$100m revenue is impressive. But what are the gross margins on that?
Instacart (YC S12) Scores $220M Investment
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Re: Instacart (YC S12) Scores $220M Investment
#12As someone moving from the Central Valley in Ca to Portland in the next few months...this is exciting to hear, I've been pretty excited to get to use this service.
Instacart is still fairly expensive here in Portland. If you're living in the city proper you should have a grocery store located If you're in the suburbs it might be worth it.
Re: Instacart (YC S12) Scores $220M Investment
#13Congrats to the Instacart team! I love what they are doing. Their app has a great user interface and the service is fast and easy to use. It's definitely interesting to see that the world is finally ready for something like this, because Webvan (I know it's brought up a lot) didn't do so hot back in the day. We obviously have the technology now that we lacked 10 years ago to make something like this a major success.
Is the difference technological or cultural? In other words, what different technology do we have now that would have enabled Webvan to succeed? To me it seems that the most marked difference is the consumer culture and comfort with online buying.
Let's not forget the most simple and obvious answer: browsing the internet was slow back in the day. When I was living in NYC during the Kozmo/Urbanfetch era it would be 20-30 seconds or so to load a product page, then you'd have to add something to the cart, which took awhile, and so on. Images were crappy and small, pages took forever to load, websites just in general didn't work all that well, core principles of UI/UX we take for granted now hadn't really been settled yet. And I had DSL, most at the time had dial-up.
Ordering things online back then was really annoying, and the grocery type order, with lots of little things that are kind of hard to browse and sort (a problem Instacart still struggles with today to be honest) made it especially annoying for this kind of service. And I was a tech minded person who wanted it to work and wanted to use it.
Online browsing and buying was really tedious, it's easy to forget just how much so.
Re: Instacart (YC S12) Scores $220M Investment
#14[deleted]
Re: Instacart (YC S12) Scores $220M Investment
#15$100m revenue is impressive. But what are the gross margins on that?
Obviously hard to tell, but you can extrapolate a bit.
At $100mm in revenue, and an assumed $60 order price, you've got 1.6mm orders. Assuming 25% of people pay for faster delivery, you've got gross revenue per order of $4.50, or gross revenue of $7.2mm. If Instavart takes a 30% share (similar-ish to Uber and iTunes), you're looking at $2.2mmin revenue after paying contractors.
So that would leave you with 2.2% of sales as your margin after contractors. This obviously changes if they mark up the groceries or if the assertions are different.
Out of interest, a 15 P/E on 2bb would correspond to a 60x grow in their market (ish). They currently represent about 100mm of Whole Foods 15bb take, or about 0.67%. A 60x increase would take them to managing 40% of Whole Foods orders, given no expansion into other grocery chains.
This is a lot of hand-waving, so please take it with a grain of salt.
Re: Instacart (YC S12) Scores $220M Investment
#16This company does the little things right, and people notice. I think faster internet + smartphones are necessary but not sufficient in explaining Instacart's success.
I live in a place with an entrance not visible from the street. The first time I ordered, I directed the shopper over the phone. Every subsequent shopper has found the entrance without a problem. I assume the shoppers share accurate notes. Literally every other delivery I get requires a phone call and directions. These little things make a huge difference, and are where similar companies with the same potential technology fall short.
Congrats to the team. Well deserved.
Re: Instacart (YC S12) Scores $220M Investment
#17Congrats to the Instacart team! I love what they are doing. Their app has a great user interface and the service is fast and easy to use. It's definitely interesting to see that the world is finally ready for something like this, because Webvan (I know it's brought up a lot) didn't do so hot back in the day. We obviously have the technology now that we lacked 10 years ago to make something like this a major success.
Unlike Webvan, they rely on contract workers. No need to operate a large fleet of delivery vehicles/drivers, or sink money in warehouse operations. Internet penetration has doubled (~45% then vs almost 90% of US population now). Of course, smartphones everywhere are a big enabler as well.
Funny enough, I have seen several people say that this makes Instacart worse than Webvan, because "at least Webvan had assets." I'm pretty sure that's a nonsensical argument, since those assets were just from them dumping millions of their investment dollars into infrastructure.
Re: Instacart (YC S12) Scores $220M Investment
#18Congrats to the Instacart team! I love what they are doing. Their app has a great user interface and the service is fast and easy to use. It's definitely interesting to see that the world is finally ready for something like this, because Webvan (I know it's brought up a lot) didn't do so hot back in the day. We obviously have the technology now that we lacked 10 years ago to make something like this a major success.
Unlike Webvan, they rely on contract workers. No need to operate a large fleet of delivery vehicles/drivers, or sink money in warehouse operations. Internet penetration has doubled (~45% then vs almost 90% of US population now). Of course, smartphones everywhere are a big enabler as well.
> Unlike Webvan, they rely on contract workers. No need to operate a large fleet of delivery vehicles/drivers...
They currently rely on contract workers but there is a legitimate question as to whether many of the on-demand companies have misclassified their workers[1]. Uber and Handy have already been sued over classification, and class action attorneys have publicly named other on-demand startups that they're investigating for similar actions.
As one attorney has observed, the startups that have made 1099 contractors the foundation of their businesses "are potentially exposed to a bet-your-company liability if they have not structured, documented, and implemented their freelance relationships in a manner that enhances their compliance with federal and state independent contractor laws"[2].
[1] http://nymag.com/daily/intelligencer/2014/09/silicon-valleys...
[2] http://independentcontractorcompliance.com/2014/12/02/novemb...
Re: Instacart (YC S12) Scores $220M Investment
#19$100m revenue is impressive. But what are the gross margins on that?
Obviously hard to tell, but you can extrapolate a bit. At $100mm in revenue, and an assumed $60 order price, you've got 1.6mm orders. Assuming 25% of people pay for faster delivery, you've got gross revenue per order of $4.50, or gross revenue of $7.2mm. If Instavart takes a 30% share (similar-ish to Uber and iTunes), you're looking at $2.2mmin revenue after paying contractors. So that would leave you with 2.2% of sa…
They do mark up the groceries
Re: Instacart (YC S12) Scores $220M Investment
#20Earlier quoted context omitted.
Obviously hard to tell, but you can extrapolate a bit. At $100mm in revenue, and an assumed $60 order price, you've got 1.6mm orders. Assuming 25% of people pay for faster delivery, you've got gross revenue per order of $4.50, or gross revenue of $7.2mm. If Instavart takes a 30% share (similar-ish to Uber and iTunes), you're looking at $2.2mmin revenue after paying contractors. So that would leave you with 2.2% of sa…
They do mark up the groceries
They say they don't for "most" stores