On-Demand Grocery Startup Instacart Raises $44 Million From Andreessen

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On-demand grocery delivery startup Instacart wants to make its service available in every city in the United States. To make that happen, it’s raised $44 million in Series B funding led by Andreessen Horowitz. Along with the funding, a16z partner Jeff Jordan will be joining the company’s board.

The deal was put together just about a year after its last round of funding. Altogether, Instacart has raised about $55 million from investors that also include Sequoia Capital, Khosla Ventures, and Canaan Partners, along with Box CEO Aaron Levie, and Y Combinator president Sam Altman.

The new funding comes as Instacart has seen huge growth both in its revenues and also the number of cities it operates in. Over just the past nine months, revenue has grown 15x.

Much of that growth comes from a huge number of new markets in which Instacart is available, as the company is in the midst of serious expansion across the U.S. You can now use the grocery delivery service in 10 cities across the country, including San Francisco, Austin, Boston, Chicago, Los Angeles, New York City, Philadelphia, San Jose, Seattle and Washington, D.C.

According to co-founder and CEO Apoorva Mehta, nearly every city that it’s launched in has grown more quickly than the last. With that in mind, it’s moving full-steam ahead in launching new markets. The company expects to have operations in a total of 17 U.S. cities by year end, it hopes to be in all major U.S. cities by the end of 2015.

Instacart is able to do that since it has a crowdsourced, marketplace model for connecting users with personal shoppers who pick up and deliver groceries to them. It takes less than six weeks for Instacart to get a new city up and running, according to Mehta.

That comes in contrast to many companies that have sought to change the way people got their groceries, but did so by building out warehouse and other delivery infrastructure. The ability to move and launch quickly will be a key advantage of Instacart, particularly as companies like Google and Amazon use the warehouse model to build their own local delivery services.

As it seeks to expand, the company will be looking to new board member Jeff Jordan for advice. Jordan and a16z are also investors in Airbnb, and he previously served as president and CEO of OpenTable. That combination of marketplace and local experience could be hugely beneficial, as Instacart operates in both those worlds.

Meanwhile, Andreessen Horowitz saw a huge opportunity to invest in a fast-growing company that has a huge market opportunity ahead of it. “The largest single retail category in the U.S. is grocery, and it’s the category that’s been least touched by technology,” Jordan told me by phone.

He noted that all of the biggest investments to-date had been full-stack, with businesses paying for warehouses, delivery trucks, and driver salaries. In contrast, he said, “Instacart is leveraging an army of people who already have cars and smartphones.”

Now it’s just a matter of getting that army into more markets through the U.S. The funding should help.