Few companies had as good a pandemic run as Instacart. The company’s service saw huge demand gains, leading to waves of venture capital interest.
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From a late 2018 funding cycle that valued the U.S. grocery delivery company at around $7.9 billion, per PitchBook data, Instacart went on to raise $325 million at a $13.8 billion valuation in July 2020. The pandemic sent many folks home — and to their phones to order foodstuffs — to Instacart’s benefit.
But that was just the start. PitchBook indicates that Instacart raised again in October 2020, adding $200 million more to its accounts at a $17.7 billion valuation. And then in March 2021, Instacart raised a further $265 million at a valuation of around $39 billion. (You can cross-check the PitchBook data with Crunchbase here, if you’d like.)
Few startups reach the $1 billion valuation threshold. Far fewer make it to the $5 billion mark before going public. And only a true handful get to $10 billion or more. A nearly $40 billion pre-money valuation is stupendous, and puts immense pressure on the company to generate the sort of numbers that public-market investors will expect from a richly valued tech company.
But it turns out that Instacart is seeing its growth rate plateau in 2021, per reporting at The Information. What’s going on?
Instacart’s growth
The Information’s Berber Jin reports that after Instacart tripled its revenues to $1.5 billion in 2020 when compared to 2019, its growth rate has moderated to around a 10% rate this year. Though, she adds, the company’s Q3 revenue growth was doing better, up around 20% on a year-over-year basis. [Update: This paragraph updated to reflect the correct author of The Information’s piece.]
The Exchange reached out to the company about the various data points, but it declined to comment on the record.
After reading Clark’s piece, I decided to collect information from the company’s various competitors. Let’s talk about Amazon, Walmart, DoorDash and Uber, companies that may be snacking on Instacart’s core business.
Competition
Data compiled by Second Measure is always useful for learning about consumer spending habits, within limits. While Second Measure is brilliant when it has the data you need, it at times cannot parse out all the information we’d hope for.
Regardless, the consumer spending observer does have data comparing Instacart spend and Walmart Grocery spend. Both saw their fortunes spike when the pandemic hit, but Second Measure indicates that Instacart’s numbers have essentially flatlined from early-2020 levels. This data set fits into what The Information reported.
However, Second Measure’s data set doesn’t include grocery delivery results from Amazon, DoorDash or Uber Eats because those payments are “indistinguishable” from other consumer buys through those services, so they are not counted or displayed.
We have to learn from the companies themselves instead. Let’s see what we can pick up from Uber and DoorDash, thankfully now public companies, therefore allowing us a greater window into their results.
Here’s Uber in its most recent earnings call talking about its larger delivery business:
Outside food delivery, we’re increasingly tapping into consumers’ growing appetite for the on-demand delivery of, well, everything. Today, we’re focused on addressing grocery, convenience and alcohol through our marketplace, bolstered by the addition of Cornershop and most recently, Drizly, through the Uber platform.
Uber is going broad — grocery, alcohol, convenience — and global with its delivery goals.
DoorDash is similar. Here’s the company during its recent earnings call:
Our priorities still remain: first, to build the number one food app in the U.S.; second, to continue adding multiple categories beyond food and expand into convenience, grocery, pet food, retail and so on.
Additionally, DoorDash is buying Wolt for $8.1 billion, expanding its geographic footprint and adding more markets where it can handle grocery delivery, even if that is only a portion of its business.
Mix in Amazon’s never-ending struggle to dominate all digital commerce in markets where it operates, and the number of megacompanies that are chasing Instacart appear legion. That could explain why Instacart is struggling to grow more quickly today.
One more thing: What did we expect to happen? Instacart posted bonkers-good revenue growth during the pandemic; surely that soufflé could only rise once?
More to the point, I am not irked that Instacart is not growing faster today. After all, the fact that it is growing at all in 2021 means that it has held onto all of its 2020 gains — and then some. Not bad! But investors who pushed its valuation up to $39 billion from $7.9 billion in about a year and a half might be less enthused by the results. You don’t add more than $30 billion in value to a company in 35 months and not expect it to keep growing like a proverbial garden pest.
Instacart has the advantage of focus, I suppose. It is best known for one thing, while its rivals are expanding more laterally into its market. That may help. But Instacart needs to get its growth rate up one way or the other. Perhaps advertising will prove the lucrative market that it anticipates.
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