HomeGrocer pulls in funding for expansion

The top-flight list of investors included venture capital firms Kleiner Perkins Caufield & Byers and Hummer Winblad Venture Partners, e-commerce giant Amazon.com, and better-living maven Martha Stewart.

Company president and cofounder Terry Drayton said the money would fund the company's expansion plans through the end of next year. HomeGrocer currently serves customers in Seattle; Portland, Oregon; and Orange County, California. However, Drayton said the company plans to open two new distribution centers by the end of this year and operate up to 30 facilities by the end of next year.

"You'll see us pretty much everywhere," Drayton said. "There's not a region that we don't plan on opening at least one facility."

HomeGrocer's expansion plans come as Webvan, one of its chief online rivals, prepares for its initial public offering. Webvan, backed by another set of top-flight investors, including Benchmark Capital and Sequoia Capital, placed a $1 billion warehouse order in July and announced plans to expand into 26 markets over the next two years. The company currently operates only in the San Francisco Bay Area.

Drayton said that HomeGrocer's new distribution centers will be built on the West Coast, focusing on California. The company opened a distribution facility in Orange County in September and plans to open a second distribution center in the area in a couple of weeks, he said. Drayton also hinted at the possibility that HomeGrocer will move into new California markets in the near future.

"We like all of the market around Los Angeles and all of the market around the Bay Area," Drayton said.

Expanding into the Bay Area would bring the company into head-to-head competition with Webvan, a prospect that didn't seem to affect Drayton.

"We look forward to it," he said.

At the same time, the company plans to move away from its West Coast base next year to focus much of its expansion on the Northeast, Drayton said. "We like Boston and the whole area around New York."

Drayton said the company received $20 million each from Amazon, Kleiner Perkins, and Hummer Winblad and $15 million from the Barksdale Group, which is headed by former Netscape chief executive Jim Barksdale.

In addition, Drayton said HomeGrocer received $5 million each from Liberty Digital and Madrona Investment Group as well as a "meaningful amount" from Martha Stewart.

The investment from Martha Stewart could lead to some partnerships between Martha Stewart Omnimedia company and HomeGrocer, Drayton said.

"I think we'll be able to do some neat things together," he said.