Grocery delivery startup Instacart raises $200 million and prepares to battle Amazon

SAN FRANCISCO (Reuters) - Grocery delivery service Instacart has raised $200 million in fresh funding, the company said on Monday, boosting its valuation and providing new resources for the startup to compete against heavyweight Inc.

Instacart, a San Francisco-based company that shops for and delivers groceries from about 200 retailers including Target Corp and Costco Wholesale Corp, said the new funding values the company at about $4.2 billion. That’s up from the $3.4 billion valuation the company commanded when it raised $400 million nearly a year ago.

The new round was led by Coatue Management and included Glade Brook Capital Partners and existing investors. Instacart was previously backed by Sequoia Capital, Andreessen Horowitz and Whole Foods Market, among other investors.

Instacart makes an app that allows shoppers to order groceries that are delivered to their home the same day. The company makes money through delivery fees and also through promotions and coupon deals it has with a number of brands including General Mills Inc, Coca-Cola Co and Pepsico Inc.

But Instacart faces uncertainty with the recent acquisition of Whole Foods by Amazon. Whole Foods has been one of Instacart’s largest and most important grocery store partners, as the startup in 2016 signed a multi-year deal to be the exclusive delivery provider for most Whole Foods goods. But Amazon, which has been steadily pushing into grocery delivery, said last week it is testing free two-hour delivery of Whole Foods groceries to Amazon Prime customers in certain U.S. cities.

Reporting by Heather Somerville; Editing by Andrea Ricci