The battle between Amazon and everyone to deliver groceries to your doorstep

Amazon’s Whole Foods acquisition gave Instacart momentum 📈

Feb 15, 2018 · 3 min read

Americans spend 15 billion hours every year shopping for groceries. Most of those people would rather be doing something else.

The demand for groceries to show up at your doorstep has been evident since 1996, when a dot-com called Webvan raised a Series A from Sequoia and Benchmark, and went public within a few years.

In 2001, Webvan went bankrupt and became the face of the Dot-com crash, along with other good startup ideas that came too early.

Fast forward to today, and Sequoia-backed Instacart just announced a massive new funding round, valuing the company at a $4.2B valuation.

Instacart plans to double their Product and Engineering teams this year, and is hiring 200 people. Check out Instacart’s open positions.

When Amazon enters your space

In June of 2017, Amazon acquired Whole Foods, giving the everything store access to hundreds of popular retail locations in major cities. The focus instantly turned to Instacart, and the next day just about every major grocery chain held an emergency board meeting.

Amazon’s acquisition of Whole Foods could have killed Instacart. Instead, it gave the five year old startup tremendous momentum.

The major grocery chains are aware of what typically happens when Amazon enters an industry, and they look at Instacart as the technology partner to power their (now non-optional) same-day delivery.

As a result, Instacart now has partnerships with 6 of the top 7 grocery chains in North America, and the company is expanding quickly.

Two approaches to making same-day delivery happen

In a way, AmazonFresh is like a more efficient Webvan, with fulfillment centers across the country, and now hundreds of Whole Foods in prime customer locations. Like Webvan, Amazon owns and operates its own fleet of delivery vans, and maintains its own inventory of groceries.

Instacart, which is now 3rd on the list of highest funded startups to come out of Y Combinator (behind Airbnb and Dropbox), has taken the Uber approach — hiring drivers as contractors, which means it doesn’t have the capital expenditure of owning it’s own fleet of delivery vans. Instacart also doesn’t carry an inventory, and offers a wide selection from all the top grocery chains in the country.

Like UberCab, which started as a high-end black car service but is now cheaper than taking a taxi in most locations, Instacart is able to leverage its platform to strike price deals with retailers. That means that the price to use the service continues to drop as the company scales, while maintaining the convenience of same-day grocery delivery.

Instacart is giving people back their time — that’s 15 billion hours that most people would like to spend elsewhere.

Fun fact: Instacart co-founder Brandon Leonardo is one of the first AngelList employees, and has the 20th commit in our code base, which is 100k+ long today. Brandon shared what it was like working at AngelList in a Reddit AMA.


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