Uncapped #47 | Max Mullen from Instacart

Max Mullen is the co-founder of Instacart and an active investor having invested in 100+ companies including Gumloop, Mercury, Owner among others. He also runs a founder community in San Francisco called Workshop. We discussed the full arc of building Instacart from a contrarian idea that investors rejected to a $10B consumer marketplace. Max highlighted the scrappy early days, marketplace product-market fit, and key inflection points like retailer partnerships and the Amazon–Whole Foods moment. We also explored what makes great consumer founders, why the best ideas look wrong at first, and how to build and scale in “hard mode” markets. Finally, the conversation touched on investing, decision-making frameworks, and what it takes to win in consumer over the long term. --- Timestamps: (0:00) Intro (0:36) The inception of Instacart (4:55) Finding product market fit (7:20) Landing Trader Joe’s (11:04) Big levers for growth (13:36) Operationally complex businesses (14:55) Amazon’s acquisition of Whole Foods (17:50) COVID and Instacart’s IPO (20:02) Prioritizing profitability (23:21) Avoiding temptations (24:59) The future of Instacart (25:53) Investing in consumer (28:21) Irrationally optimistic founders (29:49) B2B vs consumer founders (30:35) How to work with investors (33:38) Building Workshop --- Links: https://x.com/Max https://x.com/jaltma https://maxmullen.com/ https://uncappedpod.com/ --- [email protected]

• 0:00Speaker 00

  And I look at their sneakers. If you're looking at a founder and they got dirty white sneakers on, people that are busy building, they're locked in on their companies, they're sleeping at the office, right? They don't have time to buy nice sneakers, right? They just put on the same pair of sneakers and they get dirty. And like the real builders, you know, they sort of just, they look the part.

• 0:18Speaker 01

  All right, Max, I'm very excited for this one. I love doing this with close friends. As you know, we've had some other ones on the show. And one of the things I was just sharing to you is we've hung out a million times and we barely talk about work. I barely know what you do. So I'm excited to learn about your work along with the rest of the audience.

• 0:35Speaker 00

  Well, thank you so much for having me, Jack.

• 0:36Speaker 01

  Let's start with Instacart because you obviously just completed, you know, sort of the, the end to end dream of any entrepreneur. And then I want to go into sort of your investing and some of your other work. But starting with Instacart, and I don't even know all these stories, which I really should, given how much we've hung out. Can you talk about Instacart getting started? Like the early days, the idea coming together? I know this was YC like back in 2012, right? So tell me about the beginning.

• 1:00Speaker 00

  I'm so fortunate to be, to be able to be a founder of a consumer company because it's like a household name and everybody knows about it. And

• 1:08Speaker 01

  I mean, I use it like seven times a week.

• 1:10Speaker 00

  You really do order a lot.

• 1:11Speaker 01

  You probably know what I eat too.

• 1:12Speaker 00

  I do not look at customer accounts, but

• 1:14Speaker 01

  Could you if you wanted to?

• 1:16Speaker 00

  I, I can't. No.

• 1:17Speaker 01

  Okay, you probably could.

• 1:18Speaker 00

  But, but what's great about being a consumer founder is, is that, you know, everybody knows kind of what you do. You don't need to repeat yourself anymore when you're pitching the company. And that wasn't the case in the early days, right? In 2012, grocery delivery was basically something that didn't exist in the US. It was quite a contrarian idea back then to have an app.

• 1:36Speaker 01

  Well, actually, it's even more contrarian because didn't people try it in like web 1.0? And it was like a big, high-funded failure?

• 1:43Speaker 00

  Yeah, there were some spectacular failures in 20, in like the dot com

• 1:48Speaker 01

  Like hundreds of millions went in and it didn't work.

• 1:50Speaker 00

  Yeah, like Sequoia invested over a billion dollars in a company called Webvan.

• 1:53Speaker 01

  Yeah.

• 1:54Speaker 00

  And it failed. And that was 10 years earlier before we started.

• 1:57Speaker 01

  So did you have that when you were talking to, was that like the big thing when you were talking to investors was like, this has been tried, it doesn't work?

• 2:03Speaker 00

  Yeah, that was the elephant in the room.

• 2:04Speaker 01

  Yeah.

• 2:05Speaker 00

  And most investors totally turned us down because they thought that it would not work again.

• 2:10Speaker 01

  And so what changed?

• 2:11Speaker 00

  Okay, so a bunch of things changed, obviously, from the dot com boom until 2012. First, more people were on the internet and those people were more accustomed to e-commerce. Right? So in 2012, there was lots of e-commerce going on, but nothing in the grocery industry. And the other thing that changed is that we had smartphones, right? And so on the supply side, the shoppers could have a smartphone that could help them do this work. And, you know, had GPS and it could help us make this an efficient marketplace.

• 2:38Speaker 01

  The shoppers part was the key. I think a lot of people think about it as like, oh, I'm gonna order from my couch on the phone, but it's really the shoppers who are in the store needing the application.

• 2:46Speaker 00

  Yeah, and the idea of using stores as warehouses was also new, right? Most people who had tried to do grocery delivery tried to build big warehouses, buy trucks. It was very expensive and we didn't do any of that. We just went into the same grocery store that you would and shopped just like you would and delivered just like you would.

• 3:04Speaker 01

  You know, obviously, this was like hard to raise money for, but you still got into YC. You were still able to raise capital, but like you still didn't have to like start a marketplace and you still had to like get apples, you know? Like, so what did you do to actually get this thing started? Like, you know, day one, you had nothing. Day two, what did you start doing?

