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Misfits has a growing appetite for acquisitions

Oct 3, 2023
Illustration of a bag full of groceries with a cursor over it

Illustration: Sarah Grillo

Now that Misfits Market has nearly completed its integration of Imperfect Foods, it is looking to acquire other food e-commerce companies, CEO Abhi Ramesh tells Axios exclusively.

Why it matters: For many startups in the grocery delivery space, scale is paramount — and Wonder's recent acquisition of Blue Apron could signal further consolidation.

What they're saying: "We are more actively looking at whether there are other companies in the space we should buy," Ramesh says.

  • There are a lot of adjacent e-commerce businesses that are having difficulty raising capital and that can't go public, Ramesh points out.
  • And their investors are questioning what their exits will look like.

Details: Misfits is seeking to acquire food-related e-commerce businesses with revenue between eight and nine figures and low customer churn within the next 12 months, Ramesh says.

  • Different business lines can be plugged into the infrastructure, including perishable grocery, shelf-stable food and meal-kit providers, he says.
  • Anything that would fit into a grocery store would be theoretically something Misfits would look at, though it's focused on the retail side rather than the brand side, Ramesh says.
  • He cited HelloFresh's aggressive acquisition strategy, wherein the company spent several hundred million dollars rolling up competitors, as a template for Misfits.

The big picture: Misfits proposition is broader than reducing food waste, Ramesh says.

  • It has built a platform and infrastructure for grocery e-commerce with almost 1 million square feet of refrigerated and frozen warehouse space, he says.
  • Misfits also has 400 vans that deliver perishable food across the U.S. and custom technology in its warehouse management systems.

By the numbers: The company has raised a total of $525 million, including a $225 million round led by Softbank in 2021 that valued it at $2 billion.

  • Misfits has the balance sheet, equity and the backing of deep-pocketed investors to finance acquisitions.
  • The only other reason to raise money is if the company identifies pre-IPO investors it wants on the cap table prior to an offering.

Catch up fast: Misfits acquired Imperfect just over a year ago in an all-stock transaction.

  • The Imperfect business was going to raise capital, but the market was not ideal, so their investors connected with Misfits, Ramesh says.
  • Since they were targeting a similar customer, the two companies decided they were better off together, and a deal got done within a month, he says.

Meanwhile: "It used to be cautious optimism, now I feel like it's cautious again," Ramesh says of the IPO market.

  • Misfits is discussing an IPO but is not ready to file an S-1, he says.
  • Ramesh does expect an IPO in 2024, but perhaps in 2025 or beyond.
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