Inside the Deal: Instacart's Biggest IPO Winners

September 19, 2023
Startup Investing

Welcome to our weekly Inside the Deal series, where we take a deep dive into the early investors of trailblazing companies. 

It has been a few months since we covered the Instacart Mafia. After a lot of waiting and delays, Instacart finally went public, so we dug up some data on the first investors who decided to bet on Instacart.

Instacart went public this Monday, pricing its IPO at $30 a share, surpassing the earlier projection of $26 to $28, which is a 7% to 8% increase in share price. It's raised $660 million in its IPO.

The graph below illustrates Instacart's major investors and the price of each funding round.

But how did it all start?

One of Instacart's co-founders, Apoorva Mehta, had a revelation about the inefficiencies of traditional grocery shopping. The time-consuming trips to the store, the maze-like aisles, and the endless checkout queues—Mehta saw all of this as a problem technology could solve.

In his mind's eye, he envisioned a future where customers could have groceries delivered to their doorstep on demand. To validate this vision, Mehta made some personal experiments, timing the entire grocery shopping process.

His experiments ultimately led to his partnership with co-founders Max Mullen and Brandon Leonardo, two individuals with the technological and operational prowess to bring this vision to life.

Fast forward to the present, and Apoorva Mehta announced that after Instacart goes public, he'll be stepping away from the company within a week. You can read the original tweet here. 

Notably, Mehta is set to reap more than $780 million from the listing, while one of the prominent investors, Sequoia Capital, stands to profit over $1 billion.

Y Combinator

Instacart initially faced rejection from Y Combinator, but Mehta's persistence got them in eventually (after they applied too late).

Investment amount: $75,000 in the seed round + 30 million in Series D
Value of stake at IPO: $54 million

Initialized Capital

Garry Tan, founder of Initialized Capital and a partner at Y Combinator, also decided to write down a check in Instacart's seed round.

Investment amount: $150,000 in the seed round
Value of stake at IPO: $17 million

Khosla Ventures

Khosla Ventures convinced Mehta to add a valuation cap to the convertible note during the seed round. They later participated in the Series B and C rounds. The theoretical return on their investment is an impressive 4,580%.

Investment amount: $6 million
Value of stake at IPO: $277 million

Canaan Partners

Canaan Partners recognized Instacart's alignment with the on-demand economy and invested in the seed note, followed by participation in the Series B and C rounds.

Investment amount: $2.6 million
Value of stake at IPO: $196 million

That's a theoretical return of 7,579%.

Sequoia Capital

Sequoia Capital was one of the early investors in Instacart, putting about $8 million in its Series A round. They continued to support the company through subsequent rounds. The theoretical return on their $300 million total investment is around 359%.

Investment amount: $300 million
Value of stake at IPO: $1.4 billion

Kleiner Perkins

Kleiner Perkins was supposed to initially lead Instacart's Series B round, but Mehta was concerned that Kleiner Perkins partner, Doerr, sat on the board of directors at Google, which had recently launched its own same-day delivery service that Mehta saw as a potential threat.

Instead, Kleiner Perkins led the next round of funding, in a deal led by Meeker in 2015.

Investment amount: $55 million
Value of stake at IPO: $109 million

Andreessen Horowitz

Instacart caught the attention of Jeff Jordan, a partner at Andreessen Horowitz, after expanding to 10 cities in the US by 2014.

According to sources cited by The Information, Jordan, who joined Instacart’s board, beat out several other firms interested in leading the Series B round—including Greylock Partners, DFJ, Menlo Ventures and Redpoint Ventures.

Andreessen Horowitz invested around $16 million in Instacart's Series B round in 2014. They continued to invest in subsequent rounds.

Investment amount: $126 million
Value of stake at IPO: $254 million

Coatue Management

In response to competition from Amazon purchasing Whole Foods, Instacart raised about $200 million from Coatue Management in 2018.

Investment amount: $225 million
Value of stake at IPO: $302 million

Investors found Instacart to be an attractive investment for a few key reasons:

Market opportunity: The grocery industry represents a massive market with consistent demand. Investors recognized that consumers would increasingly turn to online grocery shopping and delivery services, making Instacart's business model highly relevant.

Experienced leadership: Apoorva Mehta, the founder and leader of Instacart, had a background in e-commerce and had previously worked at Amazon. His experience and vision for the company instilled confidence in investors.

Early mover advantage: Instacart was one of the early pioneers in the online grocery delivery space. Investors saw the value of being an early mover in an industry poised for growth.

Partnerships: Instacart established partnerships with major grocery chains and retailers, including Whole Foods, Costco, and Safeway. These partnerships allowed Instacart to offer a wide range of products and tap into established customer bases.

Scalability: The platform's scalability was attractive to investors. Instacart could expand its services to new cities and regions relatively quickly, thanks to its flexible model of connecting customers with personal shoppers.

Changing consumer behavior: Investors recognized the shift in consumer behavior toward online shopping, especially for groceries, driven by convenience and changing lifestyles. This shift aligned with Instacart's mission.

Network effects: As more customers and retailers joined the platform, Instacart benefited from network effects, where the service became more valuable as its user base grew.

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