How Misfits Market turned ugly produce into a $2 billion grocery delivery business

Executive overview

Retail grocery's grading system rejects vast quantities of edible produce on aesthetic grounds alone, creating a supply of cheap, good-quality food with no buyer. Abhi Ramesh spotted that gap at a Pennsylvania apple orchard and built Misfits Market around it — sourcing cosmetically imperfect and surplus food from farmers at steep discounts, then delivering it to consumers at prices below premium grocery stores.

The business that emerged is fundamentally a perishable logistics operation, not a food retailer. Owning that distinction — and building the infrastructure to match — is what drove Misfits from a Philadelphia warehouse to 48 states, a $2 billion valuation, and near-profitability.

Early ventures and the pattern that emerged

• Abhi ran a personalised SAT tutoring business (Altair Prep) at Penn, pivoting from human tutors to software — the software failed; customers wanted the tutor, not the tool.
• A follow-up coding bootcamp (Horizons) reached 200+ students a year and was profitable, but couldn't scale beyond physical locations without years of expansion.
• Both businesses confirmed a pattern: strong unit economics early, hard ceiling on scale without a different model.
• Returned external capital rather than disappoint venture investors with a tutoring business that couldn't sustain 10x growth.
• Nine months at Apollo Global Management reinforced that he wanted to be on the operating side, not the finance side.

The produce insight and first test

• USDA grading standards for produce are highly specific — size, shape, colour, aesthetics — and much of what fails grading is nutritionally identical to shelf product.
• At a Pennsylvania apple orchard, Ramesh found cold-storage drums of perfectly edible apples the farmer was going to discard; the farmer named almost any price.
• He cold-called every organic farm on the USDA's public certified-farm list, bought cases of grade-two produce (apples, squash, carrots, root vegetables), and stored them in his apartment.
• Demand test: a Shopify landing page, Facebook ads featuring the ugliest produce photos he had, two box sizes ($22 small, $35 large), pre-orders only, geotargeted to Philadelphia.
• First conversions cost $5–10 each; he scaled ad spend from $50/day to $1,500/day before stopping to process the backlog.

Building the operation from scratch

• First 400+ orders: rented a small North Philly warehouse, two Costco industrial refrigerators, U-Haul runs to farms three times a week.
• Hired drivers via Craigslist using their own cars; used an off-the-shelf routing tool to print optimised delivery sequences.
• Switched to UPS/FedEx after three weeks — then discovered produce packaged without dividers was destroyed in transit; tested insulated bags, cardboard separators, and wrapping until packaging held.
• First outside capital: $150,000 from college friend Edward Lando, wired with no entity or documents in place.
• Seed round of $2 million from Green Oaks Capital (his former desk-mate at Apollo), based on the arbitrage thesis: buy at 30–40 cents on the dollar, sell at 80 cents, pass savings to the consumer.

Scaling nationally and expanding beyond produce

• Series A of $16.5 million (Green Oaks again) triggered a push to go national fast: multiple new fulfillment centres, including a 300,000 sq ft custom refrigerated facility in Salt Lake City for West Coast coverage.
• Moved from 5–10 produce items to 30–40, then to 1,200+ SKUs today — adding non-produce by sourcing cosmetic or shelf-life rejects from food brands (upside-down olive oil labels, near-expiry salad dressings).
• Hiring philosophy: matched hires to current stage, not future scale — first ops director had run a food fulfillment centre, not a Fortune 500 supply chain.
• Key realisation (late 2019): the core business is perishable fulfillment and logistics, not e-commerce or grocery — the same moment McDonald's "realised they were a real estate business."

COVID and the pressure test

• Between March and April 2020, the customer base nearly doubled — any 5–10% demand spike requires proportional inventory, boxes, warehouse space, and logistics capacity.
• Turned off new customer acquisition and opened a waitlist; waitlist itself exploded.
• State of New Jersey initially ruled Misfits was not an essential business; the governor's office intervened to keep operations running.
• Warehouse staff of ~700 people required COVID safety protocols while maintaining throughput.
• Personally: Ramesh's then-fiancée was diagnosed with aggressive lymphoma during COVID, requiring seven-days-on, seven-days-off routines between the warehouses and her treatment.
• Company exited COVID at a nine-figure annualised revenue run rate; his wife exited treatment cancer-free.

Acquisition, logistics ownership, and current model

• Acquired competitor Imperfect Foods in October 2022; kept both brands separate under the Misfits parent.
• Imperfect brought ~400 delivery vans and a proprietary logistics network; Misfits now handles 70–75% of all deliveries with its own drivers and vehicles.
• Now offering third-party perishable fulfillment to other direct-to-consumer brands (pet food, smoothies, etc.) that have no good cold-chain logistics alternative.
• Online grocery currently 12–13% of the US market's $1 trillion annual spend; comparable categories (apparel, electronics) run 30–40%, pointing to significant headroom.
• Business is mid-nine-figures in revenue, near profitable, with IPO and strategic sale kept as open options.