Instacart gets $44M to fuel expansion

Instacart has raised $44 million in venture capital to help fund its fast-growing grocery delivery service, bringing the total amount of capital raised to $55 million.

The San Francisco-based company completed a round of Series B financing led by Andreessen Horowitz. Existing investors Sequoia Capital, Khosla Ventures and Canaan Partners also participated in the round. In addition, Aaron Levie, CEO of Box, and Sam Altman, president of Y Combinator, made personal investments.

Instacart has not disclosed what value was used to raise funds, but Techcrunch reported in April the figure was likely close to $400 million.

"As we think about the future of e-commerce, groceries are among the last huge untapped opportunities. While many have tried to crack the code, few have met with success," said Jeff Jordan, partner at Andreessen Horowitz. "However, mobile is enabling a new way to tackle digital grocery distribution through an execution that I refer to as 'People Marketplaces.' This is Instacart's approach, and we're betting it will be the winning play. We are excited to partner with Apoorva and team as they seek to have software eat grocery delivery."

Instacart is powered by software that connects customers to existing grocery stores and a small army of people who have signed up to be independent shoppers. Shoppers place their orders online and Instacart delivers them in one hour or less, or at a scheduled time.

Instacart now serves 10 U.S. cities. Its crowd-sourced model means it can be up and running in a new market in just two to three weeks. While competitors including Amazon (NASDAQ:AMZN) are busy building out proprietary infrastructure, Instacart is using capital to grow its technology and improve the existing model.

This latest round of funding will be used to expand geographically, improve the customer experience, experiment with new delivery models and make improvements to the technology that fuels the platform, according to the company.

Instacart has raced past the goals it set for itself when the company announced its Series A round in June 2013. At that time, the company pledged to be in 10 major cities, including its home city of San Francisco, by the end of 2014. That goal was reaching in May 2014 and Instacart Founder Apoorva Mehta expects the service be in 17 cities by the end of 2014, nearly double its original goal.

The company's revenue has grown by 15 times over the past nine months.

"We've proven out our model in 10 cities across the U.S., and it works," said Mehta. "Instacart's customer base in every city is growing by double digits monthly, and we've developed a great playbook for geographic expansions. This funding will enable us to expand even more quickly and establish a wide, national footprint over the next 18 months."

Instacart currently operates in San Francisco, Austin, Boston, Chicago, Los Angeles, New York City, Philadelphia, San Jose, Seattle and Washington, D.C.

Instart's rapid growth and ability to raise capital speaks to the optimistic attitude toward same-day delivery among investors, but shoppers have different ideas. Only 1 percent of shoppers consider online shopping as their primary method of buying groceries, according to a new report by PriceWaterhouseCoopers. While shoppers seem to appreciate having the option to shop online, few are doing it.

An investment in Instacart and other grocery delivery programs is a bet that improved technology and service will instigate a signficant change in shopper behavior.

For more:
-See this Instacart press release
-See this Techcrunch story

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