‘Ugly’ produce delivery startup Misfits Market just raised an $85M Series B

North Philly-founded subscription grocery delivery service Misfits Market has had an extremely busy 2020 so far.

The startup, founded in 2018, is seeing an increased demand for its “ugly” produce and shelf-stable groceries like many other food delivery services amid the coronavirus pandemic, as consumers are limiting their trips to the grocery store. And that demand initially lead the company to hire about 100 people back in March.

And Wednesday, the startup announced a $85 million Series B led by Valor Equity Partners with participation from additional investors including Greenoaks Capital, Third Kind Venture Capital and Sound Ventures. It brings the company’s total fundraising to $101.5 million.

“We started to see upward tick in business in February and early March,” founder and CEO Abhi Ramesh told Technical.ly. “The middle three weeks in March and into April we essentially saw new customer growth up 400 or 500%.”

So, the company scrambled to scale up, adding the additional employees and eyeing a new space that could be customized to fit the exact needs of the startup as it added more products like coffee, herbs and chocolates to its boxes, Ramesh said. This expansion comes along with an upcoming feature that allows subscribers to customize their box of produce with other items, part of an end-of summer project that includes a redesigned website and app.

Along with the fundraising and expanded offerings, the company announced it is retrofitting a warehouse in Delanco, New Jersey — just on the other side of Delaware River, near Torresdale — to up its production. That facility joins the company’s Pennsauken space, where the startup recently moved when it couldn’t find the proper space in Philadelphia.

Ramesh said that the relationship with Valor is a new one, but the investment firm frequently works with food innovation companies. (The firm is also an investor in delivery startup goPuff.) Valor Partner Jonathan Shulkin will be joining the Misfits Market board of directors.

“Food waste and food access are both extraordinarily important problems, especially in today’s macro environment, and Misfits has built a unique, tech-forward approach to solving both,” Shulkin said in a statement.

“We knew we’d have to fundraise soon since we were a growing company, but it happened before we were planning,” Ramesh said. “Our original timeline was to kick off the process in March or April, but it manifested earlier. We met the Valor team and learned more, and wanted to jump on the opportunity.”

The raise will be followed by yet another round of hiring, including the company’s operations team of marketing, supply chain, engineering and product pros. There are currently about 100 employees on those teams, and an additional 560 full-time warehouse employees, and 70 temporary warehouse employees who will likely convert to full time in the coming weeks and months. The round will go to significantly growing the teams, Ramesh said. (See current open positions on Misfit Markets’ website.)

While operations are now totally over in South Jersey — the team gave up its North Philly location a while back — contributing to the local ecosystem is important to the founder. Ramesh himself lives in the city, as do many of the staff, he said.

And even as the Philadelphia region slowly resumes (some) normalcy from the coronavirus pandemic, Ramesh said he believes parts of daily pandemic life, like grocery delivery, will become more commonplace.

“There’s still a significant demand, but it’s not as wild as back in March. But I think we’re seeing a fundamental shift in mentality,” he said. “Really what these past few months have shown is adoption can accelerate much, much faster in certain circumstances.”