How 29 year old founder Abhi Ramesh who Built a $1 Billion dollar Start-Up Called Misfits Market (Startup Motivation and Positive story, Learning)
Abhi Ramesh , Misfits Market is an online grocery delivery service that sells “ugly” organic produce for cheap. In the first four months of 2021 alone, Misfits Market has rescued the same amount of food as it saved in 2020 as a whole. In 2020, Misfits Market shipped 77 million pounds of food to more than 400,000 households across the US. Since launching in 2018 Misfits Market has expanded to both coasts and has over 1,000 employees and has received over $300 million in funding. Bloomberg reports its valuation tops $1 billion putting it into unicorn territory. But Misfits Market wasn’t an obvious success. In fact, it was just one of many businesses started by its 29 year old founder Abhi Ramesh.
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| Image of Abhi Ramesh Founder Misfits Market | Image Source: |
Abhi Ramesh (Misfits Market startup,Life Journey and Positive Learning)
What I probably took too lightly at the time,
looking back, was that like if for whatever
reason, I would be sitting with a ton of
credit card debt if that whole thing didn't pan out.
Misfits Market is an online grocery
delivery service that sells ugly, imperfect
produce for cheap.
In 2020, Misfits Market shipped
77 million pounds of food to more than 400,000
households across the U.S.
But in just the first four months of 2021,
Misfits Market procured the same amount of food as it did
in all of 2020.
In fact, since launching in 2018,
Misfits Market has expanded to both coasts and has
over 1,000 employees, and
it has received over $300 million in funding.
Bloomberg reports its valuation tops $1 billion,
putting it into unicorn territory.
But Misfits Market wasn't an obvious success.
In fact, it was just one of many businesses started by
its 29 -year -old founder, Abhi Ramesh.
There are three numbers to look out for in
this story:
$35,000: The amount Abhi left on the table
to pursue his dream of entrepreneurship.
$150,000: The amount of credit card debt
he personally took on to launch Misfits Market.
$350 million: Misfits Market's expected
sales for 2021.
Perfect. All right, thanks.
Take it away, Nate.
Here's how Abhi Ramesh built Misfits Market
into an online grocery juggernaut.
For CNBC Make It, I'm Nate Skid.
This is Founder Effect.
Abhi's story starts like so many others.
When his parents were just 28 -years -old,
they risked it all to move he and his brother from
India to the U.S.
in search of more opportunity and a new life.
His family settled in suburban Atlanta,
where he spent a lot of time alone in his bedroom, dreaming
up crazy ideas for potential ways to get rich.
Then he discovered Amazon Marketplace
and saw his first business opportunity.
My idea was we have all these required
reading books and textbooks that like high school made us
buy every year.
And then they went stale after 12 months
and no one knew what to do with them.
And so I basically went to all my classmates and
I was like, "I will buy your textbooks and your
required reading books for, you know, $20.
$30. You know, money that matters to you."
And then I go and resell all of this on on Amazon for, you know, $80 or $90.
And for me, it was like a huge deal.
It was my first time doing any of this stuff.
I kind of learned how to be scrappy.
How to get something off the ground.
That wasn't the only or even most
successful business he started in high school.
His parents were adamant that
he get good grades, apply to top colleges and nail his SAT.
It was the latter where he found an income stream.
I had an SAT tutoring company in the
back half of my high school years because I got a really good
score on the SAT and I had a few
friends who scored well as well.
And so we ended up banding together
and built the tutoring program and
basically sold tutoring
service to other people.
He considered his ventures as hobbies,
just a way to earn some cash on the side.
But the experience left a taste in his
mouth for the freedom that comes with entrepreneurialism.
Here I am sitting in a building with 1,000 other people,
you know, doing the same thing.
And it certainly wasn't as fun as like reselling
books on Amazon, which is kind of crazy to say.
So I ended up actually getting drawn back into the
entrepreneurship world and I actually restarted
that tutoring company that had been
kind of worked on in high school.
This time he added a software component
and developed a predictive algorithm.
The only limitation for the company was his time.
In 2012, two years into the finance program at
the Wharton School of the University of Pennsylvania,
he made a decision to put his education on hold.
I was like, "I can't do this for real while I'm in school."
So I took a year off from school.
These days, gap years are a lot more common.
