Grocery delivery firm Instacart raises funds amid Amazon battle

February 14, 2018 14:10
Instacart has completed a new funding round as it prepares for increased competition from Amazon in the online grocery services business. Photo: Instacart

Instacart, a US-based grocery delivery services startup, has raised US$200 million in fresh funds as it seeks to expand its operations and take on e-commerce behemoth Amazon in the fast-growing business segment.

The new funding round valued Instacart at about US$4.2 billion, up from the US$3.4 billion valuation the firm commanded when it raised US$400 million nearly a year ago, according to Reuters.

Instacart, which is headquartered in San Francisco, has developed an app that allows shoppers to order groceries online.

The company shops for groceries from about 200 retailers including Target and Costco, and delivers the items to the customers' home the same day, sometimes in as little as one hour.

Instacart gets its income from delivery fees and the promotions and coupon deals it partners with brands including General Mills, Coca-Cola and Pepsico.

The new funding raised in the latest Series E round would bring the five-year-old startup’s fundraising total to nearly US$900 million, according to CrunchBase.

Apoorva Mehta, Instacart’s co-founder and CEO, told Bloomberg that the company raised fresh funds "because we want to win".

The firm is expanding the service outside the 190 markets in the US and Canada where it is currently available, and add new businesses beyond delivery, coupon management software and digital circulars. 

The new funding round was led by Coatue Management, with Glade Brook Capital Partners and several existing investors also participating.

Sequoia Capital, Andreessen Horowitz, and Whole Foods Market, among other investors, have previously invested in the startup, according to CrunchBase data.

The latest fund-raising comes as Instacart is facing some uncertainty as one of its largest partners, Whole Foods, has been acquired by Amazon. In 2016, Instacart signed a five-year deal with Whole Foods to be the exclusive delivery provider for most Whole Foods goods.

However, Amazon, the new owner of Whole Foods, is aggressively laying its hand on grocery retail. The company recently began offering free two-hour delivery of Whole Foods groceries to Amazon Prime customers in some US cities.

Some analysts believe Amazon will be a real threat to Instacart’s business.

In an interview with CNBC, Instacart CFO Ravi Gupta said Whole Foods did not participate in the latest funding round. He said the company won't launch another round before going public.

According to him, Instacart's business grew 160 percent last year.

This article appeared in the Hong Kong Economic Journal on Feb 14

Translation by Ben Ng with additional reporting

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Hong Kong Economic Journal