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.
Thanks for sharing! You love to see it.
Indian Ingenuity at its finest.
Well done, sir!