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.
And $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 ma de 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 this 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 to 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.