On today’s episode Becca and Dom are joined by Abhi Ramesh, the CEO and founder of Misfits Market, a grocery startup that sells surplus and unwanted produce directly to consumers who don’t mind funny-looking foods. They talk about how he started the company in his apartment handling every aspect from personally buying the unwanted produce from the farms, to storing the food, to packaging and shipping, all while running the website and trying to fundraise. He racked up six-figure credit card debt to fund the logistics-heavy startup before raising his first seed round — and that was just the first three months of the company.
Launching an e-commerce startup in the grocery space is no small task. On today’s episode Becca and Dom are joined by Abhi Ramesh, the CEO and founder of Misfits Market, a grocery startup that sells surplus and unwanted produce directly to consumers who don’t mind funny-looking foods. They talk about how he started the company in his apartment handling every aspect from personally buying the unwanted produce from the farms, to storing the food, to packaging and shipping, all while running the website and trying to fundraise. He racked up six-figure credit card debt to fund the logistics-heavy startup before raising his first seed round — and that was just the first three months of the company.They also talked about:
Found posts every Friday. Subscribe on Apple, Spotify or wherever you listen to podcasts to be alerted when new episodes drop. Check out the other TechCrunch podcasts: Equity and Chain Reaction.Go to found.simplecast.com to find episode transcripts.
Connect with us:
Becca Szkutak 0:03
Hello, and welcome to found TechCrunch is podcast that brings you the stories behind the startups from the folks that are building them. I'm your host, Becca scatec. And I am joined by the lovely
Dom Davis 0:12
Dominic Midori Davis. Are you excited for this conversation today? I know you are.
Becca Szkutak 0:17
I'm very excited for this conversation. We're chatting with a company today that deals with grocery logistics, which is something I am weirdly passionate about. Don, do you ever think about grocery logistics? Or are you normal?
Dom Davis 0:28
I listen, I have never thought about grocery logistics at all. I have no idea what happens when I leave the store.
Becca Szkutak 0:36
Well, if anyone is curious and wants to fall down this rabbit hole, there's this lovely book called The Secret Life of groceries by Benjamin Lorre that talks about both the history of grocery stores here in the US, as well as what supply chain looks like what the long haul truckers look like. And sort of a lot of stuff that we kind of get into today. One of which being produce produce is one of the most interesting parts of the grocery store logistics because we buy produce with the store regularly, it has to look perfect, it has to fit certain specs that have absolutely nothing to do with how it tastes. And it all is kept in this weird limbo. And then when they need produce at the store, they all flush ripen it and send it it's kind of crazy.
Dom Davis 1:16
What you're saying is like produce has to conform to our like Western standards of being like it has to be perfect before it can be presented. And they put it in a box so that they show it off and the produce are just like us, I guess I know, kinda
Becca Szkutak 1:31
and this is why grocery store companies have such tight margins because they have to do this whole show and tell of oh, this is the perfect pair. This is the best cucumber when in reality, it's like these companies struggle to make money. So the fact that they're doing this is crazy. And the founder we're talking today knows that all too well. Starting a company in the produce space, he had to raise money almost immediately racked up over $120,000 in credit card debt trying to get this off the ground right from the start. I know this is the space is just the budgets are so low,
Dom Davis 2:03
it's expensive, and it's messy. But I mean, hey, we got to eat. It has to happen. But I guess that's why companies like this are so amazing, because he takes those rejected vegetables he takes I guess not the ugly ones, the different ones and you know he they're perfectly fine to eat. So this was actually like a brilliant way to tap into whitespace I guess
Becca Szkutak 2:26
if you haven't figured out who we're talking to. Today on the show, we have Avi Ramesh, the founder and CEO of misfits market, which is the online grocery store that takes these ugly or as dumb said different looking produce from farms and surplus and sells them to people who don't mind eating this different produce.
Hey, Avi, how's it going?
Abhi Ramesh 2:52
I am doing well. How are you?
Becca Szkutak 2:54
Oh, you know hanging in there. Enjoying this nice fall weather in New York? Where are you based
Abhi Ramesh 2:59
in Philly? So probably pretty similar. For weather.
Becca Szkutak 3:03
Are you a Phillies fan?
Abhi Ramesh 3:04
I don't really watch an Eagles fan I've become but I didn't really watch sports until recently. Well, but I know the Phillies.
Becca Szkutak 3:10
Yeah, they're doing well. I was gonna say you're in a good position. If you're a baseball fan. Yep. Well, cool. Probably a good place to get started. Although we probably do have some listeners who are familiar with misfits. But maybe if you want to start by telling us a little bit about the company and how you came to that idea to begin with?