• 3:19Speaker 00

  We sort of always had the company launched like from almost day one. So we had a not very well-designed app and a not very well-designed shopper experience. And we sort of just put one foot after the other, trying to like build from a very small base of customers to a little bit larger and a little bit larger and try to pay attention to both the demand side and supply side at the same time.

• 3:40Speaker 01

  So like, who's the very first customer? Like, or like, what is their experience?

• 3:43Speaker 00

  Honestly, the very, very early customers, a lot of whom were our YC batchmates, probably placed orders that never arrived or were really late or didn't contain all the items. It's a human business, right? There's a lot of processes involved and mistakes. And every week, we would try to make these metrics go up, right? Percent of late deliveries would go down and number of deliveries per week would go up. And the percent of your items that were delivered perfectly, found rate would go up. And just we would every week try to push those metrics up and just make little tweaks to the software to make that happen.

• 4:15Speaker 01

  Did you ever shop?

• 4:17Speaker 00

  I still shop.

• 4:18Speaker 01

  Really?

• 4:18Speaker 00

  Yeah, I still have a shopper credit card and.

• 4:21Speaker 01

  But you go fulfill orders sometimes?

• 4:22Speaker 00

  Occasionally, yeah, it's really fun and it's super hard.

• 4:25Speaker 01

  Is it hard?

• 4:25Speaker 00

  It is really hard.

• 4:26Speaker 01

  What's it like?

• 4:27Speaker 00

  Well, first of all, when you're shopping for yourself in the grocery store, you know exactly what you want. And if something's out of stock, you just make a quick replacement and you're you're good with it.

• 4:34Speaker 01

  Right.

• 4:34Speaker 00

  But when you're shopping for someone else, it's kind of hard to understand what their intent is.

• 4:38Speaker 01

  You also don't know if they're gonna be like happy with the different chips or if they're gonna be really pissed because they wanted lemon lime.

• 4:42Speaker 00

  Right, or do they want a bigger size of a same brand or a smaller size of the, you know, different brand?

• 4:47Speaker 01

  Yeah.

• 4:48Speaker 00

  Yeah.

• 4:48Speaker 01

  Yeah, it's a judgment call.

• 4:49Speaker 00

  Yeah.

• 4:49Speaker 01

  But then, I mean, you can ask questions in it.

• 4:51Speaker 00

  You can. Sometimes customers are really responsive, sometimes they're not.

• 4:54Speaker 01

  Yeah, okay, so you get all of these initial pieces going, you know, you start kind of improving it consistently.

• 5:01Speaker 00

  Yeah, and very importantly, we were doing, I was like doing all of the customer support myself. So customers would call Instacart's phone number and it would ring my phone. So the pain of anything that was wrong with our service was personally felt by me.

• 5:14Speaker 01

  Yeah.

• 5:14Speaker 00

  Basically seven days a week. And then I would go and make the roadmap and fix those problems so that I didn't have to get those calls anymore.

• 5:20Speaker 01

  Wow, how pissed do people get? Like, is it like an emotional thing for people who are like, hey, my burgers aren't here?

• 5:24Speaker 00

  It really depends, you know, every customer is different and it really depends. Sometimes people are buying, you know, things for their office, they're more chill.

• 5:31Speaker 01

  Yeah.

• 5:31Speaker 00

  You know, if you're buying a rack of lamb for dinner and it needs to arrive before five, otherwise your dinner's gonna be late. Then you'll be really upset if it doesn't.

• 5:38Speaker 01

  Yeah, actually later, I'm gonna, I want to ask you about like fast delivery and some other like adjacent markets that I know you've thought about and done work in. But I'm still interested in how you like actually got this consumer marketplace going because they're so hard to get going. So like, did you feel pull immediately or was it the kind of thing where in order to get strong product market fit? You needed to add suppliers and selection and it didn't actually cross until you had more and more products in the catalog?

• 6:00Speaker 00

  My belief is that product market fit is like a spectrum, it doesn't just happen in one moment. And so the early days of Instacart, we sort of thought we had product market fit. We had a lot of pull from customers who wanted. Deliveries of groceries that were quick, but they didn't really care from what store. Our initial product was basically all coming from one conventional grocery store in San Francisco. But our real product market fit was really from families. And that only happened later when we started adding retailers and their full catalog to the platform.

• 6:31Speaker 01

  Why was that important?

• 6:32Speaker 00

  I mean, you don't want to buy groceries from a warehouse. You want to buy groceries from Sprouts.

• 6:37Speaker 01

  Yeah.

• 6:37Speaker 00

  Or from Buy Right Market, right? You have a really strong loyalty toward the grocery stores that you already shop at. And you want to get delivery from those on Instacart.

• 6:44Speaker 01

  How did the business like itself work in the early days? Like, I imagine it could not have been great margins when you were getting going. Cause you couldn't like charge $7 for an orange, but you still had to go like send somebody to go get the orange and bring it and all of that. So were you like running like on a wire at the beginning? Like, what did it look like at first?

• 7:01Speaker 00

  To be quite honest, at first, we weren't very good at tracking our unit economics.

• 7:04Speaker 01

  Like, I don't know.

• 7:05Speaker 00

  And, and we were definitely losing money, but it was a little bit unclear how much money.

• 7:09Speaker 01

  Yeah.

• 7:09Speaker 00

  Our primary goal was just to get more deliveries and higher quality deliveries and more customers. And we knew that we could achieve positive unit economics later, but it would take, you know, a lot of work and bigger scale.

• 7:20Speaker 01

  Zooming forward a little bit, were there like landmark partnerships, grocery store deals, like whatever that like really inflected the business? And could you like talk through, you know, an example, like end to end?

• 7:32Speaker 00

  Yeah, I mean, I mean, the first thing is we, we, we didn't know how important retailers were. And in the early days, we, we asked our customers, you know, what could we do better? What could we do differently?

