Instacart nabs nearly $14 billion valuation in new funding round
Instacart has raised a new round of financing that makes it one of the most valuable private companies in the U.S., leapfrogging DoorDash, Palantir and Robinhood.
Amid surging demand for grocery delivery due to the coronavirus pandemic, Instacart has raised $225 million in a new funding round led by DST Global and General Catalyst. The round increases Instacart’s valuation to $13.7 billion, up from $8 billion when it last raised money in 2018.
“COVID-19 created a massive shift for the grocery industry and forever changed how people view the necessity of on-demand services,” Instacart founder and CEO Apoorva Mehta said in a press release. “Overnight, Instacart became an essential service for millions of families across North America”
Mehta said the new round will fund support for shoppers and partners and further expand initiatives in advertising and enterprise.
As the pandemic led to country-wide lockdowns, Instacart’s share of the grocery delivery market surged. According to research firm Second Measure, which tracks credit card spending, Instacart’s share of grocery pickup and delivery sales jumped to 55% in the third week of May, up from about 30% in February, pushing past Walmart and making it the biggest player in the space. Instacart hired an additional 300,000 workers between March and April to meet the surging demand, and plans to hire at least 250,000 more.
The latest funding round comes amid growing unrest among Instacart’s shoppers, who are classified as independent contractors. During the coronavirus pandemic, they have been on the frontlines as essential workers, but do not have the protections or benefits that full employees are entitled to, including employer-sponsored health insurance.
In late March, a group of in-store shoppers organized a strike to protest what they considered to be the grocery delivery app’s inadequate response to the outbreak. Presumptive Democratic presidential nominee Joe Biden pledged his support, writing on Twitter: “Instacart needs to step up and give their workers the protections and pay they need and deserve.” Sen. Bernie Sanders (I-Vermont) echoed Biden, citing Instacart’s previous valuation and exhorting the company to meet shoppers’ demands.
The following week, Instacart rolled out health and safety kits — which included a reusable cloth face mask, hand sanitizer and a thermometer — but the move came two weeks after many cities across the country enacted shelter-in-place restrictions. Instacart has also provided up to 14 days of paid sick leave to workers diagnosed with the coronavirus, but in-store shoppers continue to push for more — including hazard pay of $5 per order.
Scrutiny of shoppers’ treatment has risen further in recent weeks, as Instacart has also come under fire for how it handles customers’ tips. CNN reported in April that some customers on the platform were engaging in tip baiting, by enticing shoppers with a large tip and then removing it once the order was delivered.
In late May, four senators sent a letter to the Federal Trade Commission, urging regulators to investigate tipping practices at Instacart and other grocery delivery apps. Last month, Instacart unveiled changes to its policy, shortening the window a customer can alter their tip from three days down to 24 hours. The company is also requiring that customers leave feedback when they do remove or change tips.
“For the benefit of all shoppers on the platform, we are now deactivating any customer who consistently and egregiously engages in this type of behavior,” Instacart said.
Aside from shopper concerns, some analysts also worry about whether the company can continue its momentum following the coronavirus-induced surge in demand.
As cities and states across the country begin to reopen, a survey last week by investment firm Stifel suggests that the eating-at-home trend may have hit its apex. Researchers found that 63% of consumers responded they are eating or cooking at home more often. And, while that tracks with levels in early March, it’s below the peak levels we saw in April, when a large swatch of the country was under shelter-in-place orders.