Back then, it wasn't common.
So I actually got a lot of heat from
the Penn administration, from my parents for
dropping out of college for a year.
I moved to San Francisco and then I lived in L.A.
for a little bit. I worked on a bunch of startups.
Abhi actually raised $25,000 from an incubator
to build something, anything.
He founded three companies in quick succession.
First, there was the men's shopping
platform called TrendBent.
We got off the ground.
We got like 5000 customers.
They were paying. And then we're like,
"This is too hard of a business to scale."
Big mistake, because now there's a company
called Stitch Fix, which does pretty much the exact same
thing.
Then there was StorTok, a social
media shopping application.
The social buying.
Interesting idea. I think it was probably
early for the times.
Then he took on health care.
All three of these didn't go well.
So I was like, "OK, I think getting a
company off the ground is hard and probably not for me."
After taking stock of his failures
, he realized he skipped a crucial step.
He needed some real world experience.
So he finished his degree and went to work at
an asset management company called Apollo, where he
landed in a department called "opportunistic investing."
But while he was there, he befriended
a colleague who ended up at a prominent VC firm.
That friend would later play an outsized
role in Misfits Market success.
I lasted ten and a half months, 11 months.
And the reason I remember that and not a year,
it was actually a big decision.
You get a bonus at year end.
12 months in.
That decision cost him a bonus of about $35,000 .
What was painful for me was being on
the investor side of the table.
We met management teams of these incredible
companies that had scaled from zero to, you know,
X over the course of 3 or 4 or 5 years.
The misery for me was less so I hate my job.
It was more so like, "My job is fine.
I really want that guy's job.
Like, that's really what I want to be doing."
And I've, you know, I've tasted enough of it.
I tried this in college.
I tried this in high school.
They didn't quite work.
But like, I have the foundation.
Now, I have a finance background.
I understand how to code.
I've tried a few things a few times and failed.
Like, I think that I need to take a crack at this again.
So in 2014, he moved back to San Francisco
and started yet another company with two co-founders.
An intensive 12 -week coding boot camp called Horizons.
That company lasted just over 2 years
and graduated some 700 students.
But it was apple picking while on a
rural farm in Pennsylvania with his
girlfriend where he put it
all together.
I don't want to sound like this is like
the cliche light bulb moment.
I think it's part of the light bulb moment.
There's a couple of different light bulb moments.
But, I spent some time talking to the farmer
there and I was like, "Hey, you know, like,
who do you sell to?
And what do you do with all these things?"
And I think the most interesting thing was I was like,
"All the apples are on the ground.
Very few of them are on the trees.
What do you do with all these apples on the ground?"
He was like, "Well, you know, those are all like number
two and number three grade apples.
Those can't really be sold to stores.
So we'll put them in the cold storage
shed for a month and a half.
And if we can't sell them to our neighbors
or anything like that, we'll toss them.
In high school, he discovered arbitrage.
Buying textbooks low and selling high.
In college, he learned about building
a distribution company with TrendBent.
He saw the importance of creating a
seamless shopping experience with Store Tok.
And at Apollo, he was at the table as startups
pitched their ideas on how to scale up.
But he couldn't shake what that farmer told him
about what happens to those number two apples.
By the time it kind of got to a point where, OK,
the idea sort of bursting out of my head and I
have a pretty good plan on
how to implement and get off the ground.
The end of the Horizon's days were already there.
And so we end up shutting that down.
And I was like, "All right, my next thing is
I'm going to get this company off the ground."
It wasn't named at the time.
And so I moved to Philadelphia permanently and said,
"All right, let's do this thing."
Drove back to actually the exact same farm that
we did that apple picking in.
Really? Yeah, that same farm.
He found a USDA list of organic farms in
the region and called every one of them.
50 in all. Then, he spent the next few months building
relationships with about a dozen farmers.
His goal was to get them to sell them
their number two or three produce cheap.
Dirt cheap. So each time he visited their farms,
even if it was just to say hi, he'd buy
about $50 worth of produce.
I lived in a studio apartment.
I started stacking.
I had, like, peaches, apples, tomatoes,
onions, all in my apartment.
There was no business to sell them yet, but like
it was just my way of saying thank you for your
help. So I'd keep buying the stuff.
