Amazon Inc.'s acquisition of Whole Foods Market Inc. pits the technology giant directly against a wave of venture-backed startups that have been trying to change the way consumers buy food.
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The deal is a blow to grocery delivery upstart Instacart Inc., which recently raised at least $300 million at a roughly $3.4 billion valuation.
The tie-up could also complicate plans for many other food and meal delivery startup, including Blue Apron Inc., Doordash and Postmates.
Blue Apron declined to comment, citing a quiet period as it prepares for an initial public offering. Doordash did not immediately respond to a request for comment. Postmates declined to comment.
Venky Ganesan, a Menlo Ventures managing director, said the move is "massively disruptive" for the category.
"It's like you're playing chess and someone throws the chess board in the air," he said. "It's a completely new game now."
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Instacart delivers Whole Foods groceries, and the grocer is an investor in the company. Its stake totaled less than 1%, a person familiar with the matter said.
The purchase of Whole Foods comes as Instacart has aggressively been forming partnerships with retailers beyond Whole Foods, including recent alliances with Wegmans Food Markets and Publix Super Markets Inc. Instacart has also diversified its partnerships into brick-and-mortar retail giants such as Target.
Mr. Ganesan said the deal calls the valuations of food and grocery delivery companies into question.
"Today's news lowers those valuations," Mr. Ganesan said. "If they were a public stock, they would have traded down."
The deal did drive down the stocks of publicly traded retailers such as Wal-Mart Stores Inc., Target Corp. and Costco Wholesale Corp.
Amazon's big buy could ignite interest in more partnerships among existing brick-and-mortar retailers, who will have an urgency to move into the category now that Amazon is taking a more aggressive position.
"It validates how strategically important this category is," said Semil Shah, founder of Haystack and an investor in Instacart.
Instacart signed a new partnership with an unnamed grocer on Friday, a person familiar with the matter said.
The deal could also cause traditional retailers to be more acquisitive, one Instacart investor said.
"It lights a fire under Wal-Mart to make a big move here," said Canaan Partners General Partner Hrach Simonian.
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(END) Dow Jones Newswires
June 16, 2017 18:24 ET (22:24 GMT)