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The Future Startup Dossier: Instacart

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May 26, 2021

The Journey of Instacart. Instacart, founded in June 2012 by three co-founders Apoorva Mehta, Brandon Leonardo, and Max Mullen, is a US-based on-demand grocery delivery platform that allows its customers to buy groceries from the retailers using a personal shopper and get same-day home delivery. Started with covering a few cities in the US, Instacart has since expanded to Canada. 

The idea of a quick delivery service came to Mehta’s mind when he was working in Amazon which is one of the largest online marketplaces. In 2012, Mehta placed the first order on the early version of the Instacart app, went to the grocery store, and delivered the item himself. As the number of users of the service started to grow Mehta had to build a team of personal shoppers and train them. He was one of the participants of Y Combinator’s summer batch in 2012 which led to the further development of Instacart and in Y combinator Mehta met the other two co-founders of Instacart, Leonardo and Mullen. 

The company got funding from Y Combinator as well as several other VCs. In 2015, the company raised $220 million in its Series C led by Sequoia Capital and Andreesen Horowitz. After series C, the valuation of Instacart reached $2 billion.

In 2017, Instacart was launched in Canada. In 2017, the company’s value rose to $7.87 billion.

The company has partnered with over 350 grocery retail chains and independent stores covering over 2500 grocery stores.

Through its service, Instacart has built a platform that is based on the sharing economy where those who can not go grocery shopping — busy professionals, old and disabled people, can get their groceries delivered at home by the personal shoppers and the personal shoppers get a commission for this. 

The users can place an order anytime they want via Instacart’s website or app and get their orders delivered at a scheduled time. It also enables the customers to buy groceries from several retailers under a single order. Though Instacart is based on a sharing economy where it offers self-service, the users can reach out to its sales and support representatives via email, phone, or online contact forms.

The personal shoppers who work in Instacart can work at a convenient time providing them with a flexible working hour.

For its service, Instacart manages a network of retail grocery stores including large chains and independent local grocery stores, ensuring a wide range of options for the customers to buy their groceries from. By partnering up with Instacart the grocery stores can reach more customers leading to an increased number of online orders.

The revenue of Instacart is generated through various fees imposed on its customers which primarily includes a surcharge placed on some items and delivery charges. The delivery charges vary depending on the time. The usual delivery charge is $5.99 for delivery within two hours or scheduled delivery, where the buyer can get the products delivered at a convenient time. The delivery charge is higher for delivery within an hour. Customers have to pay a higher delivery charge if the order is placed during peak hour or the total cost of the order is more than $35. Instacart offers membership options under ‘Instacart Express’ for a flat monthly or annual fee. Under this membership, users can enjoy unlimited free delivery for orders under $35, a reduced service fee, and no extra delivery charge during peak hours.

Instacart has also partnered with Rite Aid, an American drugstore chain, to deliver prescribed medicine.

Over the years, the company has raised six rounds of funding. In June 2020, Instacart raised another round of funding raising $225 million led by DST Global and General Catalyst. After the funding round, the value of Instacart reached $17.7 billion. At the beginning of 2021, the company raised $264 million in another funding round led by existing investors Andreessen Horowitz, Sequoia, and D1 Capital Partners, as well as existing institutional investors like Fidelity and T. Rowe Price, doubling its value. As of 2021, the current value of Instacart is $39 billion.


Behind Instacart’s Rapid Growth. According to Pitchbook, Instacart is the second largest US based unicorn after Elon Musk’s SpaceX. In 2020, Instacart has partnered up with 150+ new or expanded partners. The number of shoppers has increased three fold as well.

The key reason behind Instacart’s growth is their value proposition which provides the customers with a quick, flexible and convenient delivery service. The founders of Instacart pointed out one of the main issues of the fast paced life of the 21st century- ‘lack of time for grocery shopping’ and found a solution for that.

Besides, during the COVID-19 pandemic the demand of online grocery shopping has skyrocketed which is another reason behind Instacart’s massive growth during this period. In the first half of 2020, Instacart saw a 450% increase in the order volume and 35% increase in average basket size. According to a report published by Forbes, the customers bought $700 million worth of goods in each of the first two weeks of April. 