Meanwhile, he built a pre-order page on Shopify
to see if there was demand for ugly organic produce.
All he needed was a healthy list of email addresses.
So you saw the supply side.
You knew that there was supply, right?
You went apple picking.
You see the apples.
But, like, what was your sense of the demand?
Because, you know, these are farmers.
They understand that they have t
his number two apples, whatever they're called.
They didn't see that opportunity.
So why did you? I think the short answer is
because I'd spent so much time trying to build
these other consumer facing businesses.
Whether it's the social shopping,
social buying app or TrendBent.
The fashion one or even like the tutoring companies.
I spent a lot of time selling to consumers and,
you know, other products.
Not food, obviously. And I had a pretty
decent sense of what would resonate in terms of value
proposition. And I think the idea that
I could buy something that on the supply side wasn't
valued and sell it to a set of consumers at a lower price point,
therefore transfer that value to them.
I had a hunch that there was demand there.
He spent $150 on a logo, $1,000 on ads,
and then did the unthinkable.
He took out five credit cards and maxed them all out.
I applied for a bunch of different credit cards.
Approved in all of them. Got a decent limit across all of them.
And basically put those credit cards on Google and Facebook
and started spending against those credit
limits. All on outreach?
All on outreach.
And how much can I ask, do you
think all in all those credit
cards you put?
Because that's a big investment in yourself, man.
That has big risk, too, because by the way,
what I probably took too lightly at the time, looking
back, was that like if for whatever reason,
you know, I would be sitting with a ton of credit card
debt if that whole thing didn't pan out.
But, you know, it was probably $100,000 to $150,000 across those credit card
limits spent on paid advertising.
On a product, on a promise that you can deliver ugly fruit.
Maybe even one step further than that.
All I was acquiring was were email addresses, nothing else.
So on a on the bet that some chunk of
those email addresses would convert to real
customers, and that was something I didn't know.
Right? Like, I probably end up getting like 5,000 to 10,000
email addresses or something like that,
maybe a few more than that.
The bet was some large percentage of email addresses would
convert to customers, would pay
for a box. That part I didn't risk.
To say Abhi was bailed out by a close friend
who happens to be an angel investor is a bit of a
stretch, but not a big one.
Edward Lando provided a crucial influx of cash,
helping Abhi pay off his credit card debt so he
could start buying inventory.
Seems like this looks interesting.
I think you're going to have to raise some
money for it pretty soon.
Otherwise, those credit card bills
are going to come crashing down on you.
And, you know, again, I spent some time in finance.
So I also know that, like, if I had gone out to go raise
institutional capital from traditional funds
without a real business, without revenue,
without like a deck, I would be laughed out the door.
To keep overhead low, Abhi rented everything.
A 700 -square foot storage facility.
The fridge in the corner to keep the produce cold.
The trucks he'd use to deliver his packages.
He found a couple of employees on Craigslist
to help him box up the orders and use a navigation
app on his phone to help him find the most
efficient delivery route.
He maxed out at 15 boxes a day.
And so at some point I need to get more drivers.
And so I actually started hiring drivers, renting more vans.
I realized probably a month in that us delivering
on our own vehicles would prevent
scaling this quickly because it's a whole different beast.
Scaling kind of like a logistics infrastructure for last mile.
By the end of 2018, Misfits Market was shipping
about 200 boxes a week, which got the attention of
his buddy from Apollo.
You know, the one who left to work for that VC firm.
And so I had kind of explained to him the whole
story like, "Hey, this is what I did after I left.
The company where I worked at built this coding school.
Now, here's what I'm doing here at Misfits Market."
He's like, "Cool, interesting. Keep me updated."
And, you know, I would keep him updated pretty
much every week.
And be like, "Hey, we're shipping 20 boxes a week.
Now we're shipping 60 boxes a week.
Now we're shipping 200 boxes a week."
And at one point in time, you know, we're probably shipping a couple hundred orders a week.
He was like, "Hey, you want to talk to our investment team?"
Green Oaks Capital put up $2 million in that
first round and offered to provide any future VC the
company needed.
And I didn't shop around the offer.
I didn't go like go try to raise money from
ten other people just because, like, I wasn't
optimizing for that at the time.
You know, it wasn't about like getting
the best valuation or the least dilution.
