Life has indeed become a lot easier to live as compared to the kind of lives lived by our ancestors. The presence of this ease is mostly because of the growing on-demand economy. A group of startup companies provides everything from food and apparels to flowers at our door step. Everything seems to be just a “click” away from our reach, thanks to the space-age device named internet.
Instacart
A San Francisco based startup company has something new for the people of USA. It aims to be the king of grocery delivery on demand. The company announced a closure of $220 million round of venture capital from investors like Andreessen Horowitz, Sequoia Capital, Kleiner Perkins Caufield and Byers, among others. This new round has raised the total amount of funding $275 million. The company is now valued at a roaring number of $2 billon. The fact has been confirmed by two people related to the company on the condition of not being named because of continuing ties to the company.
The face of the grocery world is surely going to witness a tremendous change. The company, which was founded in 2012, allows customers to have access to the online catalogs of their favorite grocery stores like Whole Foods (WFM, Financial), a major partner of Instacart, and the delivery is scheduled directly to their door step.
One of the major attractions of the website is that it is very easy to use. The grocery items are laid out on an easy-to-browse grid. Currently this service is available only in 15 American cities.
Playing along with the old players
This whole concept is not a fresh one. Instacart would have to face tough competition from Fresh Direct, which operates in New York and has offered grocery delivery services for more than a decade. And then, there are major players like Walmart (WMT, Financial) Google (GOOG, Financial) and Amazon (AMZN, Financial). These companies have far better resources and have played their cards in this field by offering same-day delivery services.
In defense of this the CEO of Instacart, Apoorva Mehta, calmly says that the size and the structure is likely to perform successfully.
In an interview Mehta said, “We have the ability to try new things in a very quick way. We don’t hold inventory, we don’t own warehouses and we don’t own trucks. The changes we make are software changes.”
The points mentioned by Mehta clearly point out the contrast between his company and the major players like Amazon, Google and Walmart, which are much larger and have a wider range of delivery items.
Light and quick on the feet
Investors say that the key to the success of Instacart lies in its contract employees who do the shopping and delivery works. The company only employed 100 employees, but it has more than 4000 contract workers. Instead of having hired full time employees the company has economically resorted to these workers. Just like the ones that drive for Uber, the cab start-up.
According to Will Gaybrick, a partner at Thrive Capital and one of the investors, “one of the things that’s so exciting is the capital efficiency of the Instacart’s model, which allow them to move into new markets incredibly quickly. Like Uber, hyper growth happens in a matter of months not years”.
Without mentioning the specific numbers, Mehta said that Instacart’s revenue grew by more than a factor of 10 previous years and doubled in the final quarter of 2014.
Conclusion
The new capital would further advance Instacart’s growth as the company is planning to hire more business development executives and customer service representatives to fuel its expansion into more cities. As investors it will be worth keeping an eye on this startup for an IPO or acquisition event.