• 7:42Speaker 01

  Cause at first you were not shopping from a grocery store.

• 7:44Speaker 00

  At first, we were, we were always shopping from a grocery store. But at first you went on Instacart and you saw a catalog and we did not tell you where the groceries were going to come from.

• 7:51Speaker 01

  Yeah, it's like, I want some strawberries, where are they from? You're like, don't worry about it.

• 7:54Speaker 00

  And our idea was going to be, we'll get them from the cheapest, closest store.

• 7:58Speaker 01

  Yeah.

• 7:58Speaker 00

  Right? People won't care where the strawberries come from.

• 8:00Speaker 01

  Right.

• 8:00Speaker 00

  And so we asked our customers and they told us. We love Trader Joe's. We want only to shop at Trader Joe's. So we went on this mission to try to figure out, how can we partner with Trader Joe's? Right? And we couldn't get in touch with them. We tried everything. And at a certain point, we went to the store and we looked around and we said, well, maybe we can just shop out of a Trader Joe's without a partnership. And in order to do that, we would need a picture of everything that they sell. And so we asked the manager, can we get a picture of everything that you sell? And they said, absolutely not. We don't have that. We can't give that to you. And I said, well, what if I took my own pictures? You know, I'll do it in the corner of the store or let us take some items out of the store into the parking lot and we'll take some photos and we'll bring them back. And they were like, no, no, no. And so we came back, actually.

• 8:44Speaker 00

  And we said, what if we bought one of everything in the whole store? And they were like, that would be great. Come on a Thursday when it's slow. And so I said, okay, great. We'll be back on Thursday. And I went to that store with a bunch of other people over three days. And we bought one of every product in the entire Trader Joe's.

• 8:59Speaker 01

  How much was that?

• 9:00Speaker 00

  $20,000.

• 9:01Speaker 01

  That's okay.

• 9:02Speaker 00

  Yeah, not too bad. We had just raised the money from, you know, from Demo Day. So we had a couple of million bucks in the bank. We ran this experiment. We made the catalog of every Trader Joe's item. We launched it on instacart.com. And at that time, we had to add like a toggle, right? So now instead of seeing no retailer names, you would see Safeway or Trader Joe's and you could switch between them. And that was the moment, I think, we started to really find marketplace product marketplace.

• 9:27Speaker 01

  That's interesting. It's crazy how, I mean, Airbnb had something similar. Once they got good photos, it's like, you know, it was worth it to them to go do super manual things, apparently.

• 9:36Speaker 00

  Yeah. And you have to sort of roll up your sleeves and go do these crazy things to get, to get the first customers to be really excited to tell their friends to get the next set of customers, you know, just to get one city going.

• 9:45Speaker 01

  Once you had that understanding, did you then shift a bunch of the company focus to going and getting more retailers?

• 9:51Speaker 00

  Yeah, we, we, we did this with, you know, Whole Foods and Costco and sort of a bunch of other retailers. And of course, we eventually got to the point where we struck partnerships with those retailers. And then they would give us their catalog data or they would at least let us in their stores to photograph it carefully.

• 10:05Speaker 01

  What was the argument that you needed to convince somebody like a Costco to serve products with you?

• 10:11Speaker 00

  Well, we're, you know, a few people in San Francisco. We're a startup. No one's ever heard of us, you know, so it's tough to strike a partnership with a really big public company.

• 10:19Speaker 01

  Well, because also I assume the deal is, you know, we're going to buy, we're just going to come buy from you. Maybe we're going to cannibalize some of your online sales. I don't really know, you know, how the math works out, but I assume that there might be some idea of them thinking, no, I should just own this channel directly if I can.

• 10:32Speaker 00

  Honestly, back then, it was a bit more of lack of awareness. You know, retailers didn't understand how important sort of e-commerce was going to become, and they didn't have a good strategy yet. And in fact, retailers pay Instacart, right, a commission for bringing them.

• 10:45Speaker 01

  Right. Well, now you have all this traffic.

• 10:46Speaker 00

  Yeah, more growth.

• 10:47Speaker 01

  Yes. So at some point, that flipped where you're like, hey, I've got the traffic. Now you can, you can command a different sort of price dynamic.

• 10:53Speaker 00

  And at first, we started with a little, little local retailers, you know, Buy Right, Rainbow Grocery right over here. And they were thrilled to partner with us. And then eventually, we kind of got to the bigger sort of Whole Foods markets of the world.

• 11:04Speaker 01

  What were your levers for growth other than, I mean, so it sounds like adding retailers equals more growth in general.

• 11:10Speaker 00

  Yep.

• 11:10Speaker 01

  What else were the big levers? I mean, I got to assume price.

• 11:13Speaker 00

  Geographic expansion.

• 11:14Speaker 01

  Geographic expansion.

• 11:14Speaker 00

  Was another big one, right? Like, we learned how to launch new cities. We launched Chicago. We launched Boston. We launched Washington DC. We launched New York City.

• 11:21Speaker 01

  How do you launch a city?

• 11:22Speaker 00

  Oh, man. At first, I just went there with an engineer, and we would, you know, catalog the stores, make sure that our sort of, our operations were set up correctly to understand the, the sort of borders of the city and the zip codes that we could serve efficiently. We'd hire shoppers and hire operations folks to sort of get things going on the supply side. And then we'd do demand-side marketing and, and kind of try to match those and grow those.

• 11:46Speaker 01

  What worked?

