Mar 8, 2017

Instacart CEO talks about his $3.4 billion company

Grocery delivery company Instacart today announced that it has raised $400 million in new VC funding at a $3 billion pre-money valuation, confirming a deal that Axios first reported last week. Existing shareholder Sequoia Capital led the round, and was joined by a group of new and return backers: Wellcome Trust, Y Combinator Continuity, Andreessen Horowitz, FundersClub, Khosla Ventures, Kleiner Perkins Caufield & Byers, Initialized Capital, Thrive Capital and Valiant Capital.

Axios spoke with Instacart founder and CEO Apoorva Mehta. Some takeaways:

Income statement: Instacart remains unprofitable overall, but Mehta says it becomes profitable in individual markets around six months after launch. Last year Instacart expanded from 18 to 30 markets, and this year plans to add another 30 (inclusive of five new markets already launched).

Competition: "We think about this as a two horse race: Us and Amazon... Amazon is building their warehouses to compete with the entire grocery landscape, while we're empowering the entire grocery landscape. The reason we think we have a good shot against Amazon is that customers want choice. It's the same reason why people buy Netflix even if they have Amazon Prime ― you can't get House of Cards through Amazon. We have unique product from some of the best grocery stores in the country, and grocery is really a long-tail business where selection matters."

Fine-tuning: Instacart has spent the past 15 months analyzing and tinkering with its unit economics. For example, the company wasn't collecting beverage can and bottle deposits accurately until recently, and the fix has increased gross margins by 25 cents on average deliveries nationwide. It also wasn't accurately charging sales tax, which varies by county and by item. In some markets, for example, different types of juice get taxed differently depending on their percentage of water concentration. That fix has yielded around 30 cents.

Compensation: Instacart has taken heat over changes to its contractor compensation, including the substitution of a flat delivery service fee for tips. Mehta reiterated past comments that the move has increased pay for some and lowered it for others, and that the switch has introduced more predictability and made Instacart more competitive with rivals (Uber, etc. for "shoppers" and supermarkets for in-store "pickers"). More importantly, he says that users are sent the option to provide an extra tip via either push or email notifications after the delivery is concluded.

The future: Mehta acknowledged that Instacart is open to someday operating without contractors itself, but that for now it's most cost effective to do both the picking and delivery. It has, however, done some tests with alternate structures.

Go deeper

U.S. coronavirus updates

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Andrew Witherspoon/Axios. This graphic includes "probable deaths" that New York City began reporting on April 14.

Coronavirus antibody tests are still relatively unreliable, and it's unclear if people who get the virus are immune to getting it again, the Centers for Disease Control and Prevention cautioned on Tuesday.

By the numbers: More than 98,900 people have died from COVID-19 and over 1.6 million have tested positive in the U.S. Over 384,900 Americans have recovered and more than 14.9 million tests have been conducted.

World coronavirus updates

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Axios Visuals

Mexico reported its highest single-day death toll on Tuesday, after 501 people died from the coronavirus, per data from Johns Hopkins and the country's health ministry.

By the numbers: Almost 5.5 million people have tested positive for the virus as of Tuesday, and more than 2.2 million have recovered. The U.S. has reported the most cases in the world (over 1.6 million from 14.9 million tests).

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Global: Total confirmed cases as of 9:30 p.m. ET: 5,588,299 — Total deaths: 350,417 — Total recoveries — 2,286,827Map.
  2. U.S.: Total confirmed cases as of 9:30 p.m. ET: 1,680,625 — Total deaths: 98,902 — Total recoveries: 384,902 — Total tested: 14,907,041Map.
  3. Federal response: DOJ investigates meatpacking industry over soaring beef pricesMike Pence's press secretary returns to work.
  4. Congress: House Republicans to sue Nancy Pelosi in effort to block proxy voting.
  5. Business: How the new workplace could leave parents behind.
  6. Tech: Twitter fact-checks Trump's tweets about mail-in voting for first timeGoogle to open offices July 6 for 10% of workers.
  7. Public health: Coronavirus antibodies could give "short-term immunity," CDC says, but more data is neededCDC releases guidance on when you can be around others after contracting the virus.
  8. What should I do? When you can be around others after contracting the coronavirus — Traveling, asthma, dishes, disinfectants and being contagiousMasks, lending books and self-isolatingExercise, laundry, what counts as soap — Pets, moving and personal healthAnswers about the virus from Axios expertsWhat to know about social distancingHow to minimize your risk.
  9. Other resources: CDC on how to avoid the virus, what to do if you get it, the right mask to wear.

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Updated 59 mins ago - Politics & Policy