Commerce

Online grocery company Misfits Market to acquire Imperfect Foods

Comment

Misfits Market
Image Credits: Misfits Market

Misfits Market is acquiring Imperfect Foods in an all-stock deal, Misfits Market founder and CEO Abhi Ramesh told TechCrunch.

Both online grocery platforms, Misfits Market raised nearly $530 million since being founded in 2018, most recently a $200 million Series C round in 2021 that put its valuation at over $1 billion. Meanwhile, Imperfect Foods, founded in 2015 to rescue and redistribute goods, brought in a total of $229 million, including a $110 million Series D round last year.

Though Ramesh declined to disclose the valuation of the deal, he did say that as combined online grocery platforms, it would accelerate Misfits Market toward $1 billion in sales and reach profitability in early 2024, something that would not necessarily be possible as two separate companies.

“Scale is what will drive long-term profitability in online grocery and unit economics efficiency,” he said. “Until probably close to a billion dollars in revenue, it is very hard for any online grocery company to be even close to profitable.”

Discount grocery startup Misfits Market raises $200M

Indeed, both companies have similar financial and cultural synergies, Ramesh said, including a focus on eliminating food waste. In the U.S. that affects between 30% and 40% of the food supply, driving up costs, according to the companies. They’ve estimated to have collectively “rescued nearly 500 million of pounds of food that may otherwise have gone to waste,” Imperfect Foods CEO Dan Park said in a statement.

This is Misfits Market’s first acquisition and is particularly fitting, given the online grocery environment over the past few years, Ramesh said. He has long believed that the food e-commerce and grocery commerce space was “ripe for consolidation” and saw a wave of it happen in 2020 and 2021; for example, HelloFresh acquiring both Factor75 and Youfoodz.

Having a strong balance sheet, the company saw a few deals come its way, but Ramesh said the company was not super interested in pursuing them. Then a few months ago, he was introduced to one of Imperfect Foods’ investors and discussed Imperfect going after a round of funding, but it was a challenging market for capital.

“We’ve known Imperfect for a few years because we’re in the same space and we’re the two big names people talk about,” he added. “Those discussions then turned into ‘there are no two businesses that are as synergistic as these two businesses, what if we discussed something more strategic?’ That’s when we seriously started looking at this.”

The acquisition is still subject to regulatory approvals and closing, but Ramesh expects after the closing, it will take about a year for the two companies, which will have a combined 3,000 employees, to fully integrate. He will serve as CEO of the combined company, and Imperfect Foods’ executives will join the Misfits Market leadership team.

Park, who joined Imperfect Foods as CEO in January, will advise the transition and integration, then “will likely transition out post-integration,” Ramesh said.

The online grocery industry in the U.S. is poised to be a $187.7 billion industry by 2024, up from $95.8 billion in 2020. However, as Ramesh mentioned, it is difficult to reach profitability in this industry as sales have leveled off in the past two years. Some companies have had to make layoffs and leave markets due to “burning a tremendous amount of cash and not raising capital,” and public markets don’t like that, he added.

Rather, Ramesh is adamant that Misfits Market is going to be the exception and become a public company, eventually.

“That would be the next immediate step for us,” he said. “When we are profitable, we will be able to take on all of these massive incumbents.”

Wilson Sonsini Goodrich & Rosati is serving as legal advisor to Misfits Market. Solomon Partners is serving as exclusive financial advisor to Imperfect Foods, and DLA Piper is serving as legal advisor to Imperfect Foods.

Startups are on track to acquire more VC-backed companies than ever in 2022. Here’s why

More TechCrunch

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

9 hours ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

11 hours ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?

Strava announced a slew of features, including AI to weed out leaderboard cheats, a new ‘family’ subscription plan, dark mode and more.

Strava taps AI to weed out leaderboard cheats, unveils ‘family’ plan, dark mode and more

We all fall down sometimes. Astronauts are no exception. You need to be in peak physical condition for space travel, but bulky space suits and lower gravity levels can be…

Astronauts fall over. Robotic limbs can help them back up.

Microsoft will launch its custom Cobalt 100 chips to customers as a public preview at its Build conference next week, TechCrunch has learned. In an analyst briefing ahead of Build,…

Microsoft’s custom Cobalt chips will come to Azure next week

What a wild week for transportation news! It was a smorgasbord of news that seemed to touch every sector and theme in transportation.

Tesla keeps cutting jobs and the feds probe Waymo

Sony Music Group has sent letters to more than 700 tech companies and music streaming services to warn them not to use its music to train AI without explicit permission.…

Sony Music warns tech companies over ‘unauthorized’ use of its content to train AI

Winston Chi, Butter’s founder and CEO, told TechCrunch that “most parties, including our investors and us, are making money” from the exit.

GrubMarket buys Butter to give its food distribution tech an AI boost

The investor lawsuit is related to Bolt securing a $30 million personal loan to Ryan Breslow, which was later defaulted on.

Bolt founder Ryan Breslow wants to settle an investor lawsuit by returning $37 million worth of shares

Meta, the parent company of Facebook, launched an enterprise version of the prominent social network in 2015. It always seemed like a stretch for a company built on a consumer…

With the end of Workplace, it’s fair to wonder if Meta was ever serious about the enterprise

X, formerly Twitter, turned TweetDeck into X Pro and pushed it behind a paywall. But there is a new column-based social media tool in town, and it’s from Instagram Threads.…

Meta Threads is testing pinned columns on the web, similar to the old TweetDeck

As part of 2024’s Accessibility Awareness Day, Google is showing off some updates to Android that should be useful to folks with mobility or vision impairments. Project Gameface allows gamers…

Google expands hands-free and eyes-free interfaces on Android