the app, and once they have reached a certain balance, they can cash out to a Paypal account, bank account, or digital gift cards from within the app. Since its debut in 2012, our mobile app has attracted over 50 million registered users and been rated over 2.3 million times across the App Store and Google Play Store, earning an average of 4.7 out of 5 stars.
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Browser extension and website
To create a positive consumer experience and make cash back offers broadly accessible for online shopping, we built a free desktop browser extension for Google Chrome that is supported by the Ibotta.com website. Our browser extension compares prices across and allows consumers to set price drop