Groceries from strangers: Instacart poised for expansion

Crowdsourced grocery delivery provider Instacart is expanding its same day and one-hour service to new markets after receiving $44 million in funding from some big name Silicon Valley investors.

Instacart employs a crowdsourced model of “Personal Shoppers” who provide their own transportation and smartphones to shop and deliver groceries to customers. The company said it would use the additional $44 million to fund geographic growth beyond its 10 existing markets, improve the customer experience, experiment with new delivery models and improve the proprietary Instacart technology. The company currently operates in San Francisco, Austin, Boston, Chicago, Los Angeles, New York City, Philadelphia, San Jose, Seattle and Washington, DC. It expects to be in 17 markets by year end.

"We've proven out our model in 10 cities across the U.S., and it works," said Instacart founder Apoorva Mehta. "Instacart's customer base in every city is growing by double digits monthly, and we've developed a great playbook for geographic expansions. This funding will enable us to expand even more quickly and establish a wide, national footprint over the next 18 months."

The $44 million in Series B financing was led by the firm of Andreesen Horowitz. Existing investors Sequoia Capital, Khosla Ventures and Canaan Partners also participated in the round along with Aaron Levie, CEO of Box, and Sam Altman, President of Y Combinator, who made personal investments, according to the company.

"As we think about the future of e-commerce, groceries are among the last huge untapped opportunities. While many have tried to crack the code, few have met with success," said Jeff Jordan, a partner at Andreessen Horowitz. "However, mobile is enabling a new way to tackle digital grocery distribution through an execution that I refer to as 'People Marketplaces.' This is Instacart's approach, and we're betting it will be the winning play. We are excited to partner with Apoorva and team as they seek to have software eat grocery delivery."

The company said its infrastructure-free, crowdsourced model enables it to expand into a new city in just two to three weeks, versus six to nine months for competitors who rely on traditional warehouses, company-owned trucks and full-time drivers. After opening an account at www.Instacart.com, customer receive free delivery on their first order of $35 or more. The company also offers an Amazon Prime like service called Instacart Express where for an annual fee of $99 there is no delivery charge for orders above $35.