Online grocery company Misfits Market to acquire Imperfect Foods

market of misfits is acquiring imperfect foods in a stock deal, Misfits Market founder and CEO Abhi Ramesh told TechCrunch.

Both online grocery platforms, Misfits Market have raised nearly $530 million since its founding 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 salvage and redistribute assets, raised a total of $229 million, including a $110 million Series D Round last year.

Although Ramesh declined to disclose the valuation of the deal, he said 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 companies. separated.

“Scale is what will drive long-term profitability in the online supermarket and the economic efficiency of the unit,” he said. “Until they probably get close to $1 billion in revenue, it’s very difficult for any online grocery company to even come close to being profitable.”

In fact, both companies have similar financial and cultural synergies, Ramesh said, including a focus on eliminating food waste. In the US, that affects 30% to 40% of the food supply, driving up costs, according to the companies. They have estimated that collectively they have “rescued nearly 500 million pounds of food that would have otherwise 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 environment of online grocery stores in recent years, Ramesh said. He has long believed that food e-commerce and grocery trading were “ripe for consolidation” and saw a wave in 2020 and 2021; for example, HelloFresh acquiring both factor75 Y youfoodz.

With a strong balance sheet, the company saw some deals, but Ramesh said the company was not very interested in pursuing them. Then a few months ago they introduced him to one of the Imperfect Foods investors and they talked about Imperfect looking for a funding round, but it was a challenging market for capital.

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

The acquisition is still subject to regulatory approvals and closing, but Ramesh expects that after closing, the two companies, which will have a combined 3,000 employees, will take about a year 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, he will advise on transition and integration, then “probably transition after integration,” Ramesh said.

the online grocery industry in the US is poised to be a $187.7 billion industry by 2024, up from $95.8 billion in 2020. However, as Ramesh mentioned, profitability is hard to come by in this industry as sales have stabilized in the last two years. Some companies have had to lay off and leave the markets because they “burned through a huge amount of cash and didn’t raise capital,” and the public markets didn’t like that, he added.

Rather, Ramesh insists that Misfits Market will be the exception and will eventually become a public company.

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

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

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