• 11:48Speaker 00

  Man, I mean, I think there's, at first in 2013, when we first launched, you know, the first city outside of San Francisco, which was Chicago. Luckily, I had a girlfriend there who's now my wife, and she was going to business school. And so we got all the business school students, all the MBA students at, at Chicago University to become customers. And they told their friends. We threw events. We did PR. And there was something like novel. There still is actually something novel about putting in your grocery list on app.

• 12:15Speaker 01

  Oh, yeah.

• 12:15Speaker 00

  And then in an hour, it all just shows up.

• 12:16Speaker 01

  I get a rush every time.

• 12:17Speaker 00

  And so we would try to use that. Try to use that.

• 12:20Speaker 01

  As you know, you know what I'm, you know. Yeah, you know. Yeah. See, that's what I told you.

• 12:25Speaker 00

  No, no.

• 12:25Speaker 01

  Yeah, that's what I thought.

• 12:26Speaker 00

  I don't judge.

• 12:27Speaker 01

  Okay. So there's that. So there's, there's geographic expansion. Was price a big lever? Like, was it the kind of thing where you're like, I change these prices and I just like, you know, am I playing with that tool carefully? Or is it not that big of a deal?

• 12:36Speaker 00

  Yeah. I mean retailer set prices, but we would, we would make, we would make delivery free. You know, we offered an annual membership that we have sort of discounted and would give free trials of Instacart plus.

• 12:47Speaker 01

  Did you ever do referral programs?

• 12:49Speaker 00

  Absolutely. In fact, I designed this killer referral program that was like a third of our traffic in the early days.

• 12:54Speaker 01

  When I first moved to San Francisco in like 2013 or something like that, I was like doing these crazy Uber referral. I was like an Uber refer. Like I was deep in there just doing paid marketing for Uber to get more drivers. And it was great.

• 13:06Speaker 00

  And I assume. Just for fun?

• 13:07Speaker 01

  No, I got, I got Uber credit.

• 13:09Speaker 00

  Oh, nice.

• 13:09Speaker 01

  Yeah, it was great. I think they'd stopped it at some point, but it was great for a little while. So you had those referral programs going for shoppers?

• 13:15Speaker 00

  We had.

• 13:15Speaker 01

  For customers.

• 13:17Speaker 00

  Right. Like, like the key thing we figured out is that after your first order, right when you placed it, but before it was delivered, you were really keen to share the service with other people. And so we would have this give $10, get $10 offer, or we would change those, those values to play around with them and experiment.

• 13:33Speaker 01

  Yeah.

• 13:34Speaker 00

  And that got a lot of people to share with their friends.

• 13:36Speaker 01

  When I think about the overall story of Instacart, obviously you needed a nice piece of software too. But a lot of this is building a business in terms of like partnerships, business development. You know, the hard work of CD expansion, boots on the ground, hiring people. Is that common? Do you think like, do you think a lot of consumer marketplaces are more require these other components besides just the technology more than like B two B companies?

• 14:01Speaker 00

  There's some consumer and some B two B marketplaces that are, that are what I call operationally complex. And ours is like probably hard mode, like extra hard mode. If you think about it, there's the consumer app, which of course, you know, as a consumer who orders a lot of ice cream.

• 14:14Speaker 01

  Yeah.

• 14:14Speaker 00

  There's the shopper app, right? They have to have an app that's beautiful and, and works really well and is performant in like low wifi situations in the back of a grocery store, has all the photos of all the items. We have a huge ads business, right? We're partnered with almost every consumer packaged goods company in the. US and Canada. And then we have the retailer component, right? We're delivering enterprise-grade software to retailers.

• 14:35Speaker 01

  Yeah.

• 14:36Speaker 00

  And then we have a logistics system, right? That routes in batches, orders, and we have lots more stuff, analytics. There's so many facets to the business, right? You know, that's uncommon. A lot of the business models that you and I invest in are like pretty much the SaaS business model or sort of AI applications, a lot less complicated. And so I think it's not for the faint of heart to try to build such a complex business.

• 14:55Speaker 01

  Yeah, talking about other like hard-won moments. Whole Foods was obviously like a big customer of yours. I remember one day I was shopping with Whole Foods and then one day we're not. Can you talk about like what happened there? What it meant for you, like how it sort of affected the company?

• 15:10Speaker 00

  So the company's chugging along and we're signing retailers. And we signed this big, long-term deal with Whole Foods Market, which is, you know, not the largest retailer, but a really important one from a brand perspective. Seven in the morning, I get woken up one morning in 2017. And we find out that Amazon has bought Whole Foods. Now, Amazon, you know, is our biggest competitor. They're really focused. They have been working on online grocery for decades and they have essentially infinite resources. And Whole Foods Market is our biggest client in terms of, you know, the number of orders that we send them. And so this is kind of an existential crisis for the company. And then the headlines started coming out, you know? Amazon buys Whole Foods for $13.7 billion. Amazon buys Whole Foods. What does it mean for the grocery industry?

• 15:55Speaker 01

  Yeah.

• 15:55Speaker 00

  Amazon buys Whole Foods. Will Instacart succeed or fail?

• 15:58Speaker 01

  Yeah, it's crazy.

• 15:58Speaker 00

  Amazon buys Whole Foods. Instacart's toast.

• 16:00Speaker 01

  Yeah.

• 16:01Speaker 00

  And we were like, kind of freaking out, right? And so what do you do? What do you do when you get hit with something like that as an early company? We had an all-hands and we declared wartime. And we realized that this was going to be not a terrible thing for the company, but a dynamic situation we could kind of make the most of. Every other retailer saw this news as well. And they were asking questions like, what is our e-commerce strategy? You know, what are we going to do now that Amazon has entered our industry? And we used that to our advantage and we re-engaged with, or they re-engaged with us, almost every retailer that we hadn't signed yet.

• 16:38Speaker 01

  You're like arming the rebels.