Abhi Ramesh 3:25
Yes. So I launched misfits about five years ago, it's almost exactly five years is in the fall of 2018. The inspiration for misfits came from call it two sources. One in a previous life, I worked in finance, that big bad world of finance, I spent some time on cold storage and food transportation, and started to get an initial understanding from like the supply chain side of the world, how much food goes to waste in the logistics part of our supply chain, many and I remember reading about and seeing examples that were told to me about, you know, truckload of strawberries, like $30,000 of strawberries, that would arrive to a grocery store destination, 35 minutes later an hour late, and they'd have to dump it all because it was too late. They found a last minute supplier and so that truck had to turn around, go somewhere else, take it to a landfill. That wasn't just a one off example. There are tons of those. So that was kind of one inspiration. And then I actually, you know, as I got more and more interested in this problem, I ended up speaking to a farmer in an apple orchard. And I was like, hey, what do you do with all these apples that fall off the trees? No one's picking them. There's hundreds on the ground. And he was like, Well, those are our misfit apples. There's not a home for them. And so we ended up kind of putting them in this cold storage we try to donate some we present from cider, but a lot of them are thrown away. So that was kind of the the lightbulb moment that I talked about often where I was like, Okay, I am two hours from where I live in Philadelphia, there's a bunch of apples on the ground, like I'm gonna buy these and I'm gonna see if I can figure out a way to sell them and see what price I'm gonna get for them. So I started misfits by kind of jumping into it and actually like purchasing products from farmers that they'd be throwing out and then it kind of snowballed from there in a good way and we started expanding our assortment and I got in contact with a bunch of other farms, many of whom were introduced to me by that first farmer. And that was sort of like the original kind of chaotic Inception story for misfits.
Dom Davis 5:07
Oh my, how do you bootstrap a company like this? Because every time like, companies in the food space, I always want to know like, how did it initially start, because I know that it's hard and also expensive.
Abhi Ramesh 5:17
It is hard and expensive. And I would say, I don't even know if I would call my story, a bootstrap story. It was in the very early days. But I very quickly realized I need external capital, I also did some really foolish things personal financial wise, I ended up I remember the early days, I built the website, myself. So I didn't spend money on that I was storing our first warehouse was my apartment. So I'd like go buy all of this food, I bought an extra fridge and I just like put all of the produce there. So I didn't have a warehouse in the early days. But as we started spending money on customer acquisition, on Facebook, and Google and all these places, I just started racking up debt on my credit cards, which people look at that and they're like, Oh, that's very cool that you did that as an entrepreneur, like, it was probably really foolish of me to do that. Because if for whatever reason this hadn't worked out, I would have been in a lot of financial trouble. So I have multiple credit cards that I was racking up, you know, hitting the limits on, but that, you know, I would say that was like two months, two and a half months, then once we got to a point where, you know, I needed an actual warehouse to rent space, I needed cold storage, I needed a truck supply to go move things around. I did not put strap and I ended up raising outside capital, probably like two and a half months into starting the business.
Becca Szkutak 6:23
And I'm definitely curious, you mentioned it all kind of started with that first farm, agreeing to let you buy some of theirs quote, unquote, misfit produce. But because the system wasn't working in that way already, it sounds like it was easy for you to start working with other firms easy and air quotes, nothing. Building a startup is easy. But how did firms react when you did reach out? And were like, hey, like, that's stuff you're gonna throw out that probably bothers you that you throw out like, I actually think I might have a solution.
Abhi Ramesh 6:50
Yeah, it was, it was really interesting, because at first farmers didn't really even know what I was talking about, and like what I was referring to, and so I'd use all like, try to use jargon and be like, Oh, you're X grade product to this. And they were like, I don't know what you're talking about. So I had to physically go to a lot of these places for the first couple weeks, because on the phone, and it's hard to explain what you're looking for. And it's hard for them to explain the other way. And oh, by the way, a lot of the farms I was working with in the early days, they were Amish farms. And they don't have phones or cell phones that they carry with them. So they have a landline that's in the barn that they have access to for like an hour a day. So my solution was, I'm going to drive. So I literally drove from farm to farm, you know, on the weekends, and essentially say, hey, is there produce that you wish you could sell? They are not selling today? And you have to throw out but you you think it's fine quality for people to consume? And kind of frame that way? A lot of them like yeah, sure come to the shed come to this cooler unit, like look at all this food. And then surprisingly, like they were shocked that I wanted to buy it. I think a lot of them were like, What are you going to do with like this, you know, six crates of butternut squash that are shaped oddly, and I was like, Well, I'm going to figure out a way to sell it to other people. And they were like, well, I don't know if people will buy it. So getting in with the farmers in the early days was very easy, because they had all this supply. They were wasting money on it because they have to go store it if to harvest it. And so I was essentially offering them a solution and a revenue stream, which I think was welcomed.
Becca Szkutak 8:09
flipping to the other side, the customer side, because you just mentioned a little bit as well. Obviously, of course, grocery stores carry this perfect image of all this different produce because they think people are more likely to buy it. So was it hard at first to sell to consumers? Or is that maybe like a disconnect between grocery marketing and how consumers actually feel about buying food?
