American Express Ventures, the corporate venturing unit of the eponymous financial services company, has tapped into what could be one of the fastest growing consumer IT investment stories in the past year, Instacart. Its move into the convenience grocery delivery segment has helped it win the sub-$50m investment award, highlighting new ways that financial services companies can strategically tap into the disruption of the retail sector.
Same-day grocery delivery app Instacart, now reportedly valued at $2bn, is expanding rapidly across the US and has been approached by Apple to partner its Apple Pay service, in order to help expedite Instacart payments for users making orders from Apple’s smartphone, tablet or desktop devices.
Founded in San Francisco in 2012, Instacart is seeking to reinvent the grocery shopping space. It enables users order groceries from a variety of stores through its app that are are then delivered to the customer’s home on the same day by crowdsourced personal shoppers.
Instacart raised $44m in a June 2014 series B round in which American Express Ventures invested along with Sam Altman, Aaron Levie, Canaan Partners, Khosla Ventures, Sequoia Capital and Andreessen Horowitz.
The company’s rapid growth since then was illustrated by the completion of a $220m series C round in early 2015 led by Kleiner Perkins Caufield & Byers that also featured Comcast Ventures, the corporate venturing unit of cable and telecommunications service provider Comcast, Dragoneer Investment Group, Thrive Capital, Valiant Capital, Andreessen Horowitz, Khosla Ventures and Sequoia Capital.
Instacart claims it increased revenue tenfold over the course of 2014, doubling it in the fourth quarter alone. It operated in 15 US cities as of January 2015, and is signing on more contract personal shoppers and retailers all the time.
The company now has more than 4,000 personal shoppers, who work as independent contractors, shopping for and delivering customer orders in as little as one hour. It holds no inventory and does not have the added overheads of warehouses or trucks.
Instacart charges $3.99 for two-hour delivery and $5.99 for one-hour delivery if users spend $35 or more. It also offers a premium membership service for $99 per year and has set up a price transparency service to show shoppers which shops offer the best deals for their selected items.
The company is also actively finding new delivery campaigns. In February 2015, Instacart and grocery chain Whole Foods teamed up for Valentine’s Day to deliver flowers to customers’ doors in less than an hour, with prices starting at about $25.
Shortlist
Kabbage – UPS Strategic Enterprise Fund, Softbank Capital, BlueRun Ventures
Verdezyne –Sime Darby, BP Ventures, DSM Venturing
Instacart – American Express Ventures
Udacity – Bertelsmann, Recruit and Cox Enterprises
Veracode- Symantec, In-Q-Tel, Rovi
