Lessons From Instacart's Magic and Intensity

I joined Instacart as one of the first team members in 2013 and spent 6 years there. It was absolute ground zero for learning what real product market fit is, how to build a profitable business and unit economics that can scale, and how to build a culture that endures. Here are some thoughts from that experience.

By: Scott Holloway, General Partner @ Starting Line

The importance of data fluency

Instacart was the most data literate company I have ever encountered. Every employee went through a home built SQL university thanks to the brain of engineer Michael Righi and the professorship of my friend and colleague Bill Babeaux. When you have a distributed employee base that can make decisions without waiting for gatekeepers in “data science”, decisions happen faster, learning happens faster, and when you are growing double digits per week for years on end, that time efficiency compounds dramatically.

Finance runs the world (and the best startups)

Getting finance hires right is critical. @RaviGupta is one of the most underappreciated, formidable, and impactable executives in the valley in the last decade. There were stretches where we were growing exponentially, yet burning $15+ an order, leading to tens of millions of dollars out the door per month. That is a very scary recipe for a business when you don’t want to shut the door on growth. Ravi and Sagar (who is also ten+ employees in one person) led a six month exercise to swing the unit economics 15 bucks to gross margin positive. To this day it is some of the most exhausting but rewarding work any of us have ever done. Teams were walking out paces in grocery stores trying to move registers to get 15 seconds out of an order which compounds to hundreds of thousands a dollar a year. One of Instacart’s earliest values, which has multiple meanings, was “every minute counts”

Culture is the heartbeat of a company

Some great colleagues of mine and I got to lead an exercise where we wrote the values for the company. There are several ways to do this, but one very simple powerful heuristic to deploy in this exercise is the following: Who is the person you admire most at the company? Now, think of that person and write down the attributes they exhibit that makes them so admirable. You will quickly see that these are cultural attributes that you want to be pervasive throughout that company. That person for me was Nilam Ganenthiran. He rolls his sleeves up and does the work. The 48 hours before new retail launches were brutal. Ensuring that inventory was accurate was one of the many challenges. Upon being told by one of our internal teams that we couldn’t get the inventory done in time for a retailer launch, Nilam simply asked the team to email him the steps it took to get the items live and then he spent the night doing it himself. That is what it takes. A company is very simply just a bunch of people making decisions. Culture therefore is everything– how hard do people work? What types of decisions are made and by whom? How fast are we expected to act? What is the quality of work that my colleagues are putting forth? Culture is everything. It is the accepted norm of how entities operate.

Frozen cold starts

How do you get a grocery store to give you their inventory, images, pricing, when they have no idea who you are? Me and the early regional teams spent much of our time getting tossed and dragged out of grocery stores during our days. We deputized task rabbits and university students to execute store maps we built and physically scan 30K plus skus with motorola scanners. We’d buy items and set up physical photo studios to ensure we had product imagery – conversion is much higher when you have images. Then, you go back to those retailers and ask how much money they are generating a month. They say 1M per week, and we’d say ok, we’re 6% percent of that just FYI and we went live here 60 days ago – and 90% of that is incremental. Would you like to talk about data integration so we can make that 10%? That is a pretty easy sales pitch.

Sales people don’t need to be salespeople

To this day, Instacart has the best business development team of any business I have ever encountered. They were not sales people by training, rather they were former executives and consultants that had to negotiate and manage massive contracts with industry ceo’s while managing the natural challenges that arise from having hundreds of thousands of independent contractors in and out of stores every day. From the first retailer contract signed in the north shore of Chicago (which I helped ink!) in 2014 to today as noted in the S1, retailer partnerships are at the core of Instacart’s compounding advantage.

Trade-offs of multi stakeholder marketplaces

Building a multi stakeholder marketplace is very hard. Instacart has four very important constituents: Customers, shoppers, retailers and advertisers – all are critical to the success of the business. Every product and business decision affects all of these stakeholders differently and they are often at odds with one another. You need to have a clear line of sight to where the ultimate value creation is happening in your marketplace, and be comfortable making hard decisions on behalf of the most critical stakeholders in any given moment. For example, do you choose to show customers which stores and items have markups? That decision has very different consequences for each stakeholder.

Hire to win

Mercenarial missionaries. The best employee you can have at startup is neither a mercenary nor a missionary. It is both.  A ruthless student of the business that knows every single lever and how they relate to one another, with a massive short term bias for action and paranoia, balanced against a long term view that what you're doing is differentiated, sustainable and accretive to customer lives and the broader ecosystem in which you operate. You need people who can hold both those beliefs in their heads. These are mercenarial missionaries. In June of 2017 we woke up and our biggest competitor Amazon, had bought our biggest customer, Whole foods. That is not a normal thing that happens in business everyday. It was at that moment that we needed to activate these folks and go out and win. We went on to sign almost every single remaining grocer in North America that year and secure our place as the market leader for years to come.

Winning is all that matters

Ravi would often joke that we didn't know if he was any good at Mckinsey or KKR (which he most assuredly was), but we knew he came from winning places. And if we made Instacart a winning place, it would be the same for us. It is extremely simple yet true and profound advice. There is often parroted advice of “join for the company, not the role”. This is one of the only cliches I agree with. When some of my very talented friends would leave the business early on for various reasons - some about titles or promotions, I would appeal to them with the following: this is the one; there are no other ones like this in this cohort.