Abhi Ramesh 8:30
We had a lot of education work to do in the early days, we still do candidly, part of it is when folks think about the idea of misfit produce or ugly produce, there is still the misconception that there's something wrong with it. And that misconception existed very much. So five years ago, I think we have done a lot I believe in terms of educating the consumer that misfit producing, does not equal bad produce does not equal rotten produce, not equal damage produce folks in the industry like imperfect foods that we recently acquired, they've done a lot to educate the consumer as well. But I would still say the average grocery consumer still doesn't know what that is, and still probably has a little bit of a negative connotation around the word ugly produce or mister produce, and that very much. So what's the case five years ago, so we had to do a lot of education. We use our social media platforms for that we partnered with folks like Bobby Flay, who's a celebrity chef, who people, you know, are like, hey, if Bobby Flay is going to do something, it's definitely high quality. So let me let me listen to him. So we had to do a lot along the way to get people over that initial hump of ugly produce sounds like there's something actually wrong with it. But eventually, we gotten there. And what we found was, no matter how much storytelling we did, how much blog education getting a box is the thing that convinces folks the easiest because you get a box, you open it up, you're like, this stuff's actually totally fine to consume. There's not like something fundamentally wrong with the use of produce but I think that reaction only comes when you have the box sitting in front of you.
Dom Davis 9:53
Yeah, like because I've never used Mr. Market. So I'm wondering like, how ugly is the produce that people are like, I would not Buy this, like, how ugly is it, it
Abhi Ramesh 10:03
varies, there's a spectrum of ugly, you can go from a lot of prejudice, you can't even tell it to be fair. Some of that's because some of our misfit produce is actually not aesthetically different, it's that there was like, there's a surplus of a certain commodity, you know, they're an over abundant harvest. That's why it's misfit. So then it's the exact same items, just an excess, but you'll find things where you'll have apples, we'll have like gala or honey crisp apples, where people are used to seeing these like huge gala apples sitting on the grocery store shelves, you know, we'll have some that are maybe a standard deviation smaller than that a couple of just smaller in diameter. And when you get that in the box, you're not really going to notice you're not gonna be like, Oh, that gal apples ugly, maybe it's a little smaller than what you've seen, but that's part of it. But then on the other end of the spectrum, you know, we'll have like squash that are crazy shapes and sizes, we'll have like the carrots and root vegetables, especially, they have a reputation for being kind of the uglier produce that we sell. I think those are the ones at one of our first logos back in the day was a twisted carrot, like two carats of like intertwined. So things like that, they pull that out of the bunch before they put the carrots in the shop at the grocery store. Same thing with a squash that's like curved in a weird way. So I think those are the ones where you know, you'll pick it up out of the box with like, wow, that actually looks ugly. What's interesting, though, is over time, people stopped using the word ugly, because it's not like it's just different looking. It's not like a negative Oh, it's it looks bad. It's actually just like, it looks very different from the character that I normally get.
Dom Davis 11:29
I love how this is all just like teaching people to like love how things come like. I don't know, like it's there's something very wholesome about it, but also something very indicative of society that we're just like going around saying it'll, that carrot is ugly, when it's like it's not ugly, it's just different.
Abhi Ramesh 11:44
Yes, it's interesting, because the word ugly, this whole movement that began was around the phrase ugly produce, and therefore it stuck. And, you know, we still use it every once in awhile, although we've been trying to push away from the word ugly, because though people kind of recognize that as part of this movement, like it is not really ugly, it's just different, you know, ugly is very much so it's got a negative, it's bad looking, this just looks different.
Becca Szkutak 12:07
Something I wanted to ask you about, partially because I have spent way too much time reading about the logistics of like the grocery industry, I just find it really fascinating. So I've read some books about grocery stores and how it all works. And from that, I know, logistics are really, really difficult. And margins are typically pretty low. So there isn't a great, those aren't like the best looking stats, when you look at are evaluating a business that's gonna scale and gonna grow. So how do you guys think about that for yourselves and sort of being able to bring this new innovative product to essentially the grocery market and make it work in a space that is traditionally decently hard to succeed in?
Abhi Ramesh 12:45
Yeah, we, I was joking with some of our early investors recently, and I was like, you know, five years ago, we were trying to get this company off the ground. And we were essentially saying, we're going into the hardest industry, there is grocery, and we're gonna layer on E commerce logistics, which is even harder. And we're going to try to make it like a value play and try to make people save money on what is already a low cost, low margin cutthroat industry. Why did we do that? Like that just sounds kind of crazy when you think about in hindsight, so definitely the case, like grocery is a notoriously challenging industry, low margin perishables as well, like when you look at the spoilage that happens in the grocery industry, it's massive, because it's super hard to forecast to can't forecast your strawberries and bananas properly, you're gonna lose a ton of them, because they don't have a ton of shelf life logistics are challenging. Our simple thesis on this was because it's so hard, fewer people are going to try to do it. And if we're willing to do the hard stuff that others are not willing to do that in and of itself is probably a competitive advantage over time, we're going to need to raise a lot of capital, we got to do that from day one, because this is not something you can bootstrap and do the tiny amount of capital, we need to raise a bunch of capital, this is going to be operationally intensive looks like except that because that's part of the game we're playing. But if we're willing to do the hard things that other people haven't been willing to do, we think we can build something with a real competitive advantage and moat. And when I think about kind of where the business is today, and where we've come, I think that what we've built, I'm biased, obviously. But I think what we've built over the past five years will be really hard for someone else to come and build this we have a like a perishable multi temperature supply chain that can handle frozen can handle fresh across multi temperatures, and can handle regular non temperature regulated goods, we bring that into our own fulfillment centers, we probably have, you know, somewhere close to a million square feet of fulfillment center space across the country, we can pack all that into a single box and get it out to the consumer. And we can do that in a way that is unit economics profitable on an order basis, which I don't think anyone in the grocery industry has done scalable, even thinking back to the web and era. So I think our take on it in the early days was like this is going to be really tough, like brutally challenging, but we're willing to do it as long as we accept operationally intensive gonna be capital intensive, and it's going to take some time I think grocery Unlike other spaces isn't a place where you can go to kind of go innovate in six months or 12 months and MVP your way to a great product, you need to be willing to commit and think on a very different, longer time horizon than everyone else.