It was really just, like, here are partners that believe in me.
Believe in what we're trying to do here
and they want to move quickly.
And I don't have to waste my time
doing three months of fundraising.
How long w as the time line between
you're picking apples to you sold your first box?
Four weeks.
A month.
It was time to invest in all areas of the business.
From physical operations and customer service to
the fulfillment center and the marketing
department.
Actually, I think the first official hire
was someone to run customer service.
Just because people were writing a bunch of questions.
Being like,
"What is this fruit?"
And, "Where's my box??
And so we had a customer service hire
who still works for us, by the way.
I'm proud to say.
Our second hire was someone in the fulfillment
operations side to help manage the warehouse.
And our third hire was someone to
run purchasing and procurement.
To go and build these farm relationships,
to scale them, to manage the weekly purchas ing,
to figure
out, you know, how much we needed.
Abhi set aggressive goals for the company,
but Misfits Market easily beat them.
Its customer base doubled week after week.
In under a year, Misfits Market went from a
700 -square foot warehouse into a 10,000 -square
foot facility. But Abhi wasn't about
growth for the sake of growth.
The bigger Misfits Market became, the more
leverage he had and the lower the company's
prices.
This kind of goes to the logistics point that I made earlier.
For us, like, growth and scale.
You know, they're important from
business perspective because it's important for every
business to grow in scale. But for us,
it was also important because, like, growth in scale
meant we're able to kind of like provide
access to a much larger chunk of people more quickly.
It's that flywheel that growth in scale means
that we have more efficient operations because we can
leverage scale. More efficient operations means lower costs.
Means we can pass on more savings to customers.
We pass on more savings to customers.
You go back to that access part of the flywheel.
The access affordability part of
the flywheel and it keeps spinning.
So that was always the goal.
Was to, like grow, really quickly, get out
o as many zip codes as possible so we can serve as many
people as possible. Leverage that scale to drive cost
efficiencies, leverage those cost
efficiencies to drive further access and affordability.
Hence, like, growth was always.
It was like grow, grow, grow.
Not just to grow because growth,
big numbers are good, but because,
like, it is fundamentally part
of our mission and good for our value proposition.
By employing a large network of third -party carriers for
the last mile, Misfits Market was
able to expand into every single zip code in
New Jersey and New York.
Then came the pandemic.
It was basically like the week of
March 7th or something like that,
I think was when everything,
you know, went crazy.
And we actually ended up having to turn
off our check out page because we could accept no new
customers. We maxed at capacity at our fulfillment center.
We turned off check out for about, you know,
45 days or so while we kind of went through that
backlog just to make sure that
we were serving our existing customers
effectively before we took
out a bunch of new customer.
Misfits Market growth is continuing unabated.
By March 2021, exactly one year after covid
closed down the economy, Misfits Market was
five times larger with a valuation of $1.1 billion.
In April 2021, Misfits Market received
its series C funding of $200 million .
Last year, Misfits Market opened
an online marketplace where customers
can buy staples like
pasta, flour and herbs.
In its first full year in business,
Misfits Market generated about $200,000 in revenue.
By the end of 2021, Abhi expects
that number to hit $350 million.
And I guess like one of my final
questions for you would be what was the
what was your biggest money mistake you made building the company?
We moved fulfillment centers basically four times
in our first year and a half of existence.
That was challenging, like picking up
and moving 10 employees.
Then 40. Then 200 and 500 employees.
And an entire operation that large is a challenging thing to do.
And it's costly as well because you're running
two fulfillment centers at any given point in time.
You're shifting things back and forth.
Part of that is like, I didn't necessarily trust the growth.
You know? I was like, "OK, we're going to grow.
But I don't really know if we're going to
go for X in the next year or so.
I don't really want to go invest in that in
that quite yet and that infrastructure."
Looking back, we probably should've done that.
Abhi built an incredible operation in /misfits Market.
But it's sitting on a foundation his parents
created by taking an enormous risk on a better
future. And now that Abhi's older than
his parents were when they immigrated to the U.S., the
weight of their decision is becoming clear to him every day.
My dad especially told me that a ton.
He was like, "I've always wanted to go start a business."
They didn't necessarily have the
opportunity, you know, and they've almost, like, given me that
opportunity by sort of like setting me up
in this position and sort of like moving here and paying
for college. All that kind of good stuff.
