Misfits Markets, known for delivering ugly but edible produce at cheap prices, raised $85 million in a B round of funding led by Valor Equity Partners.
Other investors include Greenoaks Capital, Third Kind Venture Capital, and Sound Ventures, the venture-capital fund founded by Ashton Kutcher and Guy Oseary. Misfits has raised $101.5 million since its founding in 2018.
Abhi Ramesh, Misfits’ founder and CEO, launched the company with the goal of creating food access and reducing waste. Roughly 40% of U.S. produce is never eaten due to cosmetic imperfections or excess supply, according to the Environmental Protection Agency.
Misfits buys organic fruits and vegetables that are too big, too small, or maybe a bit lumpy from farmers and producers at a substantial discount. The start-up then sells these items directly to customers at a price that is up to 40% cheaper than grocery stores, Ramesh told Barron’s. He estimates that Misfits has relationships with roughly 200 farmers and producers. Since 2018, the company has “rescued” 40 million pounds of produce.
“This investment will help us reach more people for whom our product will be essential, whether they’re sustainably minded individuals interested in the rescued produce—or they’re a big household with a newly tightened grocery budget shopping the expanded Marketplace for discounted staples. Everyone deserves access to healthy food,” Ramesh said in a statement.
Misfits’s customers can choose from a “mischief” box, which serves up to two people, and offers 10 to 13 pounds of organic fruits and vegetables. It sells for $22. A bigger “madness” box, geared for four to five people, comes with 18 to 22 pounds of fruits and vegetables; it costs $35. (Misfit charges a fee of $4.50 to $5.50 for shipping.)
Misfits has extended its platform to include shelf staples like spices, coffee, chocolate, fresh herbs, grains, and specialty produce like avocados, which cost on average 25% to 50% less than retail store prices. Shelf staples come with different inefficiencies, Ramesh said. He pointed to a recent incident where an olive oil maker had a surplus of 50,000 cans after the label was printed backward. “We bought [the cans] for a 70% discount and sold [the cans] to customers at a 50% discount,” he said.
The Covid-19 pandemic caused sales at many grocery stores to rise. For example, Costco Wholesale (ticker: COST) was besieged by customers in March seeking essentials after stay-at-home orders were issued. Similarly, Misfits also saw a 400% spike in consumer demand due to the virus. The grocery-delivery service was forced to stop accepting new customers in late March. It has since added 400 new hires, Ramesh said. “The demand was overwhelming,” he said. Misfits began accepting new customers during the last week of May.
Misfits expects to use the $85 million raised in the latest round of funding to hire and grow. The New York start-up, which recently unveiled a state-of-the-art warehouse in Delanco, N.J., currently employs 700 people and expects to double its head count in the next year, Ramesh said. Misfits currently delivers its produce in 26 states, plus Washington, D.C., mainly along the East Coast and in the South. It recently added services in Arkansas, Mississippi, and Louisiana, and anticipates launching in Wisconsin, Minnesota, Iowa, and Michigan.
Despite these plans, Misfits is only tackling one-third of the U.S. population, Ramesh said. The company will be looking to service all 48 contiguous states over the next 1½ years. “We plan to be fully national by the end of 2021,” he said.
Write to Luisa Beltran at luisa.beltran@dowjones.com
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July 22, 2020 at 09:33PM
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Ugly Fruit Purveyor Misfits Markets Raises $85 Million - Barron's
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