Dom Davis 15:11
And you spoke a little bit about how when you first approached farmers, they didn't quite understand. But when you first approached investors, did they also not understand or did they completely get what you were trying to do? It was a mixed
Abhi Ramesh 15:23
bag, I would say, I had the benefit of having been on the investor side, in my previous, you know, when I used to work before this, and in finance, the benefit of that was, I had a good sense of what questions to ask where they try to poke holes, and what the key areas of diligence would be when someone looks at our business. And so I was able to, I think, go out and pitch in a very sort of deliberate way and talk about those points upfront. That being said, there were a lot of investors in the early days, they were basically like, look, grocery plus online, no way, never capital intensive, asset, heavy, challenging to do, we're not touching it. And there, you know, if I could put percentage, probably 60 70% of investors fell in that bucket. But then there's probably a third of investors who looked at this category, and they fully bought my vision, which was, no one's innovated in this category in a very long time. And you guys have seen some of the the industry data points, but when you look at ecommerce penetration, digital penetration in every category out there, it is like 3040 50%, Amazon has done it tremendously well with clothing, with electronics, healthcare is now heavily digitized. Now, the one area that is lagging every other vertical in ecommerce penetration is grocery. And that's now five years ago is even more so the case. And so the simple thesis of when you look at industry trends and sort of macro trends, and look at other countries as well, where grocery penetration and E commerce penetration has grown a lot you have to buy the fact that grocery is there's a ton of whitespace when it comes to online grocery, yes, it's gonna be hard, but people aren't tackling it. And so we believe we can build something special here and get that white space. That was the pitch that I think investors that saw that and believe that we're a lot more willing to kind of come on board and go look at our decks and go through our model. And I think we sort of selected those, you know, I kind of biased towards those investors, I was like, Look, if you don't buy if you're going to have kind of an allergic immediate reaction to online grocery and grocery site even worth going down that rabbit hole, right, let's just focus on the folks that like believe in the tailwinds of grocery and online grocery. And we
Becca Szkutak 17:27
talked a little bit earlier about getting consumers interested in buying the product itself. But you bring up a good point of when you guys got started. Not a lot of people were buying this kind of stuff online in general, just regardless of what it looks like or where it was coming from. And how did you guys work to do that, that changing consumer behavior to get people even comfortable? Because you probably got a lot of customers who not only were buying your product online for the first time, but we're buying groceries online for the first time. How did you guys work through that?
Abhi Ramesh 17:55
Yeah, you know, we had a that's it a horrible thing for the world. But something that accelerated that for us, which is COVID. Innovating about when we launched the business, it was late 2018, almost 2019. By the time we got up and running and was funded a year in your in domestic market, COVID happened. So as we were starting to think about that problem that you're describing, which is how do we increase adoption of online grocery in general? And then how do we increase adoption of kind of the misfit produce out of the world, the online adoption piece sort of like was handed to us, unfortunately, because of COVID. And so when COVID happened, we were barely a year and change old and every major grocery store either shut down or had significant limited hours as you guys well, no. And so there was a massive shift towards online delivery services. And we could not handle the number of signups during the first like month and a half of the COVID lockdowns, we shut off our website where like we can't take any new customers. And so it was a challenging few months, both from a customer perspective and like internally for us to manage this with our warehouse workers. And we had instances of COVID We have to go deal with all those things. But the silver lining behind all that was like online grocery adoption significantly accelerated as a result of COVID lock downs and people sort of being forced to order online. That was like the big accelerant. To be honest, I can't take any credit for that. I think it was just sort of these unforeseen macro factors that resulted in that. But now I think in the post COVID world we're in now, there's still a ton of whitespace. When you look at grocery, the percentage of groceries that are bought on line is like 13% 14%. In other categories, that number is like 40 or 50. So there's still a ton of whitespace here. And I think now it's really about can you get the right assortment to someone in a convenient way at a good price. Because if those three things can't get met, then it's hard for someone to do online grocery versus to go to the store. There aren't a ton of solutions to do all of those things. There's things that give you a convenient solution, but you're going to pay a pretty big premium to get it delivered to your doorstep. There's things that will give you a good deal, but you're making a ton of trade off for that deal. And so we're trying to see if we can bridge that gap here.
Dom Davis 19:57
And I want to talk a little bit about you. Did you You always want to be an entrepreneur and like, did you ever think one day you would own basically a grocery business?
