Online grocery subscription service Misfits Market announced today that it has raised an $85 million Series B round of funding. The round was led by Valor Equity Partners with participation from Greenoaks Capital, Third Kind Venture Capital, and Sound Ventures. This brings the total amount of funding raised by Misfits to $101.5 million.
Founded in 2018, Misfits Market started out selling imperfect or “ugly” produce boxes via subscription. The company has since expanded into other categories. It now sells all manner of packaged food considered imperfect because of things like inventory trucks being sent to the wrong location or labels printed backwards on items.
You may think that you can’t build a business on misprints, but as Abhi Ramesh, Founder & CEO of Misfits Market explained to me phone last week, you’d be wrong.
“There are a ton of manufacturing errors,” Ramesh said, “We purchased 50,000 units of olive oil because [the] label was printed backwards. Things like that happen constantly in the food system — manufacturing errors, mislabels, short coded items.”
Misfits claims that customers who buy these imperfect items save an average of 25 – 50 percent of retail prices. The catch however is that these imperfections are not consistent. That particular brand of olive oil isn’t going to misprint labels every month. Ramesh told me that while there may not be brand consistency, there are enough manufacturing issues across the industry that his market can still offer olive oil, it will just be a different brand from month to month.
Like so many other grocery related businesses during the COVID pandemic, Misfits Market has seen a surge in usage. According to today’s press announcement, the company has seen a 400 percent spike in consumer demand and has made 400 new hires since March.
Right now, Misfits Market only delivers to zip codes across the eastern half of the U.S. Consumers sign up for the service by choosing one of two different box sizes for produce, with the smaller one costing $22 and the larger going for $35. From there, they can access the other imperfect items in the marketplace. Ramesh said that eventually, Misfits Market will become more like Costco, where you pay a monthly membership that gives you access to the full store.
With $85 million now in the bank and a bigger customer base, they’ll be able to buy up even more misprinted product misfits.