(Bloomberg) — Instacart Inc. raised new financing at a $2 billion valuation, according to a person close to the startup, adding to the grocery-delivery service’s cash pile as it plans to expand to new U.S. cities.
The valuation is attached to a $220 million fundraising led by venture capital firm Kleiner Perkins Caufield & Byers. Comcast Ventures, Dragoneer Investment Group, Thrive Capital, Valiant Capital and existing investors Andreessen Horowitz, Khosla Ventures and Sequoia Capital also participated in the funding round.
The deal punctuates what has been a fast rise for the same-day delivery startup. The company was founded in July 2012 by entrepreneur Apoorva Mehta and has since raised $275 million. Revenue at Instacart, which partners with retailers including Whole Foods Market Inc. and operates in 15 cities, jumped more than 10fold last year and doubled in the fourth quarter alone, the company said, without disclosing underlying numbers. Its workforce has also more than doubled to 100-plus.
Instacart faces a crowded market, with giant web companies including Amazon.com Inc. and Google Inc. boosting their own delivery services and rival startups such as Postmates Inc. and DoorDash Inc. also raising venture capital. The crop of delivery companies represent a sort of do-over for Silicon Valley, after companies like Kozmo.com Inc. and Webvan Group Inc. imploded in the crash of the dot-com investment market more than a decade ago.
Mehta says Instacart can avoid cost overruns of past same-day delivery companies and fend off competitors because it’s focused on building technology and teaming up with grocery stores, rather than amassing inventory of its own. Instacart also works with independent contractors, instead of employing a large number of delivery people.
“Amazon’s model is built on building warehouses, owning trucks, owning inventory, and that really puts it at a big disadvantage,” Mehta says. “Instacart is primarily a software company. We’re building software for our shoppers. We’re building software for our retail partners.”
Instacart also plans to expand into new delivery categories, Mehta says, declining to offer specifics.
Michael Moritz, a partner at Sequoia, said the venture firm had a “bitter experience” years ago with delivery firms when it invested in Webvan. Yet Instacart’s focus on technology and keeping costs down has changed his mind.
“I never thought for a moment that we would be back in the online grocery business because of everything that had gone wrong” with Webvan, he says. “But step-by-step we convinced ourselves that the models that Apoorva had designed, that Instacart was promulgating, make economic sense.”