BrokerDealer.com/blog update courtesy of extracts from today’s NYT DealBook.
Companies like Uber and Airbnb have prospered by allowing people to sell their services to strangers on a smartphone-powered network.
Now venture capitalists are betting that a young start-up can use that principle to achieve success in the grocery business.
Instacart, a two-year-old grocery delivery company, announced a $44 million round of financing on Monday led by Andreessen Horowitz. Three venture capital firms that previously invested in the company, Sequoia Capital, Khosla Ventures and Canaan Partners, participated in the latest round.
The company, which is based in San Francisco, lets customers shop online from grocery stores in their area. The orders are filled by other people who have signed up to be shoppers and who receive a cut of the delivery fees. Information about a store’s inventory comes from store managers and from the shoppers. The company says it can have groceries delivered within an hour.
Jeff Jordan, a partner at Andreessen Horowitz, said he was attracted to Instacart because it was a “people marketplace.” He said the company had an advantage over other grocery delivery services, including FreshDirect, because it did not rely on warehouses, trucks or other capital-intensive infrastructure.
“Grocery is the single largest category of retail in the United States and is virtually undigitized at this point,” Mr. Jordan said in an interview. “There is an enormous opportunity if someone can figure it out.”
The founder of Instacart, Apoorva Mehta, previously worked at Amazon in the “fulfillment” division, which oversees the delivery of orders from warehouses to customers. After starting in San Francisco, Instacart has expanded to 10 cities across the country, Mr. Mehta said.
The full article can be found at NYT DealBook.