Chasing Amazon: Target Buys Shipt, Techstars Teams Up With Rakuten

Corporate America’s acquisition game in online retail and e-commerce is continuing, this time with Target buying Birmingham, AL-based startup Shipt for $550 million.

The deal may not make the same sweeping waves as Amazon’s $13.7 billion acquisition of Austin, TX-based Whole Foods, but Shipt appears to have been waiting for a suitor since Seattle-based Amazon announced its deal this summer.

“The deal moved partnering with companies like us to the forefront,” Shipt CEO Bill Smith told Bloomberg in an article about the impact of Amazon’s Whole Foods acquisition. (It’s a comment that now seems a bit coy because Bloomberg published the article on Dec. 12, a day before Shipt’s acquisition by Target was announced.)

Like its main competitor, San Francisco-based Instacart, Shipt makes deals with grocery stores to deliver food and supplies to customers, and charges those consumers a fee for the service. Bloomberg reported that the Amazon deal has helped both Shipt and Instacart grow as retailers look to advance in the e-commerce game; the report notes that Shipt expects $1 billion in revenue next year and has moved into 22 new markets in 2017. (Similarly, Austin, TX-based Favor sells a service that delivers its customers anything, from groceries to fast food.)

The buyout of Shipt leaves Instacart as the potential next food delivery service that brick-and-mortar retailers might target for an acquisition. (Interestingly, Instacart founder and CEO Apoorva Mehta is an Amazon alum, having worked on the company’s fulfillment system.) Some other recent deals in delivery and e-commerce include Walmart’s acquisition of Parcel, Ikea’s purchase of TaskRabbit, and Ace Hardware’s majority buyout of The Grommet.

There’s new activity on the early-stage company side as well. Startup accelerator Techstars announced this week it is partnering with Japanese e-commerce giant Rakuten to run a new accelerator focused on Rakuten’s Viper messaging and voice application. The Singapore-based accelerator will focus on businesses that use messaging, which is potentially useful for food delivery services (“Wait, I want Cooler Ranch Doritos, not Nacho Cheese!”). The program is accepting applications starting in January, and is expected to start in July.

Shipt was founded in 2014 and raised $40 million earlier this year from investors including Greycroft Partners, e.ventures, and Harbert Venture Partners, according to multiple news reports. It raised another $20 million in 2016, according to regulatory filings.

David Holley is Xconomy's national correspondent based in Austin, TX. You can reach him at dholley@xconomy.com Follow @xconholley

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