• 16:39Speaker 00

  Yeah, and we really, you know, used that wartime crisis moment inside the company to motivate people to work extremely hard and extremely fast. And with retailers to kind of get them to finally come aboard. And in the 18 months after that happened, we signed basically every major retailer that had been a holdout, including Costco and Kroger and others.

• 16:58Speaker 01

  And you think those wouldn't have happened without it?

• 16:59Speaker 00

  Certainly not on that timeline.

• 17:01Speaker 01

  Wow. So then that effect might have been positive.

• 17:03Speaker 00

  Absolutely. It was one of the best things that ever happened to the company, one of the scariest things.

• 17:06Speaker 01

  It is crazy how like when something like that happens, it's um, it's a good reminder that you can't always know whether some piece of news is good or bad.

• 17:14Speaker 00

  One thing's for sure. If you start a company and it takes a really long time to build it, you're going to face luck of some, some kind. Good luck and bad luck. And great companies figure out how to take those moments and kind of flip them and leverage them.

• 17:27Speaker 01

  Totally.

• 17:28Speaker 00

  And, you know, also when things that could be potentially bad for the company kind of happen, you gotta like have a thicker skin.

• 17:34Speaker 01

  Yes.

• 17:34Speaker 00

  You, you gotta, you gotta become anti-fragile. And for sure, Instacart is what I would call an anti-fragile company. Things happen and we don't get worse. We don't stay the same and just repair. We get stronger, right? People get emboldened and we get galvanized and we go off and do amazing things.

• 17:50Speaker 01

  I mean, another one that kind of comes to mind that is both, um, it's like a champagne problem, is Instacart's like a $10 billion public company, which is like a remarkable achievement by any standard. There was one venture financing that was at like 40 billion.

• 18:04Speaker 00

  Yeah.

• 18:04Speaker 01

  And a lot of companies, when that happens, that like ends up killing them and they can't get through it and it creates all these issues. But you got through it, you got public, you're now, you know, it's a public deck of corn and that's amazing. And who, you know, some of them, it's okay that, you know, can you talk about like that journey too? Cause I'm sure that didn't feel good at every moment. And there was probably some cultural things you needed to work through and all of that.

• 18:25Speaker 00

  Yeah, it sort of starts with the beginning of COVID, right? COVID happened, our business sort of.

• 18:31Speaker 01

  It might nuts, right?

• 18:31Speaker 00

  Yeah, yeah. I mean, we, we grew like four, four X in, in 2020. We were suddenly remote, right? And we had to scale the company. And even with hiring more people, everybody was working seven days a week, two standups a day, just trying to keep the business afloat because there's so much demand.

• 18:46Speaker 01

  I mean, talk about COVID beneficiary, people just like not want to do the grocery, it's, you can't.

• 18:50Speaker 00

  Yeah, and like even my own parents, right? Obviously, they're super fans of Instacart, but they were like using Instacart sometimes and going to the grocery store sometimes. And then during the pandemic, they completely switched.

• 19:00Speaker 01

  And then you build a habit, and it lasted long enough that people built habits.

• 19:03Speaker 00

  Yeah.

• 19:03Speaker 01

  Like you acquired users.

• 19:04Speaker 00

  And they stuck around. Yeah, we've never had a down year, but that's a challenging thing and and sort of not being able to forecast what the next year and the next year were going to look like. And especially during during 2021, you know, the way the markets were, right? So our valuation kind of went up and down, and this whole thing looked like a roller coaster. It's emotional, you know, people get attached to the value of their shares. And people thought that our IPO timeline was going to be one thing. And because of the markets, it had to shift and happened later. And we had to manage through all of that. Also, you know, it was it was a new era of the company, right? Up until that moment, almost everyone that joined the company was joining a company that wasn't yet really a household name, right? Kind of had to squint to believe that we were going to do all the crazy things that

• 19:48Speaker 00

  we were that we said we were going to do and achieve the scale that we said we were going to achieve. After COVID, it was pretty obvious, right? Instacart was on a great track. And so different types of people were attracted to the company at that point.

• 19:58Speaker 01

  Yeah.

• 19:59Speaker 00

  And we sort of had to manage through the change in culture that was necessary there.

• 20:02Speaker 01

  Obviously, now you're a profitable company. At the beginning, you talked about we didn't even know what our margins were. Let's just pretend they were definitely super negative. When did you sort of like go through that cultural journey of like, this is going to be, this is going to be a profitable business now?

• 20:15Speaker 00

  So two and a half years into the company, we raised a round of financing that valued us at around $2 billion. And that was sort of the beginning of us growing up as a company. We hired this guy, Ravi Gupta, you know, who then became a partner at Sequoia and is still on our board.

• 20:30Speaker 01

  Yep.

• 20:31Speaker 00

  And he was like the first, you know, adult in the room, let's say. And after a few months of joining, actually, really after like a week or two of joining, he looked at our financials and he was like, guys, I don't know if you know this, but we're losing a lot of money on every order. And we were like, yeah, we sort of know, but um, like, how much money are we losing? And we sort of quantified it. And we realized that as good as things were going, you know, the company was growing very fast. And if we grew as fast as we were growing.

• 20:55Speaker 01

  All the money was going to be gone.

• 20:57Speaker 00

  He might run out of money. And so it was kind of epic, but Ravi had this all hands at Instacart in his first few weeks and put up a slide and he said, okay, we spend $25,000 a month, let's say on blue bottle cold brew in our fridge. For that amount of money, we could like lease a Tesla for the company, a few Teslas, right? We could have a fleet of Teslas. That'd be cool, right? Or for that amount of money, we could, let's say, acquire 5,000 customers or we could acquire a thousand shoppers, right? And he asked people to raise their hands. Who wants to acquire the customers? Who wants to acquire the shoppers? Who wants to buy a Tesla? Or who wants to have blue bottle coffee?

