SAN FRANCISCO — Last summer, Instacart had a rough reality check. After a year of explosive, pandemic-driven growth for its grocery delivery business, people were returning to grocery stores. Sales slowed. New customers were harder to find. It could have been the kiss of death for a startup that expected to grow very fast.

So Apoorva Mehta, Instacart’s co-founder and CEO, asked Uber and DoorDash, two top competitors, if they were interested in acquiring or partnering with his company, said eight people with knowledge of the talks. Nothing came of the discussions, and in early July Mehta said he would leave the top job at his company but stay on as chair.

The tumultuous summer set the stage for Instacart’s current uncertainty as it tries to avoid becoming another pandemic boom company that has fizzled, like Peloton or Zoom. Mehta’s successor, Fidji Simo, a member of Instacart’s board and a former executive at Facebook, has to lead the company against competition that has become tougher since the pandemic started. She also has to manage skeptical investors who have been waiting at least four years for Instacart to go public.

When that will happen became murkier last month when, in a rare move, Instacart said it was slashing its valuation by 40% to $24 billion, citing the “market turbulence” that has roiled technology companies. In addition, top executives have left, including two presidents, one of whom resigned after just three months.

Instacart faces tougher competition from its gig economy peers, as well as from new instant delivery startups like Gopuff and grocery chains’ own online services. Revenue was still growing last year, but not nearly as fast as it did in 2020. Sales growth also slowed sharply, to 15% last year from 330% in 2020, according to 1010data, a market research firm, while the average size of each order shrank, the company said.

In a recent interview, Simo said she had a plan to tackle those challenges. She has a new vision for the business that includes selling software to grocers and selling more ads inside the app, where people place their orders.


Simo attributed the executive departures to people who perhaps didn’t want to stay at a company that no longer felt like a little startup. Instacart’s growth was still “stupendous,” she added, although the company did not reveal exact numbers.

“Grocery delivery, generally, is a service that people love,” Simo said. “It adds real value to people’s families, and so I believe that that is very much here to stay.”

Instacart, which was founded in 2012, has struggled to show that its business model works and that it is compatible with the historically thin profit margins of the grocery business.

The company allows people to order groceries from its partnering stores through its app, then dispatches freelance shoppers to gather and deliver them, charging fees to customers and the grocers. It pays its gig workers by the job and treats them as independent contractors — a model that has led to labor fights over worker conditions.

In 2020, the San Francisco company found success in the pandemic. Revenue hit $1.5 billion, and while Instacart was not profitable by normal accounting standards, it began generating more cash than it was burning, a person familiar with the company’s finances said. The company said order volume jumped as much as 500%. Instacart raked in more than $1 billion in venture funding at a valuation of $39 billion, up from $7.9 billion before the pandemic.

By late spring of 2021, as the country emerged from lockdowns, that momentum had faded. Instacart’s sales in the second quarter of the year fell sharply. Plans to go public that year looked less certain.


Mehta’s attempt to sell Instacart was a long shot. He approached Dara Khosrowshahi, CEO of Uber, about a partnership. That fell through because Uber had recently acquired a similar delivery startup called Cornershop. The companies also talked about the possibility of Uber acquiring Instacart, which would have valued Instacart between $35 billion and $42 billion. But that also fell through, said four people familiar with the conversations who were not authorized to discuss them.

Mehta also called Tony Xu, CEO of DoorDash, to ask if the food delivery service would want to acquire Instacart, five people said.

Mehta told each company that he was talking to one of its biggest competitors, so it had to act fast. But the discussions did not get far. The other companies had concerns about the price and antitrust scrutiny. Instacart declined to comment on deal talks, which were previously reported by The Information.

Around that time, there were tense discussions between Mehta and a group of board members led by Michael Moritz, an investor from Sequoia Capital, said four people with knowledge of the situation. The talks with DoorDash and Uber were part of those discussions, some of those people said. (Still, Instacart and Mehta have said his departure was a voluntary move.)

Before Simo was named CEO in July, there was a brief discussion about making her and Mehta co-CEOs, three people with knowledge of the situation said. That idea was quickly abandoned, and Mehta became chair. (The CEO of The New York Times, Meredith Kopit Levien, joined Instacart’s board of directors in October 2021.)

Carolyn Everson, a former Facebook executive who became Instacart’s president in September, left the company after just three months — the highest-profile departure from the company, which also lost its chief revenue officer as well as the person who was president before Everson. Everson was not happy because she ended up spending most of her time working on the company’s relationships with grocery executives, a person with knowledge of the situation said.


Instacart’s business has continued to grow through the management turmoil, hitting $1.8 billion in revenue last year, a person familiar with the business said. But that was far from the quadrupling growth of 2020.

Grocery industry experts and some inside Instacart have floated the idea that the company should cut out grocers by opening its own warehouses of goods, which could be more lucrative. But Simo has steadfastly opposed the move. Instead, she has tightened Instacart’s relationships with grocers, including Kroger, Publix, Wegmans and Costco.

Instacart’s next act hinges on Instacart Platform, a set of new software and advertising tools the company announced in March, with an aim of becoming more of a technology provider to grocery companies. With tools like “Carrot Ads” and “Carrot Insights,” Instacart said it would bring its own advertising capabilities and analytics to grocers’ websites. The company is also introducing fulfillment centers stocked by its grocery store partners to help it deliver products in 15 minutes.

But after Instacart Platform was announced, grocery retailers were underwhelmed and confused by how it was different from what Instacart already provided, said seven grocery industry executives and consultants, some of whom asked to speak anonymously to avoid damaging their relationships with Instacart.

Burt Flickinger III, a longtime industry consultant, described the announcement as something “grown in a hothouse at Harvard or Stanford that really had no common-sense, commercial application for the common shopper or retailer.”

Retailers have viewed Instacart as a helpful introduction to online delivery but not a necessity, the grocery industry people said. Grocers must pay Instacart fees to be part of the platform, and some think they are better off delivering to customers themselves. Large grocery companies, including Walmart and Albertsons, have also diversified beyond Instacart, offering to deliver groceries through DoorDash, Uber or their own services.


Simo said that Instacart maintained close relationships with its grocer partners and that she had not expected grocers to think the newly announced services were novel, because “I’ve been preaching that vision to them ever since I started.”

She also dismissed concerns about competition: “We have 10 years of experience building grocery products,” she said. “All of the new entrants in the space have, at best, 18 months.”

When Instacart cut its valuation in March, some employees complained that it amounted to a pay cut for employees who were offered shares at the higher price, three employees said. Some of them were given more shares as a result of the cut.

Simo has still hired aggressively, with a plan to significantly add to the 1,000 people who joined the company last year. The company has 3,000 employees, and executives believe new employees will see more upside to being offered stock at a lower price. Still, current and former employees say some prospective candidates have been hesitant to join Instacart because of turnover and because some aren’t sure the company will turn a profit over the long term.

Every week at all-hands meetings, employees have asked Simo whether Instacart is on track to go public, two employees said. She has responded that it is.

“Companies are challenged when they stay private too long,” said Jeremy Abelson, an investor at Irving Investors, which owns shares in Instacart. “The question is: How much meat is left on the bone?”