Instacart, the fast-growing online grocery delivery startup that can get groceries to your doorstep within an hour, is growing some more. The three-year-old company just announced it has raised $220 million in a funding round led by the venture capital firm Kleiner Perkins Caufield & Byers.
Other investors include Comcast Ventures, the Dragoneer Investment Group, Thrive Capital, Valiant Capital, and Instacart’s previous backers, Andreessen Horowitz, Khosla Ventures, and Sequoia Capital. A person familiar with the investment round who wasn’t authorized to discuss it publicly confirms earlier reports that the funding round valued the startup at $2 billion.
We first wrote about Instacart in 2013, when it had only 10 full-time employees and the germ of an idea: that groceries could be plucked and quickly delivered to people’s doorsteps from the shelves of existing supermarkets, rather than from refrigerated fulfillment centers outside major metropolitan areas. Like Uber and Lyft, Instacart relies on an army of smartphone-toting independent contractors, who scour store shelves and transport goods to people’s homes using personal cars. The concept first attracted attention from veteran investors such as Sequoia’s Mike Moritz, who previously belly-flopped into the first wave of failed food delivery startups like Webvan.
Instacart founder Apoorva Mehta, a former Amazon engineer, said in 2013 that Instacart’s “secret sauce” was its software, which tracked inventory across multiple supermarkets and allowed its contractors to efficiently select items from different orders placed at different times as they walk through store aisles. Customers assemble their orders via lengthy drop-down menus on the service’s website or app.
Instacart appears to be a hit. It is available in 15 cities and allows customers to shop at such stores as Whole Foods, Trader Joe’s, Costco, Kroger, Safeway, and other chains. The company says its revenue grew tenfold in 2014 and doubled in the fourth quarter alone. It has more than 100 employees and an army of 4,000 green-shirted “personal shoppers.”
The site has also attracted some criticism, particularly over its opaque pricing strategy. On its Twitter page, Instacart discloses that “sometimes, our prices are lower or higher than the stores’ prices, sometimes they are the same.” That makes it difficult for customers to tell what kind of premium they are paying as they sit at home awaiting delivery.
The company has built a huge war chest and apparently plans to expand not only into new cities, but new categories of retail as well. “We’ve got robust processes in place to support category and geographic expansion,” Mehta said in a statement. “Our vision is to help all types of local retailers get online and offer their customers one-hour delivery. This financing round will help us accelerate and scale those efforts.”
He added via e-mail that it takes only two weeks for Instacart to set up its service in a new city. As to whether it will be easy to get into product categories beyond groceries, he wrote: “All I can say is that picking avocados or delivering ice cream is tougher than delivering most other things.”
Source: Bloomberg Businessweek