Abhi Ramesh 20:05
started the second part, I never imagined I would be in this space. No, in a grocery business, I have always had an entrepreneurial bug, I guess for lack of a better word. Going back to my middle school, high school years, I used to, I did not have an allowance. My parents were just like, if you want to do stuff and pay for stuff, you make your own money and figure it out. So I was like, Alright, I'm gonna, I've told this story a couple of times. But I used to go and purchase use textbooks and required reading books from my classmates and friends, because I was so shocked that like, you'd have to buy a book for summer reading, half the students wouldn't read it. And then that was it the books like useless. So I'd go buy those books for 20 cents on the dollar, and then go sell them back on Amazon's marketplace for 70 cents on the dollar. So use books. So I do things like that just to like make money in high school. And then I've probably unsuccessfully tried to launch 20 Different companies throughout my college years and post college years across a variety of industries. I am a self taught really bad but self taught software engineer. So I know how to write, you know, a little bit of code here and there. So I have a hodgepodge of skills that were all developed around this idea of like, I want to go build something. And I want to be good enough at a lot of these things to be dangerous, which ended up working well for misfits where like I built the first version of the website, I use some of my like supply chain logistics knowledge to get that part off the ground. I have a finance background. So I know how to think about financial modeling for startups. So all that helped me and I've always wanted to do things. But you know, frankly, misfits was probably the first startup that really started to get traction quickly and worked from the early days. But I was industry agnostic, and I certainly never expect it to be in grocery.
Becca Szkutak 21:41
And now we're gonna take a quick break. But we'll be right back in a second. We have to ask because you put out there that you had probably 20 ideas that didn't work. What was your worst idea? Looking back on it obviously, probably seems like a good idea. At the time,
Abhi Ramesh 21:58
my worst idea, it was a company that and by the I this was a product that I ended up building and launching, it was a company that allowed you to shop on social media. Basically, if you saw a photo of a pair of Nike shoes on Facebook, for example, you could just type the word by and your size in the comments, and it would buy it for you. You know, I was working on it with a very close friend of mine. He's still one of my best friends. And we were like, Why isn't everyone everyone's on social media all the time? Aren't they also just like buying through comments. And so you know, we created this infrastructure where someone could like link their credit card information, their address on the back end. And as long as you were signed up on that, you can just comment and buy, as you can imagine, like, that's not a natural way for you know, you could just click and people want to browse, they want to shop steal. So the idea of shopping through comments never took off. And I think it was just us being a little bit naive about consumer behavior back in the day. But I think that was I don't know, that feels like probably one of the one of the worst ideas, a lot of the ideas by the way, I don't think they were bad ideas, we just did not stick to them for long enough. One of the platforms that I worked on was like a personal style engine. For guys. The idea being guys want to buy clothes and look good and clothes, but they hate shopping. So can you essentially like have them go through a quiz, sign up on the quiz. And then we kind of curate clothes for them every week or every month. And then we're like, this is a horrible idea. It's not working. And then companies like Stitch Fix, and a few others, like took off and have done a pretty decent job of getting ideas like that off the ground. So So I think a lot of the companies were just like myself, and some of the folks I was working with, we were just we quit a little bit too early. But I think the comments Obi Wan was just maybe a bad idea.
Becca Szkutak 23:35
It is funny to think about though now because I feel like people do buy a lot off of social media, especially like post pandemic. Not in that way, of course. But it is interesting to think if you had stuck with that one, if maybe that would have picked up or pivoted to like how people do it now,
Abhi Ramesh 23:49
maybe like native shopping would have taken a different form than like comment shopping, there's probably another way of purchasing on these platforms. Yeah.
Becca Szkutak 23:56
And are you with misfits? Are you a solo founder? Technically? Yes. And what is that? Like? We actually we just got off from talking with someone where it's a co founding team of four, which we were like, that seems like a lot of co founders. But on the other hand, being a solo founder, of course has its own challenges, but also benefits on the other end, like how has it been taking this company from idea to where it's at now, being the sole person behind it? Not including the employees, of course, but
Abhi Ramesh 24:23
ya know, I'll say a couple things about that one, I've never held that there's like a right answer to this question. And I've had folks asked me before, like, you know, we're trying to start a company like, should I have a co founder? Should I not? And I think it's a very personal sort of decision and question. And I've worked on startups before with co founders, and I've really liked it. I've worked on startup with co founders before, but it's been challenging because we'd step on each other's toes. Ultimately, I think what I realized about misfits was, in the early days, I felt I had kind of the fundamental skills to kind of get it off the ground and didn't need some people say like, oh, I need a technical co founder because I need I can't write code or I need a Supply Chain co founder. And when I was getting off the ground, I just didn't feel the need to go get someone else to help me with that stuff. And I had kind of do enough again by myself to get it off the ground, I was an expert, but but enough, and then I hired folks early to the team that were experts in those areas that you got to get it off the ground. So though I don't have the same call, like support structure of a founding team or co founder, I do feel like a lot of the early employees that I hired into misfits in the first six months or eight months, they've kind of provided the equivalents of that support structure. And, by the way, a lot of I'd say 85 90% Plus, of our early employees, meaning like hired and year one are still with us, oh, he's still senior members of the team, our CFO, I probably got him on board, you know, seven, eight months into signing the company or CTO current CTO, same thing, seven, eight months, our head of marketing a brand, you know, four months in the company, and these people are still here. Because I had this sort of this SWAT team of amazing executives that I was able to get on board early, they provided me with that same amount of support. Now, all that being said, I think the difference is, I think when you have a co founder, you have someone who really shoulders the burden with you, like of the entire business, the investors dynamics, all that, that I have to handle solo, which has its ups and downs, certainly, but you know, I think I've gotten sort of used to it over the years.
