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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

Updated 28 mins ago - Science

Nor'easter slams East Coast with flooding rain and powerful winds

A residential area in Middlesex County as floodwater from the nor'easter covers streets in New Jersey on Tuesday. Photo: Tayfun Coskun/Anadolu Agency via Getty Images

A monster storm was slamming the Northeast with record rainfall and powerful winds over Tuesday night — causing flash flooding that resulted in people having to be rescued in New Jersey and New York roads to close.

Threat level: All of southern New England westward to New York City and northern New Jersey was under the threat of flash flooding and coastal flooding from the nor'easter through Tuesday night into early Wednesday, per the National Weather Service.

Updated 3 hours ago - World

Brazil senators vote to recommend criminal charges for Bolsonaro

Brazilian senators vote on probe into President Bolsonaro's handling of pandemic. Photo: Gustavo Minas/Bloomberg via Getty Images

A Brazilian Senate committee Tuesday voted to approve a report recommending President Jair Bolsonaro be charged with a raft of criminal indictments, including crimes against humanity over his response to the COVID-19 pandemic, per AP.

Why it matters: Bolsonaro has become the face of a right-wing approach to the pandemic that includes repudiating vaccines and masks and resisting lockdowns and other mitigation measures. The Senate report holds him personally responsible for half of the country's 600,000 deaths.

Former Georgetown tennis coach pleads guilty to accepting admissions bribes

Gordon Ernst (left) former head tennis coach at Georgetown, outside a courthouse in Boston in 2019. Photo: Jessica Rinaldi/The Boston Globe via Getty Images

A former Georgetown University head tennis coach has pleaded guilty Tuesday to bribery charges related to facilitating the admission of prospective applicants.

Why it matters: Gordon Ernst solicited and accepted bribes from William Singer, ringleader of the cheating scheme uncovered by Operation Varsity Blues, and families in exchange for helping prospective applicants get into Georgetown as student athletes, according to the Justice Department.