The reason why people are choosing Instacart over other delivery services is the availability of prompt and quality delivery service. Instacart has offered people the convenience of shopping daily necessities from home during this pandemic, which was a huge relief for people during the current situation.

Through Instacart, customers can get their products delivered within just an hour. Moreover, getting your order delivered at your doorstep at your preferred time whether it's 9 am in the morning or midnight makes online grocery shopping through Instacart more convenient.

Instacart is also one of the largest online coupon platforms which often offers its customers various coupons along with credits and referrals. Besides, brands can place their advertisements on Instacart’s platform giving them the opportunity to reach a wide range of audiences.


Read.

Q&A with Apoorva Mehta, Founder & CEO, Instacart: “Growing up in a small town near Toronto, Canada, I remember waiting at a bus stop carrying bags of groceries in the freezing cold. Fast forward to 2012, I realized that while a lot had changed in the world, grocery shopping was the same. I wanted to change that. I wanted to make grocery shopping effortless.” Apoorva Mehta shares the inspiration behind Instacart.

Apoorva Mehta had 20 failed start-ups before Instacart: With 20 failed start-up ideas under this belt, Mehta put some thought into the problems he experienced day to day. As soon as he came up with the idea for an on-demand grocery delivery platform, he couldn’t stop thinking about it. In less than a month, he’d coded himself a crude version of an app that could be used by people who needed groceries, and a version for those who were shopping in-store for customers. On its first test-run, because Mehta hadn’t hired any shoppers yet, he ordered through the app, went to the store, and delivered the groceries to himself.

Instacart May Emerge As The White Knight For Grocery Retailers: There’s no question about Instacart’s ambitions in the world of online retail. The question is, will they choose the growth opportunity that helps traditional retailers adapt to the new online economy, or hammer another nail into the coffin of in-store grocery shopping?


Watch. 

Apoorva Mehta at Startup School NY 2014: Apoorva Mehta at Startup School NY 2014, talks about Instacart and how they are working to make grocery shopping more convenient.

Delivering Success with Apoorva Mehta of Instacart at Disrupt SF: Instacart's Apoorva Mehta talks to Megan Rose Dickey about what differentiates them from past delivery-based companies, their profitability forecast, and taking care of their shoppers.

Should Amazon Be Afraid of Instacart, the $4.2B Startup? - A Case Study for Entrepreneurs: Case Studies with the Biz Doc on Valuetainment. In this video, Biz Doc talks about Instacart and how it is making an impact in the grocery market.


Lessons From Instacart

1. Utilization of an opportunity: One of the lessons we can learn from Instacart’s success is the quick adaptation to the current situation and utilizing it as an opportunity to grow the company. Besides, providing the users with the convenience of shopping groceries from home, Instacart introduced a new feature, ‘Leave at my door delivery’, where the shoppers leave the delivered order at the doorstep of the customers. It helps the customers to avoid physical contact, which is mandatory during this pandemic.

Besides, Instacart has also offered prescription delivery service during this pandemic partnering with Costco, which added value to their service.

2. Well-structured business: Instacart is an excellent example of a well-managed business. On Instacart for every 10 users, there are three shoppers, which not only made it easier for the users to find a shopper whenever needed but also created new job opportunities for a large number of people. As the shoppers can work at their convenient time, it allows a lot of people to earn extra besides their regular jobs.

3. Introducing welfare schemes for workers: Instacart offers its shoppers, diagnosed with COVID-19, paid leaves. Besides, it also has bonus programs for shoppers. Introducing new welfare schemes led to a sudden increase in the shoppers' app download, increasing the number of shoppers. It proves that taking care of your employees can help in the growth of the company as well.

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Tithi Chowdhury is an undergraduate student majoring in Botany at the University of Dhaka. She is a Trainee Analyst at Future Startup and looks after our Collective Knowledge initiative where she prepares interviews and writes articles on interesting topics. She is a voracious reader and loves listening to podcasts in her spare time.

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