HomeGrocer.com Infused With Cash, Plans Expansion To 20 U.S. Cities

Online grocer HomeGrocer.com announced today that it has received an additional $100 million (US$) in financing and will dramatically expand its service to an estimated 20 markets across the United States.

The Kirkland, Washington-based company said that the fourth-round of financing was led by minority shareholder Amazon.com, as well as Kleiner Perkins Caufield & Byers, Hummer Winblad and the Barksdale Group.

Also joining in the financing were new investors Martha Stewart and a number of other venture capital firms.

The company said that the investment would fund the leasing of an expected two million square feet of warehouse space, add more than 1,000 delivery trucks and an additional 7,000 employees by the end of next year, and develop Web site upgrades and a multi-million dollar advertising campaign.

“Homegrocer.com improves people’s daily lives, obsesses over customers and has a great management team. We’re pleased to be part of it,” said Amazon.com CEO Jeff Bezos.

Battle in the Cyber Aisles

The investment will dramatically increase the company’s current service areas of Portland, Seattle and Orange County, California. The company did not specify any geographical regions in its statement, but surely it will be in major markets around the country.

For a company founded just last year in an industry that has yet to break through on a large scale, Homegrocer.com has done an admirable job of securing working capital. The company sold a35 percent stake to Amazon.com in May for $42.5 million and received additional funding from venture capital backers.

Stiff Competition

The company is not the only one in the online grocery field to snare major backing, however. Rival Webvan raised $275 million in July by selling a 6.5 percent stake, according to published reports. Japanese Internet investor Softbank and investment banker Goldman Sachs were said to be behind the investment.

Webvan, which is planning to build 26 automated warehouses at a cost of $1 billion over the next two to three years, cancelled its IPO last month after talks with the SEC. Published reports say that the SEC frowned upon company executives allegedly violating the “quiet period” leading up to an initial public offering.

Webvan was hoping to raise up to $325 million.

Peapod and NetGrocer are two other competitors in the online grocery industry. Jupiter Communications estimates that the industry could grow from $63 million in sales in 1997 to over$3.5 billion by 2002.