• 21:34Speaker 01

  That's good.

• 21:34Speaker 00

  And of course, everybody realized that, you know, the company was probably spending too much money on some silly things. And so we made some changes. We cut some things like that. And partly like, we taught the company this object lesson about being more resourceful.

• 21:48Speaker 01

  So what went into that from there? That's like a moment where you like galvanize everybody and you're like, hey, we care about this now, but what did you need to change besides the blue bottle?

• 21:56Speaker 00

  Not buying blue bottle coffee, as painful as that was, was the object lesson. But then the attitude we all had to have was we all own some little slice of our P and L, right? This team works on taxes. That team works on bottle deposits. This team works on batching efficiency and everybody was responsible for five cents, 25 cents, $1 of the bridge from negative $15 of unit economics to neutral gross margins.

• 22:21Speaker 01

  Yeah.

• 22:21Speaker 00

  And we had to do it fast, right? Because otherwise we would literally go out of business. And so that put this, this really big pressure on all of us. And we, it was hard, you know, we had a lot of arguments about what to cut and what not to cut. And every team, everyone in the company was involved in this, in this initiative. And we set a goal to become gross margin profitable. And we started to make little bits of progress towards it. And then big, big wins would happen, right? And we would figure something out. We would change prices in this city that was more expensive. And we would take away some marketing thing we were doing that wasn't working. And we slowly got the company. Margin positive. And then we threw this wonderful party, which was like, everyone who was there remembers this. We threw like a very resourceful party. Like, we didn't spend any money on the venue. We had it in our, in our office. Just like turned on the, the

• 23:06Speaker 00

  music. And then we got dollar hamburgers from McDonald's. So we got like 300 $1 hamburgers and like very cheap champagne from Costco. And we just had this like, big, huge celebration of this crazy win.

• 23:19Speaker 01

  That's awesome.

• 23:20Speaker 00

  As a company.

• 23:21Speaker 01

  I'm also curious about like, um, some of the decisions that you decided not to do. I'm kind of coming to this from a lens of like, it's always in these sort of retellings of history, it's easy to focus on like, the amazing decisions you did make. There's also a lot of like, decisions you decided actively to not make that like, might have been big blunders, or distractions, or whatever. I'm just curious about like, what are some of the temptations that you avoided? And I'm thinking about, you know, internet, and maybe there's things that you didn't do at one moment, but later it was the right thing to do. You know, maybe it's international, maybe it's rapid delivery, maybe it's new products that you would like, offer to consumers. Like, what were the things that like, were hotly contested that you decided to hold off on?

• 24:00Speaker 00

  In every company, there's like this, should we build our second product question? Or should we focus on the first product more? And we, for a long time, thought about international expansion. We thought about other products that we could do. We kept realizing that just focusing on the US and focusing on our core business, which we still weren't done with, was a better use of resources. We kind of kept the main thing, the main thing, for a really long time. I think that was the right decision, but there was, you know, every year, there would be different debates about, about international expansion. And now, 13 years after we started the company, we are.

• 24:30Speaker 01

  Yeah.

• 24:31Speaker 00

  An international company. And we are doing it. And it's, you know, not too late.

• 24:33Speaker 01

  It's like, the right idea at the wrong time is the wrong idea, kind of thing?

• 24:36Speaker 00

  Yeah.

• 24:36Speaker 01

  The US, I'm sure, could have considered just like, acquisitions to those things. I'm sure you looked at considering doing that. Did you end up deciding that it's just complicated?

• 24:43Speaker 00

  We looked at acquisitions and still do, but we just, I think we realized there weren't just the perfect company to acquire.

• 24:48Speaker 01

  Yeah.

• 24:49Speaker 00

  In, in most of the places we wanted to be.

• 24:50Speaker 01

  Yeah. Thanks for sharing a bunch of that story. It's like, very, it's cool for me to hear, because I, I haven't even gotten to ask you all those questions, despite knowing you so well. And it's just an amazing accomplishment. Maybe before we move on to the next topic, I'm interested in what you're most excited about for Instacart, like, going Forward, obviously, there's just gonna be, you know, it's a great business as it is. But like, what are the things that you're like excited to see?

• 25:09Speaker 00

  The last thing I worked on at Instacart was a bunch of our AI initiatives. And the company has really embraced AI, you know, both internally and using it in in our products. And we're just now launching, you know, some of the first consumer facing agentic AI products that that I worked on. And so I'm very excited to see those roll out. I just think that every consumer app in the near future will have incredible features where you'll be able to push a button and have magical things done for you.

• 25:35Speaker 01

  I want you to integrate with a home robot that cooks. And I just want to tell the robot that I want dinner.

• 25:40Speaker 00

  I don't think that's that far into the future.

• 25:42Speaker 01

  That's what I want.

• 25:42Speaker 00

  And I think Instacart will be a key part of getting.

• 25:45Speaker 01

  I asked Kyle Vogt this when he was on the show, co-founder.

• 25:47Speaker 00

  Yeah.

• 25:48Speaker 01

  And I was like, could that happen? He's like, I think it could happen. So you guys need a partner.

• 25:51Speaker 00

  I love Kyle and I think we should do it.

• 25:53Speaker 01

  I want to talk about, obviously, you've been, you know, a great angel investor for a long time. Now you're, you know, gonna be, you are a full time investor. I want to hear your opinions on consumer in general. And I feel like there's been like, there's like always these memes about like, consumer is dead. It's so hard. Obviously, there's some like amazing runaway consumer successes, but they are few and far between compared to B two B. But I'm curious just to hear from you as someone who's done it and has like lived it, kind of the building blocks of a good consumer business. Maybe starting with like the founder, like what makes a good consumer founder?