Dom Davis 26:17
Yeah, I was gonna ask, how do you manage like your mental health? Because I imagine being a solo founder is quite lonely. I cook, what do you cook? Yeah,
Abhi Ramesh 26:25
that's one of the things I do. I'm a horrible cook. Like, I do not make anything that actually tastes even remotely good. But it's like a distressing thing for me. And I'll like, I'll actually look at a lot of recipes, we post on misfits, or, you know, go to like food bloggers and things like that. And I'll actually like, try to whip up whatever I can using my misfits box. And I think I'd probably cook lunch every day and dinner six days a week. And I've done that for a very long time unless I'm traveling. So it's like a, it's a fun way for me to unwind and de stresses me. And then I also I'm a very active person. So I like you know, whether it's running or working out or biking or whatever it is, like I'm from, what I found is the mental stimulation and burden that comes with running a high growth startup, like I found that I need to balance out with like the same amount of physical work and simulation. So getting out and like working out a lot. And you know, all that kind of good stuff has been helpful for me.
Becca Szkutak 27:17
And I'm curious, so you guys made a pretty big acquisition last year. And so definitely, Chris, want to talk about that? Because I don't know if he would say they're a direct competitor to guys, but definitely falls under that category. So what was the decision process? Like there? Did you guys always think maybe that would happen? What were the signs just like walk me through what it was like to have that come to the
Abhi Ramesh 27:38
so we bought, I'd say like, we were frenemies with this company for a while, probably the right word to use, but they were very much competitors. Like in this category of, you know, ugly produce misfits food, it was us an imperfect foods that were kind of like the primary players in the space. So we end up acquiring them in October of last year, they came about in somewhat of a natural way, as you guys probably know, the market for raising capital externally for growth stage companies has been somewhat challenging over the past year and a half, two years. And so imperfect was gonna raise capital as they were going to go raise capital, we were introduced their investors, and we talked about it, and we're like, Hey, if you're gonna raise capital, should we actually look at combining these two businesses? Because at the end of the day, we have a shared mission? We have a shared view of the world. And when it comes to sustainability and affordability, should these companies really be two separate companies competing forever? Or does it make more sense to put them together? And we very quickly landed on like the answer of like, Hey, we should put these together, because that's going to be the right move. And then it was really just a question of like, structuring it the right way and getting the deal done.
Dom Davis 28:35
Yeah, cuz that was another thing. Like, okay, so you buy another company? How do you blend teams and leadership and decide, like, who stays who does it? Like? How does that internal process work?
Abhi Ramesh 28:44
In some ways, that's been the most challenging part of integrating these two companies. When we first put together the plan. It was like, Okay, we have to combine warehouses, we have to combine assortments and make sure all that stuff gets done. And so that was what we focused on. In the early days, the people side of this is a lot harder, because you know, you have like duplicate teams transparently. Right. And so you have marketing team, a marketing team B, and you got to put them together. And most likely, there's some overlap as well. And you have to part ways with some people. And how you do that, both quickly and objectively, is super hard. And I don't know, I don't know if we did it perfectly either. I don't think we did it perfectly. It I'm sure there were some flaws and how we went about it. Ultimately, the view that I took was, I need to pick a leader for every team, first and foremost. And so we ended up picking a group of leaders that were frankly a blend of misfits and imperfect leaders. A lot of folks when they heard that we acquired imperfect, they were like, Okay, I assume you're just going to, you know, wipe out the leadership team at imperfect and keep the leadership team at misfits in reality, both these companies were pretty large, like imperfect and misfits are roughly the same size when we bought them from a headcount perspective and all that. So it would have been naive of me to be like, Oh, I'm just gonna wipe one side and keep the other so I ended up making the decision to look at it a little bit more objectively and say, Hey, who's the right leader? For each one of these teams that can scale the combined company, and I went team by team and did these mini interviews and tried to figure out who the right leader was, for every role, there are some places by the way where teams didn't exist, and I created a new team, because with a combined company, you needed a new team to exist. So we went through that exercise. And that was the first thing that we did on the people side, establish who the leadership team is, then once we did that kind of task leadership team within going and building their teams. And then they had to kind of go do that same exercise that I just described across the rest of their teams. It's hard, because if you have a leadership, team member from one side are they don't really have context on the performance of folks who are on the other team. Probably not right. And so I think that's the hardest part. But we tried to like use prior performance reviews, we tried to use context from the other leader, all those things, but it was very challenging to do. And then after all, that's done, we went through layoffs, right. And so building the trust of the organization to be like, Hey, we had to do all these hard things to make sure we have a steady state team now. Now we're kind of, we're moving forward from this, and we're one company. So we're no longer in a good talk about imperfect versus misfits or vice versa. That's one company move forward. That took a while, I'd say that whole process of the 11 months since the start of integration that probably took like six months to do.
