Investors pour $400 million into Instacart's battle with Amazon
Instacart just got a huge push.
The same-day grocery delivery startup announced a $400 million funding round on Wednesday, bringing its total valuation to a reported $3.4 billion.
The cash boost — the company's biggest yet — comes on the heels of a string of ongoing spats over worker pay.
That controversy doesn't seem to have dampened the confidence of the company's investors, which include lead Sequoia Capital, Andreessen Horowitz, Khosla Ventures and Y-Combinator.
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Instacart's success comes as some of its smaller Silicon Valley food-delivery peers struggle to hold momentum in a famously tough business model. In general, the herd of money-losing on-demand startups has thinned in the past year or so as venture capital purse strings tightened.
Rather than small-fish startups, Instacart is more concerned with the towering threat of AmazonFresh, the online shopping behemoth's own fast-growing same-day delivery bid.
"We think about this as a two horse race: Us and Amazon," Instacart founder and CEO Apoorva Mehta told Axios on Wednesday. "Amazon is building their warehouses to compete with the entire grocery landscape, while we're empowering the entire grocery landscape."
Unlike Amazon's warehouse network, Instacart operates through a web of more than 100 store partnerships, including Costco, Whole Foods and other grocery chains.
To that end, Instacart has been cushioning its business model however it can with extra cash from advertising deals, a new $15-per-month Prime-like unlimited service and even recycling bottle deposits, according to Bloomberg.
Some of those penny-pinching moves haven't sat well with its army of delivery-people. Workers — who, like most gig economy laborers, are employed as independent contractors — have been outraged by a series of pay cuts in recent months that have taken a big chunk out of their paycheck.
The company also butted heads with its workforce over a proposed service fee last fall that workers say would have amounted to Instacart taking their tips. The company ultimately relented but also made the tip button much harder to find.
Many on-demand startups have tortured relationships with their semi-employed ground floor workers — a recent shouting match between Uber CEO Travis Kalanick and a driver comes to mind — and it's never seemed to faze investors all that much.
Instacart plans to use the money to "double its geographic footprint" this year by expanding into 35 new markets. The company grew at a similar rate last year.
“We want to blanket the country with Instacart,” Mehta told Bloomberg.
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