$400 Million Richer By Pinching Pennies

Issue 03-20-17   |   Reviewer:   Michael S. Raisinghani, Ph.D.


Instacart allows customers to shop through an app at local grocery stores. Orders are then picked off shelves and delivered by Instacart workers, who are a mix of part-time employees and independent contractors. The startup is working to increase ad revenue as it tries to prove it’s the exception in a field of delivery-app failures. With an added $400 million of venture funding capital, the San Francisco-based company’s valuation has risen to $3.4 billion.

Its founder is enacting penny-pinching moves as part of a new strategy designed to show investors that Instacart can rise above the pile of on-demand startups that have bled venture capital. The company also wants to demonstrate that it’s taking in more revenue while spending less. Instacart cut its burn rate by more than half in 2016 by focusing on the bottle deposit and sales tax adjustments and by driving down “time per delivery” metric. For inspiration, the company filmed its most efficient shoppers to learn what they did differently and then taught those lessons to new recruits. Quicker deliveries translate not only into happier customers but cost savings resulting from higher productivity. Mollie Stone’s, a San Francisco-area grocery store, said it pays Instacart a flat fee per order, which works out to 8 percent to 10 percent of an average sale.

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