Join our Waitlist for Expert Advice!

On-Demand Grocery Startup Instacart Raises $44 Million From Big-Name Investors A cross between Peapod and Uber, Instacart allows customers to select items online from their favorite grocery stores and have them picked up and delivered by locals.

By Laura Entis

Opinions expressed by Entrepreneur contributors are their own.

As companies such as Uber and Airbnb continue to receive valuations in the stratosphere, it's easy to see why the peer-to-peer economy has grown exponentially in recent years. That said, it's a crowded market. But amongst all the noise, one new startup is managing to generate a lot of buzz.

Instacart, the Uber for grocery delivery, announced today it has raised $44 million in a Series B round led by Andreessen Horowitz with participation from Sequoia Capital, Khosla Ventures, Canaan Partners, along with notable investors including Box CEO Aaron Levie and Sam Altman, the president of the tech incubator Y Combinator. This latest round brings Instacart's total amount of capital raised to about $55 million.

The San Francisco-based company lets consumers shop from a range of stores in their area but instead of receiving groceries directly from the grocer, orders are shopped for and delivered by locals who apply to work with the service.

"An order on Instacart results in a shopper going to the grocery store you selected, picking the items on your list, and delivering them immediately to your door," Jeff Jordan, a partner at Andreessen Horowitz, wrote in a blog post, adding that often grocery orders are delivered less than an hour after they're placed.

Related: Airbnb Piloting Dinner Party Program for Complete Strangers

While Instacart says its shoppers are paid on a delivery commission (based on a variety of factors including the number of items the customer orders), The New York Times reports shoppers earn between $15 and $30 an hour.

Customers ordering with the service can expect to pay a premium for convenience -- most deliveries come with a $3.99 baked-in fee -- but Instacart makes the bulk of its money through markups, which vary by item but average about 20 percent more than store prices, according to the Times.

Because Instacart's whole model consists of someone going into a store, filling a shopping order and delivering it, the startup sidesteps big costs, such as operating warehouses and fleets of delivery trucks. Google has a similar mode with its Shopping Express service.

Instacart currently offers same-day delivery in 10 cities including San Francisco, New York, Boston, Chicago and Los Angeles. With the new round of investment, the company expects to expand to seven more cities by the end of the year and be in all major cities by the end of 2015.

Related: The Sharing Economy Holds Promise for More Goods to Be Offered at Near Zero Marginal Cost

Laura Entis is a reporter for Fortune.com's Venture section.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Business News

You Have One Month Left to Buy a House, According to Barbara Corcoran. Here's Why.

"If you are planning on waiting a year and seeing where interest rates go, you are out of your mind," Corcoran said.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Side Hustle

I Made $14,000 in 1 Week With a Spontaneous Halloween Costume Side Hustle — Here's How

Sabba Keynejad was in art school when he started to refine his entrepreneurial skills.

Thought Leaders

These 3 Trends Will Change What It Means to Be an Entrepreneur in 2025

Here are three entrepreneurship trends from the new Global Entrepreneurship Monitor report that are changing the landscape for the future.

Social Media

Stop Chasing Algorithms — Here's How Creators Can Take Control of Their Content and Monetize on Their Own Terms

Social media platforms promise creators visibility, but the real challenge lies in relying on algorithms for income.