So the way that they would talk about it
and I talk about as well, is like I am probably a
continuation of their American dream.
You know? I view it that way as well, right.
It's like it's like one holistic picture.
It's like, cool. Like, my family came here,
they sacrificed a lot to sort of make all this happen.
Entrepreneurship was something they
were probably interested in.
My father certainly was, but something they couldn't do.
I've been able to do it. So it kind of ties all the way back.
Conclusion
FAQ about misfits/Abhi Ramesh
Who is the CEO of misfits market?
Abhi Ramesh
Founder
Misfits Market
Philadelphia, Pennsylvania
Where is misfits produce located?
Philadelphia, Pennsylvania
Education of abhi ramesh?
Education
Bachelor of Arts/Science, University of Pennsylvania
Bachelor of Arts/Science, Wharton
What kind of problem solved by misfits ?
Misfits Market is a subscription service for "ugly" organic produce and is designed to break the cycle of food waste.The organization has helped rescue more than 10 million pounds of food since its 2018 inception.
Q: What inspired you to start Misfits?
A:The original inspiration came from a funny apple picking experience with some friends at a farm in Pennsylvania that Misfits actually works with now. When I was apple picking, I got really bored and saw that a bunch of the apples that had fallen from the tree, were a little misshapen, or had some spots on them. That’s when I noticed someone actually coming along, grabbing those apples, and putting them in this separate giant bin, to be stored in a cooler.
A little later on, I asked the farmer about what happens to the apples that he stored in the cooler—there were thousands of them! He said that they didn’t really know what to do with them. They stored some of them for a little bit, tried to sell what they could to famers markets, and then the rest got composted, tossed, or fed to the pigs.
This was my first grower experience and it was just crazy to me that all this waste happens at a single small farm. It made me think, What could be happening at larger farms across the country?
Q: What’s the most surprising thing you’ve learned about ugly produce?
A: A lot of the time we think of ugly produce as something weird or misshapen. But what surprised me is that, for each piece of produce you’ve ever seen, eaten, or bought, there are very stringent size and even color constraints.
Grocery store buyers work off of pieces of paper passed down from grocery chains that say, “When you’re buying gala apples, here’s the diameter and coloring we’re looking for.” They send these sheets to farms, and the farmers look at a set of two to three rules on size, color, and shape. If their crop doesn’t meet those constraints at the farm level, they’ll basically just toss it in a separate bin and won’t even bother sending it to the grocery store.
It’s crazy because these rules have existed for the past 70-90 years, ever since the modern grocery store popped up. Why do we look at apples based on their size as opposed to whether they’re fresh or taste good? No one is really thinking through why these outdated rules exist. So I wanted to do something about it.
Q: What’s the most shocking fact about food waste you’ve come across?
A:For me, the per-person static is most alarming: On average, each individual American wastes $3000-5000 annually by buying food that goes uneaten. Which is ridiculous, because that waste could feed multiple people over the course of a year.
If you take the low end of the range and break it down further, that’s $60-70 week—equivalent to about two Madness boxes. Even if you went to a grocery store, you could feed a small family for a week on that amount of money.
You hear about these numbers at a global scale, which are shocking because the numbers are so big, but it’s a little hard to wrap your head around them. It’s more meaningful when you break it down to a single household or customer.
Q: What would have happened to all this misfit food if you didn’t rescue it? Would it have gone to food banks?
A:No. I think this is the most common misconception that people have about our business. I am glad that people think about it this way, though, because it shows that we have customers that care.
The reality is that the vast majority of farms don’t have the infrastructure to constantly donate their produce to food banks. Produce is inexpensive to start with, yet it’s very expensive to transport. So if a farmer were to take a bunch of bell peppers and ship them multiple hours or hundreds of miles to the nearest food bank, most farms would end up losing a lot of money shipping it. They just don’t do it. They usually leave it in their fields, try to sell what they can, and dump the rest. This happens at farm level, distributor level—every level—because the infrastructure doesn’t exist.
If anything, I see us building the infrastructure between growers and food banks. We’re aggregating all of the supply between hundreds of different farms so we can provide that pipeline and donate a portion to food banks.
Q: What makes Misfits different from other ugly food companies?
