Shopify

Instacart

Shopify

Shopify charges merchants a monthly subscription fee — $39/month for Basic, $105/month for Shopify, and $399/month for Advanced. Enterprise clients pay more through Shopify Plus.

On top of the subscription, Shopify takes a cut of every transaction processed through Shopify Payments (2.9% + $0.30, similar to Stripe). If merchants use a third-party payment provider, Shopify charges an additional 0.5-2% fee.

The genius of the model is stacking revenue. Subscription fees are the base layer.

Payment processing is the second layer. Then there's Shopify Capital (lending money to merchants), Shopify Shipping (discounted shipping labels), Shopify Email, the app store (Shopify takes 0% on the first $1M in app revenue, then 15%), and Shopify Balance (banking for merchants).

Every new service extracts more value from each merchant.

Instacart

Instacart operates as a marketplace connecting consumers with personal shoppers and grocery retailers. Revenue comes from multiple streams: delivery fees and service fees charged to consumers (typically $3.99+ per delivery), tips to shoppers (passed through, not revenue), retailer partnerships (grocers pay Instacart for access to the platform and fulfillment services), and advertising.

Advertising has become the crown jewel. Instacart Ads lets consumer packaged goods (CPG) brands like Coca-Cola, Procter & Gamble, and Nestlé pay for sponsored product placements within the Instacart shopping experience.

When someone searches for "chips," Doritos can pay to appear first. This is incredibly valuable because it's advertising at the exact moment of purchase intent.

Ad revenue exceeded $900 million in 2023.

The retailer partnership model is key. Unlike DoorDash or Uber Eats (which listed restaurants without permission early on), Instacart works with grocers as partners.

Over 1,500 retail banners including Costco, Kroger, Albertsons, and Publix have formal partnerships. Instacart provides the technology and shoppers; grocers provide inventory and stores.

Shopify

Tobias Lütke was a programmer from Koblenz, Germany who moved to Ottawa, Canada in 2002 because he fell in love with a Canadian woman. He wanted to sell snowboards online through a store called Snowdevil.

The problem was that every e-commerce platform in 2004 was absolute garbage. They were expensive, ugly, and painful to use.

Most required a computer science degree just to set up.

Lütke was a Ruby on Rails developer — one of the early ones, when Rails was still a brand-new framework. Instead of suffering through the existing tools, he just built his own e-commerce platform from scratch.

Snowdevil launched on the custom-built platform, and it worked beautifully. Other small business owners saw it and started asking if they could use the same software.

Lütke teamed up with Daniel Weinand and Scott Lake. In 2006, they launched Shopify as a product — a hosted e-commerce platform that let anyone set up an online store without knowing how to code.

The first year was slow. They had about 100 merchants.

But the product was so much better than everything else that word spread. By 2009, they had launched an API that let developers build apps and themes for Shopify stores, creating an ecosystem that would become one of their biggest advantages.

Instacart

Apoorva Mehta was a 26-year-old Amazon engineer in Seattle who quit his job in 2012 to start a company. The only problem: he had no idea what to build.

Over the next year, he started and abandoned roughly 20 different projects. A social network for lawyers.

A way to track restaurant wait times. Nothing stuck.

Then one day he was too lazy to go grocery shopping. He looked for a service that would shop for him and deliver everything to his door.

Nothing good existed. The existing options were grocery store delivery services that only worked during specific windows, had limited selection, and required ordering days in advance.

Mehta wanted to order groceries the way he ordered everything else online — immediately, from whatever store he wanted.

He built a prototype in 2012 and applied to Y Combinator. The demo was rough — he ordered a six-pack of beer through the app and had it delivered to a YC partner's house during the application process.

It worked. He got in.

Instacart launched in the San Francisco Bay Area in 2013 with a simple promise: order from your favorite local grocery store and have someone shop for you and deliver within an hour.

Shopify

Shopify grew by being the anti-Amazon. Their pitch was simple: Amazon is a marketplace where you're one of millions of sellers with no brand identity.

Shopify lets you build your own brand, own your customer relationships, and control your destiny. "Arm the rebels" became their unofficial motto.

The app ecosystem was a multiplier. By letting third-party developers build apps, themes, and integrations, Shopify created a marketplace of 8,000+ apps that extended the platform's functionality infinitely.

Need email marketing? There's an app.

Need inventory management? There's an app.

This meant Shopify could stay focused on the core platform while the community built everything else.

The Shopify Partners program turned freelance developers and agencies into a sales force. Partners who built stores for clients earned recurring revenue from referrals.

Over 10,000 agencies worldwide now specialize in Shopify development. It's basically a franchise model for tech.

COVID was rocket fuel. When physical retail shut down in March 2020, every small business in the world suddenly needed an online store immediately.

Shopify's new store creation surged 71% in Q2 2020. The stock went from $400 to $1,700 in less than a year.