• 26:23Speaker 00

  I think to be a good consumer founder and to build a really big sort of consumer company over the long term, you have to have some view on consumer preferences. You have to kind of see the world through a younger generational lens. Usually that means an idea that looks contrarian today, that has some sort of stigma associated with it, where most consumers would say, that's not for me. But that you see that in the near future, that stigma is gonna lift. And that as that sort of overton window moves, you go from looking contrarian to consensus, right? You wouldn't stay in the spare bedroom of a stranger 20 years ago. And then Airbnb made that a normal thing to do. You wouldn't get in a stranger's car and then you had Uber. Having someone do your grocery shopping for you, it wasn't a normal thing, you know, prior to 2012.

• 27:08Speaker 00

  And then we sort of willed that into existence. And so you have to have this attitude of there's something I know is gonna happen. In the near future, we are going to build it so that when people are ready, the product will be there. You have to be right and you have to time it perfectly.

• 27:20Speaker 01

  So the idea almost has to be a little uncomfortable at first.

• 27:23Speaker 00

  Otherwise, you're in perfect competition. And by the way, there's really great, large, public consumer companies that will be, they would love to do the consensus things before startups can.

• 27:31Speaker 01

  Yes.

• 27:32Speaker 00

  And so you have to be a little edgy, right? I gave some examples there. Mental health is something that had a stigma that seems to have lifted recently. Companions, AI companions is something that today is very edgy and then I think in the future will probably be more normal and many people use those.

• 27:47Speaker 01

  Yeah. What else comes to mind for consumer founders besides this?

• 27:49Speaker 00

  So contrarian idea, and that means you also have to tolerate looking wrong and sort of looking silly for many years. You have to have a thick skin. You have to really have conviction and tenacity and not pivot. And then the third thing is you have to run really, really fast, right? Once the opportunity becomes obvious, there'll be lots of competition. So you have to be way ahead and you have to have a machine that can execute really, really fast and then, um, you know, build the product faster than anyone else. Like, I think there are no great consumer companies where there's not an extremely high sense of urgency in the DNA of the company.

• 28:21Speaker 01

  Yeah. I guess generally speaking, if you had to like pick the thing that you're looking for when you meet founders, like, how would you, how would you name it?

• 28:28Speaker 00

  I mean, I'm, I'm always looking for people that, um, that are what I call irrationally optimistic, you know, that are just like so excited about their version of the future that they'll tell everyone about it and sort of attract talent that way. But, you know, investing at seed is really tough, right? You just don't always know and try to get in person with founders and you try to figure out if they're the real deal and kind of like what their motivations are. And then at a certain point, I, I kind of started looking down and I look at their sneakers and it's the craziest thing. I, I'm giving away, you know, the alpha here. But if, yeah, if you're, if you're looking at a founder and they've got dirty white sneakers on.

• 29:03Speaker 01

  Look at my sneakers.

• 29:04Speaker 00

  Yeah, perfect. You've got dirty white sneakers on. You're a real builder, right? You're in the arena.

• 29:08Speaker 01

  Yeah.

• 29:09Speaker 00

  And the reason why this is an interesting tell is that, you know, people that are busy building, they're locked in on their companies, they're sleeping at the office, right? They're working out of a house in, you know, close proximity to their founders, seven days a week. They don't have time to buy nice sneakers, right? They just put on the same pair of sneakers and they get dirty. And like, I invested in a company that Benchmark is an investor in, Gumlute. And one of the founders of Gumlute had such dirty sneakers, they were falling apart, literally, they're like flapping.

• 29:35Speaker 01

  You're like, I don't need to hear anything else?

• 29:37Speaker 00

  No, first of all, obviously, I love the company and both founders, but I had to buy him new shoes, right? Like, his shoes were so bad. And so, anyway, I've just found that like, the real builders, you know, they sort of just, they look the part.

• 29:48Speaker 01

  I love that. What's different here versus like a B2B founder, if anything? You know, like, some of this stuff exists in B2B. But I'm curious, like, you know, you've also obviously invested in a lot of B2B companies. What's different? Like, is there some, like, when you're meeting somebody on a B2B idea, do you think differently about any of those things you just said?

• 30:04Speaker 00

  Yeah, I mean, I think with B2B founders and B2B companies, you kind of need like, a little bit more subject matter expertise. You know, you may not be the customer, and so you have to have lived the problem or know lots of the customers, or sort of have deep, deep insights from having worked in the space. Starting a consumer company, it really only requires those three things, right? Like, you are a consumer, I'm a consumer, and if you have the taste, if you have the judgment, and you kind of know where people's ideas are going in the near future, you can build a consumer company without much domain expertise.

• 30:35Speaker 01

  Yeah. This is a question that's relevant for you now as a full-time investor. This is a selfish question for me. When you think about the investors that were helpful to you, and, you know, on your whole journey through Instacart, the types of investors or the specific actions, like, what was genuinely valuable to you?

• 30:51Speaker 00

  We obviously have had some amazing investors at Instacart. And I think when you, when you think about what founders get from investors, you know, they get three things, in my opinion. Obviously, the capital, right, on some sort of terms that you negotiate. They get the help, and, you know, some investors are more helpful than others. And then they get the signal. And particularly for early, early rounds, right? I think founders underappreciate the signal. Having a great foundation of your company and having exceptional investors is going to be something that follows you for the rest of your company. And every subsequent round, the new investors who are going to issue a term sheet are going to call the existing investors, right? So you want to have a great relationship with your early investors, and you want them to be high-signal, awesome investors.

