Company will use proceeds to expand its area of operation Misfits Market Inc., an online grocer specializing in delivering food that would otherwise be wasted, completed a $200 million financing round.
The company is now valued at $1.1 billion, according to a source familiar with the matter who asked not be named because the valuation is private. The Round C funding was co-led by Accel and D1 Capital Partners. Existing investors, including Valor Equity Partners, Greenoaks Capital, Sound Ventures and Third Kind Venture Capital, also participated, Misfits announced on Wednesday.
The company offers food that would otherwise go to waste, often for cosmetic reasons, at discounted prices. Its offerings range from fresh, organic fruit and vegetables to snacks and spices. Unlike other online grocers, Misfits focuses on suburban and rural markets instead of urban ones. It sees low prices as a core part of its sales pitch.
The business has been boosted by the pandemic as more shoppers avoid grocery stores and order food online instead. Abhi Ramesh, founder and chief executive officer of Misfits, said that at one point, the trend was so pronounced that the company for a time had to stop accepting new customers. By the end of April 2020, it had a nearly 100,000-person wait list. It took until early June for the list to be cleared.
Overall, the pandemic sparked a quintupling of active customers and order volumes last year, and the company shipped to more than 400,000 customers across the country.In an interview, Ramesh said he doesn’t expect to see that kind of overnight spike again, but that core metrics are being sustained: Shoppers are returning with the same frequency and baskets are staying the same or even growing.
“We’ve seen a structural shift in buying food online,” he said.
Investor Accel agrees with that assessment. Ryan Sweeney, a partner at Accel and a new member of the Misfits board of directors, said that the way people buy groceries “is changed forever.”
But while there’s plenty of demand for delivery services, there isn’t a lot of room for error, he added. “Grocery and food are thin-margin businesses and you need to be able to execute,” Sweeney said. He opted to back Ramesh and his team because of their ability to pull off the logistics.
Misfits will use the new funds to expand in the U.S., including with a new warehouse in Fort Worth, Texas. The goal is to offer 100% coverage in the lower 48 states, Ramesh said. It will also add new product categories and grow its procurement teams and technological capabilities.
Grocery delivery services have boomed over the last year. Instacart Inc., which delivers goods from grocery chains and other stores in much of the U.S., hit a $39 billion valuation recently. Among smaller operators, Imperfect Foods Inc., which like Misfits says it reduces food waste by selling produce that was rejected for cosmetic reasons, reported a revenue run rate of $500 million for 2020. Another competitor, Good Eggs Inc., more than doubled its customers last year.