Instacart

Instacart grew by solving a problem one city at a time. They launched in San Francisco, proved the model, then expanded to other major metros.

Each new market required recruiting shoppers, signing up retailers, and building enough consumer density to make the economics work.

The COVID-19 pandemic was the inflection point. Grocery delivery went from luxury to necessity overnight.

In March 2020, Instacart hired 300,000 new shoppers in a single month. Order volume increased 500%.

Years of planned growth happened in weeks. The pandemic proved that grocery delivery wasn't a niche — it was the future of how a significant chunk of the population would shop.

The enterprise play is the long-term moat. By providing white-label technology to grocers, Instacart becomes embedded in their operations.

Even if a grocery chain wanted to build its own delivery service, they'd need years and hundreds of millions to replicate what Instacart provides. The more deeply integrated Instacart becomes in grocery operations, the harder it is to rip out.

Shopify

The Amazon problem looms over everything. Amazon controls roughly 40% of US e-commerce.

Every Shopify merchant competes against Amazon, and many of them sell on both platforms. Amazon can always undercut on price, offer faster shipping, and has nearly unlimited resources.

Shopify's entire business depends on convincing merchants that owning their brand is worth more than Amazon's convenience.

The post-COVID hangover was brutal. After the pandemic boom, Shopify's stock dropped 80% from its November 2021 peak.

The company had hired aggressively during COVID, expecting the e-commerce shift to be permanent at pandemic levels. It wasn't.

In May 2023, Lütke laid off 20% of the company — about 2,300 people — and wrote a public letter admitting he had bet wrong on how much of the COVID shift would stick.

The fulfillment pivot was expensive. In 2019, Shopify announced the Shopify Fulfillment Network — their plan to build a warehouse and logistics network to rival Amazon.

They poured hundreds of millions into it. By 2023, they realized it was a money pit that distracted from their core business.

They sold the logistics operation to Flexport and wrote off the investment. Lütke called it "taking the medicine."

Instacart

The post-COVID hangover was brutal. After pandemic demand normalized, growth slowed dramatically.

The company's valuation dropped from a peak of $39 billion in early 2021 to about $10 billion at IPO in September 2023. Investors who bought at the peak saw a 75% paper loss.

The narrative shifted from "essential infrastructure" to "nice-to-have luxury."

Unit economics are perpetually tight. Paying a person to walk through a grocery store, pick items, bag them, and drive them to someone's house is expensive.

Unlike meal delivery (one restaurant, one bag), grocery delivery involves dozens of items per order, refrigeration requirements, and substitution decisions. Every order that requires a shopper to call the customer about an out-of-stock item eats into efficiency.

Amazon is the existential threat. Amazon Fresh, Whole Foods delivery, and Amazon's own logistics network represent a competitor with nearly unlimited resources and a Prime membership base of 200+ million.

Amazon has been willing to lose billions on grocery delivery to build market share. Instacart's advantage is retailer partnerships — Kroger and Publix use Instacart specifically because they don't want to help Amazon dominate grocery.

Shopify

Shopify Online Store is the core — build and run an e-commerce website. Shopify POS (Point of Sale) handles in-person retail with card readers and inventory management.

Shopify Payments is the built-in payment processor powered by Stripe. Shop Pay is the accelerated checkout — it saves customer info so returning buyers can check out in one tap.

Shopify Capital provides cash advances and loans to merchants based on their sales data. Shopify Fulfillment Network was their attempt to compete with Amazon on shipping (they scaled it back in 2023).

Shopify Markets handles cross-border selling — currencies, duties, and translations. Shopify Audiences uses anonymized data to help merchants find new customers on ad platforms.

Instacart

Instacart Marketplace — the core platform where consumers order groceries from 80,000+ stores for delivery or pickup, with personal shoppers fulfilling orders. Instacart+ — subscription service ($9.99/month) offering free delivery on orders over $35, reduced service fees, and credit back on pickup orders.

Instacart Ads — a retail media platform letting CPG brands run sponsored product listings, display ads, and coupons within the shopping experience. Instacart Platform (Enterprise) — white-label e-commerce technology that lets grocers build their own online ordering and fulfillment powered by Instacart's infrastructure.

Caper Cart — AI-powered smart shopping carts (from the 2021 Caper AI acquisition) with built-in screens, barcode scanners, and payment that let shoppers skip the checkout line.

Shopify

Bessemer Venture Partners, FirstMark Capital, Felicis Ventures, Georgian Partners, OMERS Ventures

Instacart

Sequoia Capital was an early and consistent backer. Andreessen Horowitz invested in growth rounds.

D1 Capital Partners led the 2021 round that valued Instacart at $39 billion. Existing investors including Valiant Capital, T.

Rowe Price, Fidelity, and Tiger Global participated across rounds. Y Combinator was the starting point (Summer 2012 batch).

The September 2023 IPO on NASDAQ priced at $30 per share, valuing the company at approximately $10 billion.