Instacart founder exits with $1.5 billion fortune after IPO

San Francisco – Instacart co-founder Apoorva Mehta is checking out with a US$1.1 billion (S$1.5 billion) fortune following the grocery-delivery company’s initial public offering (IPO).

Mr Mehta, 37, who stepped down as chief executive in August 2021, relinquished his board position as executive chairman as part of the IPO proceedings to current CEO Fidji Simo, a former Meta Platforms executive. The transition marks the end of Mr Mehta’s 11-year tenure with the company he co-founded in 2012.

In the last decade, the start-up has transformed from a Webvan clone to the largest grocery-delivery business in the United States. Revenue grew 31 per cent to about US$1.5 billion in the six months ended June 30, powered in part by a pivot to a higher margin advertising business.

At its peak in March 2021, following a pandemic boost, the company was valued by venture capitalists at US$39 billion. Mr Mehta’s 10 per cent stake had already made him a billionaire, with a US$3.5 billion fortune at its highest point. But with viral infections dwindling and inflation accelerating, the San Francisco-based company struggled and cut its internal valuation three times in 2022 to about US$13 billion in October.

Instacart, which is incorporated as Maplebear, priced its IPO on Monday at US$30 a share,

giving it a US$9.9 billion valuation.

The shares jumped more than 40 per cent when they started trading on Tuesday in New York, before closing 12.3 per cent higher at US$33.70.

Mr Mehta’s US$1.1 billion fortune includes his 10 per cent ownership of Instacart as well as a stake in his new company, Cloud Health Systems, which aims to address chronic illness. The health tech start-up, which Mr Mehta leads as CEO, has raised US$42 million from investors and was valued at US$200 million in a November 2022 financing round.

Mr Mehta sold stock worth US$21 million in the offering, but will remain Instacart’s largest individual shareholder, according to its amended registration filing.

Venture firms Sequoia Capital and D1 Capital Partners own larger stakes, 14 per cent and 13 per cent, respectively, which do not include any additional shares they may purchase in the IPO.

Mr Brandon Leonardo and Mr Maxwell Mullen, Instacart’s other co-founders, own 2 per cent each.

Webvan 2.0

Mr Mehta started Instacart over a decade ago, getting into famed start-up accelerator Y Combinator after he had missed the application deadline by two months and delivered a partner a six-pack of beer to make up for it.

While he was born in India and grew up in Libya, he credits his time living in a small town outside of Toronto as one of the reasons he wanted to start Instacart. He hated waiting in the cold at a bus stop with bags of groceries and believed the grocery shopping experience should have evolved by then.

After studying engineering at the University of Waterloo, Mr Mehta spent two years working on supply-chain logistics at Amazon.com before deciding to leave and build a company. He burned through 20 ideas from enterprise software to advertising start-ups before settling on the idea of a personal shopper.

Webvan had tried online grocery delivery before, but soon became synonymous with the excesses of the dot.com era after burning through US$800 million in venture funding and filing for bankruptcy.

Mr Mehta had a knack for fundraising too, raising more than US$2.8 billion over the last decade from investors. Amazon’s 2017 purchase of Whole Foods could have derailed the business, but instead it drove retailers like Costco Wholesale and Kroger to align with Instacart in the delivery wars.

“It really was like a thermonuclear bomb against the entire grocery industry,” Mr Mehta said at the time. “When we look back, that may have been a turning point for Instacart.”

Change in fortunes

The other came when the pandemic struck in 2020 and people stuck at home were looking for ways to get everything from groceries to medicine delivered. Its volume grew to 262.6 million orders in 2022 from 171.5 million in 2020.

Instacart reached its peak in the spring of 2021 when it raised new funding at a US$39 billion valuation, double what it had been five months prior. But around the same time, board members started to lose confidence in Mr Mehta’s leadership while Mr Mehta began to question his own long-term commitment to the company, according to people with knowledge of the matter. It also explored acquisitions by both DoorDash and Uber Technologies, the people said.

By July, the company announced that Mr Simo, 37, would be taking over as CEO the following month with Mr Mehta moving to executive chairman. A year later, Mr Mehta decided he would step down following Instacart’s debut as a public company. BLOOMBERG