Grocery delivery startup Instacart secures 44 million from Andreessen Horowitz

California-based two-year-old grocery delivery company, Instacart has raised USD 44 million in series B round at a valuation around USD 400 million from Andreessen Horowitz. The existing investors Canaan Partners, Khosla Ventures, Sequoia Capital and Y Combinator have also participated in the round.

It aims to utilize the raised funds to improve its technology and customer experience, to fuel geographic expansion and experiment with new delivery models. At present, the company is having operations in 10 US cities and plans to launch in 7 additional cities. The firm claims to have grown by 15x over the past nine months.

California-based Instacart was launched in 2012 by Co-Founders Max Mullen, Brandon Leonardo and Apoorva Mehta. Earlier, it had raised USD 8.5 million in series A round by Sequoia Capital. Till date, including this round, the company has secured a total capital of USD 54.8 million. 

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Venture Beat says: To monetize, Instacart sets its own prices for goods — a decision that recently resulted in a cease and desist order from a key supplier, Trader Joes, a source familiar with the matter claims. That system quietly inserts additional fees and often pushes the price of goods above other competing services.

In an official release, Instacart touts that it’s “the only service that can deliver groceries from multiple local stores within an hour.” However, competing startups like WunWun and Postmates advertise similar services.

GeekWire says: “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,” acknowledged Andreessen Horowitz partner Jeff Jordan in a news release.

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“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.”

DealBook says: Mr. Jordan, partner at Andreessen Horowitz wrote in a blog post on Monday: “We’re making a bet that Instacart’s partnerships with brick-and-mortar grocery stores will be the winning play in grocery delivery to the home, with the ability to fend off competition from e-commerce companies that build out their own infrastructure.”

Forbes says: “We always talk about ‘up and to the right’ as the phrase we look for,” Andreessen Horowitz partnerJeff Jordan said when asked why his firm bought into Instacart. “What was most interesting is it was up and to the right in every market, and each new market was doing better than the one that came before.”

To contact the author, email at sujata@iamwire.com.

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