Becca Szkutak 31:17
And switching gears just a little bit. One thing I'm always curious about for startups, like yourself that are so mission driven, and not only of course, it's a for profit business, but you're trying to sell food waste, which is obviously a very important issue. That is a huge problem in both the US and beyond. How does that weigh on you that this company is doing more than say, alright, truly, always go on the show and crap on SAS companies, which I don't need to do. But if a marketing software doesn't work out, or marketing software doesn't work out, but food waste is obviously a heavier issue, does that weigh on you at all, that there's just more to it for the company to succeed?
Abhi Ramesh 31:54
It does weigh on me that I think because what we're doing here, we're a for profit company. And we're trying to build a business that works. But I also feel like what we're doing, we have somewhat of a moral obligation to figure this out to tackle food waste at scale to help fix the sustainability problem that we have. And so I do think there's some amount of pressure on hey, we kind of have to succeed here, because we're tackling such a huge problem in the ecosystem. And we're not going to do it or able to do it. Who else is, I definitely think it sort of weighs on us on the entire team here in terms of like the gravitas of the situation and what we're trying to do. But I think what's helped is the ecosystem of sustainability focused and food waste focused companies over the past five years has grown tremendously. We look and we're like, look like we're not the only ones doing this. There are companies that are trying to do, it's a SaaS company, but like forecasting technology for grocery retailers, there's companies that are trying to figure out how to provide fertilizer that is more eco friendly, there's companies that are trying to figure out how to provide cows with feed that will make them burpless. Because cow burps cause methane gas emissions. So people are tackling this from a variety of different angles. And I think it's just become front and center is such an important problem, which I think gives us conviction and hope that we will figure out a part of this problem. And there's a bunch of other companies that will figure out other parts.
Becca Szkutak 33:10
And sort of with a lot of that in mind and thinking about where you guys have gotten to at this point, where do you guys go from here? Do you expand categories? Do you see scaling to new markets? What is the future for the company,
Abhi Ramesh 33:21
a big part of what we're gonna do is category expansion. If you think about kind of the DNA of a company, we started off with produce, then we expanded into some non produce items and meat and seafood. But we still have a very curated assortment compared to the vast majority of grocery stores. Yet there's food waste, and all of these categories that we're not in. And so our hope is what we've done in produce, we can then go expand into every other grocery category, because our goal is to be a sort of standalone grocery store online. And so I think we can essentially go and tackle food waste and go by the the ugly produce of all these other categories and go build a full grocery store online. So category expansion is a huge part of it. I'd say geographic expansion, we are in every state in the US today. We don't have any immediate plans to expand internationally, I think the US is going to be our core focus. So then it really becomes about sort of getting depth in the states that we're already in.
Becca Szkutak 34:13
Unfortunately, we are out of time. I feel like we could literally keep talking for another few hours. But honestly, this has been a pleasure. Thanks for coming on the show.
Abhi Ramesh 34:20
Thank you guys. I really appreciate it.
Becca Szkutak 34:27
And that was our conversation with ABI Don once you think
Dom Davis 34:30
I loved it. I loved talking to him. He was really fun. Again, I'm still stuck on the ugly vegetables.
Becca Szkutak 34:36
Oh, I know. I shop at the farmers market a lot. So I feel like I'm always just buying ugly or different produce. So I like honestly forget sometimes that like that stuff just matters that much to some people.
Dom Davis 34:47
Yeah. And you know, it's actually really interesting when he was talking about how COVID helped his company, I don't know, explode in a way because now that I think about I do all of my grocery shopping online, which is is crazy because I live next door to grocery stores and I just have them delivered to me. But I think that's, you know, sad but but he's this is like such a new market in a sense like it's so popular now.
Becca Szkutak 35:13
Or no, it is interesting to think about because I know he said that only 30% of groceries are bought online but looking into it, it's kind of hard to nail that number down of like exactly how much is bought online? How much isn't I personally have never actually ordered like a whole cart of groceries online. I like the quick delivery services, which I'll do if I'm like lazy, because I live like a 10 minute walk from a grocery stores. I'm not far I also like to drive to Trader Joe's. I like grocery shopping as was probably evident from my weird obsession with grocery store logistics. So I have not really ordered online. But I get that I'm probably more in the minority on that. No, yeah.
Dom Davis 35:49
You saying that makes me see Oh, my gosh, I get everything delivered. But now I mean, this is totally a product that I would also look at it makes sense to repurpose or like to just find a fit for all this produce the experience of getting VC funding for this and going into credit card debt, which a lot of founders, I don't think founders have really opened up about how much debt it also costs to launch a company. So I was really happy that he was really open about that,
Becca Szkutak 36:17
for sure. No, you're totally right. I mean, I'm sure there are a lot of other founders who have done similar things and done more of the personal debt route. And some of those more types of scenarios that once they've grown, they've taken on VC funding they maybe don't want to talk about publicly because it's like they can kind of ignore it that that was like a step in the journey.
Dom Davis 36:34
I know. It's also like, Oh, my goodness, I need VC funding immediately to help me pay these bills.
