Instacart secured $200 million in new capital in its latest funding round, which saw its valuation rise to $17.7 billion. The grocery delivery service plans to use its latest cash injection to add new features to its platform.
The San Francisco-based firm has raised $2.4 billion in outside funding since its founding in 2012.
How Instacart will Spend its $200 Million Capital Infusion
In a press release, Instacart explained it would use its latest capital infusion to develop two offerings connected to its core business.
First, the company wants to build out Instacart Enterprise, its end-to-end retailer e-commerce service. The program enables grocery stores to build their own online portals using tools developed for the transportation firm’s digital ecosystem. It began offering the solution in 2017, and it is currently used by Food Lion, Costco Canada, Wegmans, and select Heinen’s locations.
Second, the corporation will pour money into its Instacart Ads project. The service is a self-service advertising platform that lets corporations market their goods to consumers through its website. For example, the tool gives companies the ability to incentivize their products with coupons. In May, Instacart announced PepsiCo, Procter & Gamble, and Unilever are users of its new marketing channel.
Earlier this year, the corporation made a profit for the first time because of the coronavirus pandemic’s impact on society. Concerned about contracting the respiratory ailment, consumers opted to order their groceries online in droves. Given that spike in popularity, the firm is wise to seize the moment and expand its market presence.
An Increasingly Competitive Sector
Instacart’s new fundraising round also indicates the company is working to build up its war chest amid a rise in competition.
DoorDash revealed it would start taking orders for groceries in California and the Midwest in August. In addition, Uber started a pilot program to bring its Cornershop grocery service to subscribers in Dallas and Miami in July. That latter move prompted a lawsuit from Instacart, which alleged Cornershop had started using its intellectual property without authorization
The three corporations are battling over the grocery delivery market because they understand the sector’s potential.
Because of Covid-19, Instacart’s business model has suddenly become viable in the United States. At the same time, Uber’s core business took a major hit from the pandemic, and DoorDash needs to prove its value ahead of a Q4 initial public offering. The three companies would have eventually come into conflict because of the similarity of their respective services, but the pandemic acted as an accelerator.
Right now, the market is too volatile to pick which service will end up dominating the U.S. grocery delivery market. That said, Instacart’s strategy of gradually expanding its offerings while building up its cash reserves indicates it has a long-term game plan. The company also has more experience operating in the grocery market demand its rivals.
Those two factors could help Instacart become the leading grocery delivery service in the United States.