Grocery delivery service app Instacart has raised fresh funding on Monday, helping the retail group contend with online retail giant Amazon.com Inc. in bringing groceries to customer’s home.
The most well-known alternative for supermarket orders in the US said that it was able to raise $200 million in venture capital.
Sources familiar with the matter said that Instacart’s market value is now at $4.2 billion. The company has already raised $400 million at a $3.4 billion valuation last year. Instacart has so far managed to raise $900 million overall from investors.
The money could potentially help with Instacart co-founder and chief executive Apoorva Mehta’s future plans. This includes broadening of the service outside the 190 markets in the US and Canada.
Mehta also aims to set up new ventures beyond delivery, coupon management software, and digital circulars. He plans to employ 200 people this year as well.
Instacart Keeping Up with Amazon
The funding is likely to help Instacart keep up with Amazon, which just started testing its free 2-hour delivery service of Whole Foods Market Inc.’s groceries to Prime buyers in four cities in the US.
Even with a $4.2 billion valuation, San Francisco-based company is still far from the e-commerce group’s $649 billion market value.
As a result, Instacart has been securing partnerships with other retailers, including Albertsons Co. LLC and Costco Wholesale Corp.
While Amazon’s progress is currently limited to its Whole Foods stores, Instacart might just gain leverage and a bigger potential through its third-party alliances.
Whole Foods is also a major partner and investor of the five-year old startup. The online retail giant bought the brick-and-mortar retailer for $13.7 billion in 2017. It did not join the latest funding round.
Instacart and Whole Foods signed the partnership deal in 2016. This made Instacart the exclusive delivery provider for most of its products. It was unclear if their agreement prohibits Whole Foods from setting up its own grocery-delivery unit.
Analysts expect Amazon to be a really tough opponent to Instacart. The two retailers might also find themselves competing on the quality of produce goods.
Food industry analyst Phil Lempert said that Instacart’s move of typically switching from contractors to permanent employees, who are trained to be expert grocery shoppers, is a good way for the company to keep its edge.
However, Lempert added that if it is unable to do that, then Instacart is likely to have a hard time.