Misfits Market, an online marketplace that sells imperfect foods at a discount, announced today that it has raised a $200 million Series C round of funding. According to a press release shared with The Spoon, the round was co-led by Accel and D1 Capital, with participation by existing investors including Valor Equity Partners, Greenoaks Capital, Sound Ventures, and Third Kind Ventures. This brings the total amount raised by Misfits to $301.5 million.
Misfits Market started out selling subscriptions to boxes of “ugly” produce back in 2018. This allowed customers to buy misshapen but perfectly edible fruits and vegetables at a discount while rescuing food from going to waste. Since then, Misfits has expanded to offer a wide range of other imperfect pantry and packaged items that might otherwise be discarded. These include products with misprinted labels and products that are shipped to the wrong location.
The global pandemic actually created a number of new opportunities for Misftits Market last year. With stadiums, schools, restaurants and more shut down, existing supply chains needed to re-direct their products to new customers. For example, with movie theaters closed, there was a glut of corn for popcorn that Misfits could purchase and sell at a discount to its customers.
Additionally, Misfits has benefited from the pandemic-induced boom in online grocery shopping as customers limited their trips to physical stores. Abhi Ramesh, Founder & CEO of Misfits Market told me by phone last week that his company grew 5x in scale last year.
With its new funding, Ramesh is hitting the gas to accelerate Misfits’ growth. The company opened a new 250,000 sq. ft. headquarters in New Jersey and was able to double its order capacity. And while Misfits is predominantly available in the Eastern U.S. right now, it will be expanding to the West Coast with a new facility in Utah. One in the Pacific Northwest will follow after that.
Misfits is also expanding its grocery categories with the addition of protein. Most customers might blanche at the thought of “imperfect meat,” but Ramesh explained to me that there is a lot of excess in the protein supply chain as well. With something like salmon, for instance, there are often 3 oz portions leftover from trimming fillets. Misfits can bundle those leftovers and sell them at a discount.
Misfits Market’s funding is also coming during a time of big investment in grocery related startups that are aiming to upend our traditional notions of food retail. A number of smaller, delivery-only grocery stores like Fridge no More and Gorillas are popping up around the world, making groceries something more akin to a utility. Online grocer Weee! is leading the way by focusing on selling Asian and Hispanic foods. And retail infrastructure startups like Shelf Engine and Trax are developing tech to re-invent how store inventory is managed.
Most relevant to Misfits, however, is its main rival, Imperfect Foods, which has also expanded from ugly produce to become more of a full online grocer that taps into existing supply chain deficiencies. Imperfect raised a $110 million Series D round in February, which means we can probably expect a marketing blitz from both companies this year.
The question over both Misfits and Imperfect at this point however is what happens post-pandemic? Will people still want to order groceries online when they can just go to their local store? Ramesh said he isn’t too concerned about that. “Yes, there will be some sort of reversion to the mean,” Ramesh told me. But because his company is offering discounts and value on products people already buy, his customers will continue to shop with Misfits.
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