instacart raises $200m more at a $17.7b valuation

Instacart today revealed it has secured $200 million in a new investment round with participation from existing investors. The investment was spearheaded by D1 Capital and Valiant Peregrine Fund. Following this funding, Instacart’s valuation has reached $17.7 billion post-money, or $17.5 billion pre-money. According to a company blog post, these funds will be allocated to the development of innovative features and tools designed to enhance the customer experience, as well as to further strengthen Instacart’s enterprise and advertising divisions.

Earlier in 2020, Instacart completed funding rounds of $100 million in July and $225 million in June. The June round established a company valuation of approximately $13.7 billion, indicating that this latest funding was secured at a significantly increased valuation in a relatively short timeframe.

Instacart, similar to other technology and technology-driven companies, has experienced a surge in demand for its services during the recent pandemic. A clear correlation can be drawn between the COVID-19 situation and the company’s performance, as individuals prioritizing staying home have increasingly utilized on-demand services for safety and convenience.

The expansion observed in Uber’s food delivery service provides a parallel illustration of this prevailing trend.

Since its 2018 Series F funding round, when the company was valued at around $7.9 billion, Instacart’s valuation has more than doubled. The speed at which Instacart has generated financial value is noteworthy, although the timing and details of its potential IPO remain uncertain, and the extent to which its pandemic-related gains will persist after the pandemic subsides is currently unknown.

The company notably achieved profitability for a month during the second quarter, reporting approximately $10 million in earnings, as reported by The Information. However, the same report indicated a loss of around $300 million for the entirety of 2019. The company’s overall profitability for the full year remains to be seen.

TechCrunch submitted several inquiries to the company, including questions regarding any additional profitable months in 2020 and the rate of growth experienced in the third quarter of 2020. Company representatives did not respond to these specific questions.

“This investment reflects the strong confidence our current investors have in our teams and the vital role Instacart plays for customers, partners, and the broader grocery industry,” stated Instacart CEO Apoorva Mehta in a press release. “I am immensely proud of our team’s efforts to scale our operations this past year and effectively meet the unprecedented consumer demand and growth we’ve experienced.”

Instacart is currently involved in a legal and regulatory dispute following the passage of AB5 in California, which altered the state’s classification of gig workers. A ballot proposition – Prop 22 – which aims to maintain the classification of rideshare and delivery drivers as independent contractors, is scheduled for a vote in California. Instacart supports this proposition, alongside Uber, Lyft, DoorDash and Postmates (which is now part of Uber).

Uber, Lyft, Instacart and DoorDash have collectively contributed $184,008,361.46 to the Yes on 22 campaign. These contributions have taken the form of monetary donations, in-kind support, and loans. In September, each of the four companies pledged an additional $17.5 million to the Yes on Prop 22 campaign through monetary contributions. According to California’s Fair Political Practices Commission, Yes on Prop 22 has received the largest amount of funding of any measure on the November ballot.

In addition to the Prop 22 issue, Instacart is facing a lawsuit filed by Washington, D.C. District Attorney General Karl A. Racine, alleging that the company imposed “deceptive service fees” on customers, resulting in millions of dollars in overcharges, and failed to remit hundreds of thousands of dollars in sales tax. The lawsuit seeks compensation for affected customers, as well as the recovery of back taxes and associated interest owed to D.C. The complaint specifically claims that Instacart misled customers into believing the 10% service fee was a gratuity for the delivery personnel, between September 2016 and April 2018.

Simultaneously, amidst the pandemic and the California wildfires, workers have requested personal protective equipment, increased compensation, and, most recently, disaster relief assistance.