Instacart: Growth Lessons from Seed to $39B
Highlights from ✨Hot Deal Time Machine✨⏳ -- On Clubhouse Thursdays at 8PM ET
Below are highlights from my Clubhouse episode featuring Hrach Simonian, General Partner at Canaan, on his 2012 seed investment in Instacart.
Sign up for reminders about the show ✨Hot Deal Time Machine✨ here.
⏳ The Origins: Hacking their way into YC
From Day 1, the Instacart founders had a hacker mindset - including hacking their way in to YC. This put them on the radar of investors well before Demo Day, and for Hrach Simonion @ Canaan, this relentless behavior was a positive signal of a founding team that would run through walls.
📈The Pitch: Smart phone + Car = Instacart Driver
This was one of the very first slides in the Instacart deck. In 2021 this seems like a laughably simple premise, but what the Instacart team pointed out was that the world was on the brink of a platform shift. Previous entrants like Webvan failed, in part, because of market timing and the lack of underlying infrastructure. Uber had a similar mobile platform premise and the Instacart team wanted to prove that the same could be applied to Grocery.
🏋🏻♂️The Hustle: Photographing grocery SKUs from his SF apartment
CEO Apoorva Mehta was building a new grocery service when limited infrastructure existed in the market - including online product catalogs. Rather than letting that be a barrier, Mehta went through the aisles of a cult favorite grocery chain and bought one of every single SKU, photographed it in his apartment, and created the first online grocery catalog for the retailer. Like many successful founders before him, Mehta hustled with move that didn’t necessarily scale, but that allowed Instacart to experiment and get to product market fit quickly
🤦🏻♂️ The "Oh Shit" Moment: When Amazon bought Whole Foods
Simonian recalled waking up to calls from every tech reporter in Silicon Valley the day that Amazon announced they were buying Whole Foods - all oh whom were ready to pen Instacart’s obituary. One reporter was even bold enough to ask “How do you feel about having lost all your money?” It wasn’t a surprise that Amazon would enter the grocery category, but the acquisition of Whole Foods was one that came out of left field for the team, given the size and scale of the acquisition. However, if there was any question as to whether online grocery would be a big category - it was answered that day. With the largest ecommerce player in the world entering, Instacart felt emboldened that the opportunity may be even bigger than anyone had initially imagined.
🚀 The Big Picture: Predicting the future based on 5 weeks of data
When Canaan invested at the seed round in 2012, Instacart had only been live for 5 weeks. In some cases, Mehta was even hand delivering groceries himself. But Simonian recounted that “when I heard the pitch, I knew I had to do this deal.” Uber at the time had quickly grown into a $2B valuation based on the premise of a massive market, a new platform paradigm with mobile phones, and an acute customer need. The belief was that applying that same playbook to grocery could result in potentially an even larger opportunity. While the deal was a controversial one at the time given how little traction data there was, the market opportunity paired with the relentless team made this a deal to jump on. And while that original investment memo (based off of 5 weeks of live data) anticipated a multi-billion dollar outcome, the big picture of a $39B+ business hadn’t even yet been contemplated.
👉🏼 ✨Hot Deal Time Machine✨⏳ is a 30-minute weekly Clubhouse show where we travel back in time to the early stages of some of today’s hottest deals. Hear from founders and investors on the original pitch and thesis…and how things actually played out, Thursdays @ 8PM ET
I'd love to listen, but I don't have access to Clubhouse.