Becca Szkutak 36:39
And that makes so much sense because it is so low margins so hard to scale, like so expensive, which is why I thought was interesting, talking about the acquisition they made of imperfect foods and thinking about like the overall venture ecosystem this year, it's those capital intensive startups that are the ones that are struggling first and sort of running out of capital before others. So finding out that they really purchased them because imperfect foods investors came in were like, hi, these company needs to survive in some way. It's something that was like, interesting to hear that that's the real reason, and probably something we're gonna
Dom Davis 37:14
see a lot next year. Oh, yeah, no, because I think it was last year, we were covering this where or I think you wrote an article saying like, a bunch of companies are probably just going to be acquired now, because the market was really tough. And so when he was talking about that, I was like, Oh, this is one of those companies that had to buy another company, because the market is really tough. Yeah, there's definitely going to be a trend. And I really want to know what other types of companies are going to consolidate in this sense, because this is definitely going to be a trend that we're gonna see.
Becca Szkutak 37:40
Right? Because of course, it's like, especially with what's going on with some of the antitrust stuff at the government level, it's gonna be interesting to see who can consolidate and who tries to, but isn't allowed to say feel like, obviously, these companies sure they're doing something very similar to each other. But you can, of course, argue in their space, like, are they going to be bigger than Whole Foods? Probably not, which isn't a bad thing for them as a business but totally takes that like anti trust piece out of it in a way that other companies who come to this sort of decision or crossroad in 2024 are not going to have the luxury of I know,
Dom Davis 38:15
and him describing the company as a frenemy, is
Becca Szkutak 38:21
that's like the best term because he's like, they did a lot of good education on this as well. But we want their customers.
Dom Davis 38:27
Yes. And you know, what were your thoughts on him going into the process of integrating two teams? Because I was shocked. He was kind of open and honest. Or maybe I was just expecting a kind of like, there were a little bumps, but we all figured it out. I was really happy to hear that he was honest about how hard it was and how they had to go through layoffs. And the human process of a merger like this is always the hardest thing to accomplish.
Becca Szkutak 38:51
Definitely. I thought it was really fascinating when he said that they really took like a granular look at each team and was like, okay, isn't this fits person better to lead this team? Or is an imperfect foods person butterly this team because I used to work at a media company that bought another media company and merged and they absolutely did not do that. And the parent company became the head of pretty much everything and everyone who had been in like a really senior position at the company that purchase were all let go or essentially demoted. Like they didn't do that at all. They didn't go oh, this person from the company or acquiring may actually be a better fit than who we have. So it was interesting to hear that because that of course as you mentioned, they didn't do it perfectly by any means. I don't know if there is a way to integrate companies perfectly but it sounds like they were much more thoughtful than Yeah, the one scenario like this that I've lived through
Dom Davis 39:39
now. Yeah, every time you hear mergers, do you think of it just being an absolute labor bloodbath? I've always wanted to hear the psychology behind it from a CEO founder perspective, like what are you thinking? Once you realize you have to lay off all of these people and how do you navigate those emotions?
Becca Szkutak 39:56
No, I think he was very candid about it in a way that hopefully people or going through this next year, maybe we can listen back on and see how someone else did it and can feel so honest about it. And you
Dom Davis 40:06
know, one thing we should mention is a lot of the ideas that when we were talking about his former startup ideas and how he kind of eventually found his way here, a lot of those startup ideas were not necessarily bad.
Becca Szkutak 40:18
No, no, because especially like the buying on social media. I mean, I don't buy directly on social media, but like, man, like Instagram is good at serving you ads of stuff that you really just do want to buy. And it's like, yeah, I'll take the extra step and go to the site and buy it, but people would probably love that. Maybe not in the format he was describing, but like, they were ahead of their time, as far as Oh, people are gonna want to shop directly on social media because like, that's absolutely true. But I
Dom Davis 40:42
think it's a good lesson for founders, you know, all those ideas that you have, they're not necessarily bad maybe just you know, maybe you weren't the right one to execute them but always keep going because it might lead you to the golden idea which is for him this or even
Becca Szkutak 40:57
like when they talked about essentially what Stitch Fix does now if they had kept with that, like they probably would have done Stitch Fix because that did prove to work. Now is a company that yeah, they've had their ups and downs over the last few years but have you seen people use them? So the definitely was that demand? They maybe just didn't. And he mentioned this too, they maybe just didn't stick with it long enough to see it through.
Dom Davis 41:17
Yeah, knowing when to pivot and when maybe if something isn't your battle to fight you know, is always a lesson in being a founder because once again, it led him here No, this one was full of lessons full of lessons. Produce are not ugly, they're just different.
Becca Szkutak 41:36
Found is hosted by myself. TechCrunch Senior Reporter Becca Skuta. Alongside Senior Reporter Dominic Midori Davis, founders produced by Maggie Stamets with editing by Cal our Illustrator is Bryce Durbin phones, audience development and social media is managed by Morgan Liddell Alisa stringer and Natalie Kreisman TechCrunch is audio products are managed by Henry pic of it. Thanks for listening, and we'll be back next week.
Transcribed by https://otter.ai