March 2nd, 2021. Instacart has raised $265m from its existing investors at a $39bn valuation. This comes ahead of a widely expected, but as yet unannounced, IPO.
Nick Giovanni, Instacart CFO, is quoted in the announcement as saying "grocery is the world's largest retail category with annual spend of $1.3 trillion in North America alone". Prior to joining Instacart earlier this year, Giovanni was 23 years with Goldman Sachs where he advised clients on financing transactions, including some of the largest funding rounds and public offerings of recent times, including for Airbnb, Baidu, DoorDash, Dropbox, eBay, Square, Twitter, and Yelp, as well as direct listings for Spotify and Slack.
Instacart provides the ecommerce technology and operations for 600 grocery retailers at 45,000 locations (of which 200 retailers & 15,000 locations were added during 2020). From these locations it can reach 85% of US households and 70% in Canada.
The Instacart valuation of $39bn should be compared to the $22.8bn valuation of public company Ocado Group (LON: OCDO), the London-listed grocery ecommerce technology provider that serves Kroger and Sobey's, and is active in several other markets worldwide, including UK, France and Japan. Whereas Instacart's model uses gig workers to pick, bag and deliver groceries, Ocado's differentiator is proprietary and highly automated warehouses that maximizes efficiency and reduces cost to serve, especially for larger operations.
In its "State of Grocery" report in March 2021, 1010data states that during April 2020, 46% of Instacart shoppers were new Instacart customers, with the business now having a 28% share of the online grocery market, highlighting its scale and growth rate.
The new capital will be used by Instacart to achieve its elevated ambitions in the market. This includes:
- Adding 50% corporate headcount during 2021
- Further developing its three core platforms:
- Instacart Marketplace - essentially its ecommerce sales channels to enable customers to place orders for products from its grocery retailers
- Instacart Advertising - a platform for Consumer Packaged Goods (CPG) companies to place their products in front of these customers during the shopping journey
- Instacart Enterprise - the wider set of applications and capabilities to enable retailers to run a complete, branded, online grocery operation
Investors participating in this funding round include:
- Andreessen Horowitz
- Sequoia Capital
- D1 Capital Partners
- Fidelity Management & Research Company LLC
- T. Rowe Price Associates, Inc.