Instacart raises $400 million at a $3.4 billion valuation to deliver groceries on-demand

Grocery delivery startup Instacart has raised approximately $400 million in a new round of venture funding at a valuation of $3.4 billion according to sources familiar with the deal. Axios broke news that Instacart was in talks to close this mammoth venture deal last week. Instacart executives declined to comment for this story.

Over the past year, Instacart has weathered controversies after raising prices for consumers and cutting rates for its workers. Previously, the startup raised around $260 million in venture funding at a reported $2 billion valuation.

Some of its competitors have faltered significantly since Instacart last raised a round of venture funding. For example, Good Eggs went through a change in leadership, layoffs and general belt-tightening. And in India, a major ridesharing operator called Ola axed its grocery delivery service entirely.

So far, Instacart has been operating within the US only, where consumers spend over $727 billion annually on food for consumption at home according to the most recent available data from the U.S. Department of Agriculture.

Instacart’s Aporva Mehta speaks at TechCrunch Disrupt in San Francisco.

As TechCrunch has previously reported, Instacart’s revenue-generating business is not just what it seems on the surface. The company generate revenue by charging customers a mark-up on groceries, plus a delivery fee for the items that they order to be picked up in stores, packed and delivered to their door within an hour.

However, Instacart also generates revenue from consumer packaged goods brands who pay the startup to advertise on its platform, much like brick and mortar groceries will charge brands slotting fees to display their products prominently on supermarket shelves.

Bloomberg reported that Sequoia Capital led Instacart’s new round of funding. Instacart launched via the Y Combinator “startup factory” in 2012. Other investors have included Andreessen Horowitz, KPCB and reportedly Whole Foods. Whole Foods Markets, and CostCo supermarkets have both made room in their stores to accommodate Instacart’s personal shoppers, including with “express lanes,” where they can quickly pay for groceries.

Emerging competitors to Instacart include companies like Shipt, Postmates and StorePower. They may be hard-pressed to raise funding following this round. Instacart is likely to be able to outspend competitors for a good long while given this latest cash infusion.

— Ryan Lawler contributed additional reporting.