• 31:31Speaker 01

  Why do you think it's underappreciated?

• 31:33Speaker 00

  Because I think founders often negotiate a lot around the terms and the valuation.

• 31:37Speaker 01

  And just the focus at the moment of the deal is the equity.

• 31:40Speaker 00

  Yeah. And like, rather than that, the focus should really be like, who is going to help me get from here to the next major milestone? And who is going to help me raise the next round in terms of having a great signal, right? Having Jack Altman invest in your company is a way bigger deal, you know, at a certain stage than it is having just a party round of other random investors.

• 31:59Speaker 01

  And then, I mean, I assume implied in sort of the language you're using, at some point, it's not the most important thing. Like, once your company has its own big brand, it's like, you know, your brand is bigger than your VCs at some point, and so it doesn't matter anymore.

• 32:10Speaker 00

  And I think you get people around the table and on the board that can help you in all the places you need help. And then the incremental next investor is maybe not as valuable in terms of help or signal.

• 32:19Speaker 01

  Right.

• 32:19Speaker 00

  And more valuable in terms of capital.

• 32:20Speaker 01

  Right. It's like you only need one or two of those.

• 32:22Speaker 00

  Yeah. And you gotta be careful not to take advice from too many investors, right?

• 32:26Speaker 01

  I actually think that's the other, the flip side is you have too many people like that. You have too many egos around, like, that can also be a problem.

• 32:31Speaker 00

  And I have sort of a framework for founders on how to take advice or not take advice from investors.

• 32:36Speaker 01

  Let's hear it.

• 32:37Speaker 00

  So you've got three kinds of decisions in your company.

• 32:39Speaker 01

  All right.

• 32:39Speaker 00

  Science.

• 32:40Speaker 01

  Yep.

• 32:40Speaker 00

  Art and religion.

• 32:41Speaker 01

  We're gonna put a little visual up behind here.

• 32:43Speaker 00

  Great. Science, art and religion. Science decisions have a right answer. Okay? Great. Get advice from investors on that. Either they've solved the problem themselves, or they're on five boards where those companies have solved the problem. Get the advice. Then you have art, right? That's why you're a great founder. You have taste and judgment, right? But you're inventing things. You're engaged in creative destruction, right? Only you can make the art decisions. Those are the ones that don't have a right answer and where you're really generating sort of a new, you're blazing a path, right? You can't outsource that and you can't get advice on that. You gotta hold that to yourself. And then there's religion, right? This is how you work. Like, what kind of company do you want to be? And there's a lot of right answers to that question, but it's a personal decision. And you ask yourself, what are my values? What are my co-founder or my early team's values?

• 33:26Speaker 00

  And then you make a set of values and you, and you sort of answer that question by looking at your values. Get advice all day long about science-related things from investors, but on anything else, especially on, on sort of the taste-type decisions, just ignore them.

• 33:38Speaker 01

  Yep. How does all of this make you think about, like, you as an investor and like what you want to build? How you're doing workshop and all of that.

• 33:45Speaker 00

  I'm trying to be the investor that I wish we had when we were this, this early, right? And help people in the first year of their companies. And I try to be very careful not to give too much advice, not to give advice on topics where I'm not an expert. And instead to, to help people network.

• 33:59Speaker 01

  That's a good instinct, by the way, because a lot of people would be like, hey, you founded Instacart. Whatever you say, I'm gonna run with.

• 34:04Speaker 00

  Yeah, I mean, if you're building an operationally complex marketplace, I have every piece of advice you could possibly want.

• 34:10Speaker 01

  No matter how good your investors are, you should definitely listen to a hundred percent of whatever anybody thinks.

• 34:14Speaker 00

  A hundred percent.

• 34:15Speaker 01

  Yeah.

• 34:15Speaker 00

  Yeah. And also don't take a bunch of people's opinions and average them. That's also a bad way to go.

• 34:19Speaker 01

  That's a horrible way to go. That's awful.

• 34:21Speaker 00

  A lot of founders do that.

• 34:22Speaker 01

  Yeah, they do. Why are you building workshop in the sort of like coworking type of way? Like, why do you have a space for that?

• 34:28Speaker 00

  So I got a founder space. I like to work alongside founders, you know, in person. And I just think San Francisco is the best place in the world to build a technology startup.

• 34:36Speaker 01

  It's crazy how it recentered. I mean, during COVID, we like almost lost it.

• 34:39Speaker 00

  I don't really think it was ever gone. I mean, I stayed and I.

• 34:42Speaker 01

  You know, I'm a big suburbs guy.

• 34:43Speaker 00

  And I, you know, I'm a big city guy. I think the city's great and I think the founders stayed and new founders have come and, and like, it's really the best place to build.

• 34:51Speaker 01

  A funny thing I was realizing, um, you know, we've got this friend group and, you know, people have had on the show. And there was a point earlier on where both you and I were founders and, you know, a bunch of VC friends. And then a couple of years ago, I became VC and now look at you. It's just, it's just a crazy life cycle, isn't it?

• 35:06Speaker 00

  Yeah, it sort of gets, gets everyone.

• 35:08Speaker 01

  Yeah. It's a, are you excited for it?

• 35:10Speaker 00

  I love helping founders and this is just like the best platform on which I can help founders. So that's why I'm excited.

• 35:16Speaker 01

  Well, this was really nice to have a serious conversation with you for once. I really enjoyed it.

• 35:19Speaker 00

  Yeah, for once, maybe we should do more of this.

• 35:21Speaker 01

  We should do more of this. This has been special. All right, Max, thank you for doing this.

• 35:24Speaker 00

  Thanks, Jack.