Instacart Raises $8.5 Million to Offer Same-Day Grocery Deliveries Nationwide

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Name: Instacart

One-Liner Pitch: Instacart aims to solve the problem of same-day grocery deliveries.

Why It's Taking Off: The startup crowdsources grocery deliveries to cut down the operational costs and limitations that have plagued other same-day delivery services.

Amazon has operated a same-day grocery delivery service for the past six years, and recently expanded into its second city. Now, one startup thinks it can do a better job — and it just happens to be run by a former Amazon employee.

Apoorva Mehta worked as a supply-chain engineer at Amazon from 2008 to 2010, dealing with the company's fulfillment process. While there, he started to recognize problems with Amazon Fresh, the company's grocery delivery service, which he chalked up to the fact that it operated on a "conventional model."

"The inventory they had was only what they had in the warehouse itself," Mehta told Mashable in an interview. "The selection, the price and the convenience were just off in my opinion."

So two years after leaving, Mehta set out to work on an alternative to the grocery services created by Amazon, FreshDirect and others. The result is Instacart, a mobile app and website that launched late last year in parts of California. Customers can shop for groceries from Safeway, Trader Joe's, Whole Foods and Costco, and request to have items delivered that day or even within the hour.

What sets Instacart apart from similar services is that it crowdsources deliveries by training a fleet of personal shoppers.

Anyone with a smartphone and a car is eligible to apply. The startup then conducts background checks and interviews on the applicants, and trains those who are approved to spot ripe produce, pick out milk that is least likely to expire and more. These shoppers are even provided with an alternate version of Instacart's app, which shows where items are located in particular grocery stores.

"The goal we have is that our shoppers will be able to pick produce better than you can when you go to the store," Mehta said.

Instacart announced Wednesday that it raised an $8.5 million Series A round led by Sequoia Capital, with participation from Khosla Ventures and Gmail creator Paul Buchheit. The funding is even more notable in that it features Michael Moritz, chairman of Sequoia and a former board member of Webvan, a grocery business that imploded during the dot-com era.

"Having been involved in Webvan, Sequoia is painfully familiar with what it takes to be successful in the grocery-delivery business. Until we encountered Instacart, we had still been receiving outpatient therapy for our Webvan fiasco," Moritz said in a statement.

He added that he felt more confident about Instacart's prospects thanks to the proliferation of smartphones — making it easier to order on-the-go — and the use of crowdsourcing to reduce infrastructure costs.

The plan is to use the funding to expand Instacart's service into 10 cities nationwide by the end of 2014. Mehta also said that he's open to expanding the delivery service to non-grocery items, but he won't say which.

Since launching last year, Instacart has delivered "millions of items," according to Mehta, and currently has about 150 personal shoppers actively delivering groceries to customers.

Image courtesy of Flickr, qmnomic