Instacart’s $44M funding round raises the stakes in grocery delivery

Apoorva Mehta

Apoorva Mehta

Grocery delivery service Instacart has raised a $44 million from investors including Andreessen Horowitz, Y Combinator President Sam Altman and Box CEO Aaron Levie — saying it will use the capital to fuel geographic expansion, improve its technology and customer experience, and experiment with new delivery models.

It’s a big boost for the San Francisco-based company company, led by former Amazon software design engineer Apoorva Mehta, which is going head-to-head with giants including Amazon and Google in the grocery delivery business. Instacart is taking a different approach by contracting with “personal shoppers” who who will run to the store to pick up your orders and drop them at your house.

The model is more along the lines of crowdsourcing companies like Lyft and SideCar, and Instacart says the lack of distribution infrastructure is a competitive advantage allowing it to expand quickly into new markets — two to three weeks to enter a market, vs. six to nine months for rivals that rely on traditional distribution facilities, according to the company.

Instacart says it is on track to reach 17 cities by the end of this year, and the company says its revenue has grown 15-fold over the past nine months. The company currently operates in San Francisco, Austin, Boston, Chicago, Los Angeles, New York City, Philadelphia, San Jose, Seattle and Washington, DC

“As we think about the future of e-commerce, groceries are among the last huge untapped opportunities. While many have tried to crack the code, few have met with success,” acknowledged Andreessen Horowitz partner Jeff Jordan in a news release.

“However, mobile is enabling a new way to tackle digital grocery distribution through an execution that I refer to as ‘People Marketplaces.’ This is Instacart’s approach, and we’re betting it will be the winning play. We are excited to partner with Apoorva and team as they seek to have software eat grocery delivery.”

Instacart raised $8.5 million last year. Existing investors Sequoia Capital, Khosla Ventures and Canaan Partners also participated in this new $44 million round. Y Combinator’s Altman and Box’s Aaron Levie invested in their personal capacities.