Instacart made it official Tuesday – the startup has raised its largest funding round yet, pocketing $220 million from venture capitalists and hedge funds, which will allow the company to expand its delivery service beyond groceries.
SiliconBeat, and several other news outlets, first reported the news last month, but Instacart had stayed quiet, finally acknowledging the new funds Tuesday morning in a news release. The investment brings Instacart s total funding to $275 million, and is a sign of investors growing confidence in the fledgling grocery delivery model — which spectacularly failed in the dot-com era, costing investors millions.
The round was led by Kleiner Perkins Caufield & Byers; other participants include Comcast Ventures, Dragoneer Investment Group, Thrive Capital, Valiant Capital and previous investors Andreessen Horowitz, Khosla Ventures and Sequoia. Sequoia was Instacart s first venture investor, putting $8.5 million into the startup; the VC firm also invested $10.8 million to prop up Webvan, the grocery delivery service that went bust in 2001.
We all held hands and prayed, Michael Moritz, chairman of Sequoia Capital, told the Mercury News last year about the firm s bet on Instacart.
Instacart founder and CEO Apoorva Mehta said that the company plans to use the funds to deliver in categories other than groceries, and continue its geographic growth and technology enhancements.
Instacart s revenue grew by 10X during 2014, doubling in the fourth quarter alone, the company said. It has signed some of its first official agreements with grocers, including Whole Foods Market, Fairway Market and Fresh & Easy; the company used to just send Instacart employees into stores to shop for customers with any approval from or agreement with the stores. It also has formed partnerships with HomeAway and Yummly.
The San Francisco-based company also doubled its full-time employee base, which now exceeds 100, and employs 4,000 contract workers, who do the shopping and delivering for customers. It serves most of the Bay Area, from San Francisco to the East and South Bay.
However, Instacart has also ignited some backlash among online grocery shoppers, who say the company is deceptive about its pricing practices. Instacart raises the prices of many of the products on its app, so that the cost of an avocado or gallon of milk, for instance, is much higher than it is in the store; many customers say Instacart does not properly disclose this practice. Mehta said the pricing depends on customer demand and how much supply the stores have; some products are cheaper on the app than in the store.
Photo: Instacart founder and CEO Apoorva Mehta in their new offices South of Market in San Francisco, Calif., on Friday, Nov. 15, 2013. Laura A. Oda/Bay Area News Group.