A: The first big thing is that we’re not an ugly food company. We deliberately named ourselves Misfits Market; we don’t use the words ugly or imperfect.
We consider ourselves to be an affordable online grocery store, starting with produce. For us, ugly food is a portion of it but it’s all about ending waste and inefficiency. We’re going into the food supply chain, finding all of these massive issues that are resulting in waste across different parts of the food system, and turning them into opportunities for affordability and accessibility for any household across the country.
The way we think about how we source our produce and deliver to households is different from the way any other food company thinks about it today. We work with a variety of farms and try to focus on small- and medium-sized farms, not massive commercial farms and growers. We aggregate their wasted produce across the country and bring it to our fulfillment center and ship directly to you.
The way we ship is also dramatically different. We don’t focus on wealthier urban areas, which is the strategy for some other companies out there. We want to service the entire country in every single zip code in every single state and get food to people who don’t have access today.
Q: How do you want to make an impact by building a socially conscious business?
A:By building Misfits, we can create a win-win situation for everyone involved. Everyone that touches this company or the business in any way, shape, or form benefits from it. First, our growers are benefiting because we’re getting things off of their hands that they usually wouldn’t be able to get rid of at a fair price. It’s really important that farmers are paid for the hard work they do.
Next, our customers are happy because there’s an amazing value proposition. They’re taking part in this big operation that’s saving the world and helping the environment, and they’re getting access to healthy food at a more affordable price.
Finally, our employees win because they get paid a fair wage, but they also are a part of this huge mission-driven vision. They’re learning about how to eat healthy, they’re getting access to affordable produce, and they’re getting a job out of it.
Q: Why did you found Misfits in Philly?
A:I’ve spent the better part of my life studying, living, and working in Philadelphia. I love the fact that it’s so close to a ton of metropolitan areas; within a couple hours drive, you can reach 50 million people.
There’s also a lot of opportunity for expanding food access here. Philadelphia is one of the largest cities in the U.S., yet it’s the poorest of the country’s 10 major cities, with a poverty rate double the national average. Within a 50-mile radius of Center City Philadelphia, there are several food deserts. That means residents don’t have access to fresh food and healthy eating optionsso it’s a meaningful place of us to start this.
Another reason is that we have the opportunity here to employ a lot of people in the North Philadelphia area. There are few jobs in the area with decent pay, so we have individuals who are happy to work for us in the warehouse, pulling through produce, packing, and building our boxes.
Q: When you’re not out rescuing veggies, what are you usually doing?
A:I’m actually cooking my own veggies. A lot of people don’t know this, but I get my own Misfits Market box every single week. When I do have time, which is usually for weekday dinners, I’ll cook my own meals with our Misfits produce. I am a pretty terrible cook, but I try my best! I do like cooking healthy meals, and I am a fitness nut. That’s another reason why I cared so much about starting something in the food world that was also health-related.
Q: Has Misfits helped you learn to appreciate any veggies you thought you didn’t like before?
A: Romanesco is one that I didn’t even know existed as a real vegetable. It’s so crazy to look at the fact that its real is mind-boggling to me. It’s a favorite of mine now. Last week we had this huge influx and I’ve been taking it home every night.
Q: If you were a Misfit veggie, what would you be?
A: One of the gigantic six-pound misfit sweet potatoes. I like lazing around and that’s what it reminds me of! But it’s actually a very healthy source of complex carbohydrates with enough protein. Sometimes when I’m lazy, I’ll just bake a sweet potato and take some avocado and stir it into a mash. I promise you, it’s so good!
Updated News about Abhi Ramesh
48 hours ago
News Inside the deal: How Misfits Market orchestrated the acquisition of its 'frenemy' to set up a likely IPO
When Misfits Market CEO Abhi Ramesh heard that one of his company's main competitors was kicking off a fundraising round, he took a risk. He proposed an alternative: What if the two rivals joined forces?
Ramesh describes Misfits Market and Imperfect Foods as "frenemies." The two sustainability-focused food delivery companies operate in the same space and have a number of parallels: size, customer base, offerings, mission and reach.
In mid-to-late June, Ramesh and the rest of the Misfits Market brass got in touch with the board members at Imperfect Foods. The discussions about an acquisition moved quickly and began heating up in July.
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