Imperfect Foods: Mission with a Margin

Highlights from ✨Hot Deal Time Machine✨⏳ -- On Clubhouse Thursdays at 8PM ET

Below are highlights from last week’s Clubhouse episode featuring Ben Chesler, co-founder of Imperfect Foods, and Nikhil Basu Trivedi, GP at Footwork and seed investor in Imperfect Foods.

Sign up for reminders about the show ✨Hot Deal Time Machine✨ here and listen in to hear the Mirror story this Thursday.

💪🏼The Hustle: Getting on the forklift to unload produce

In 2015, the first year of business for Imperfect Foods, founders Ben Chesler and Ben Simon ran the business more like a local produce company than a tech company. Chesler would wake up at 4AM each day, bike to the 3000 sqft warehouse serving 4 zip codes in the East Bay (CA), and literally hop on the forklift to move produce from the trucks. Unlike most tech companies, Imperfect Foods was profitable within the first year and by remaining hyper-focused on the customer experience and grocery operations, the Imperfect team could iron out the kinks in the business model. 

🙅‍♂️The Contrarian Approach: $50M GMV with zero engineers

Chesler and Basu Trivedi recall the growing opportunity within online grocery as one of the most attractive things about Imperfect at the time of the seed investment. In fact, the opportunity was so massive that Chesler scaled the business to $50M in GMV before ever hiring an engineer. He joked that the digital product certainly wasn’t the appeal for investors at the time, and that “in the early days, engineering was just not core to who we were.” Rather, they aimed to differentiate on business model and product. Yet, even with such limited tech, Imperfect scaled quickly - perhaps pointing to the product market fit and the latent demand in the grocery category to support a large business long term. 

💡The Lightbulb: Mission must be baked into the DNA of a company 

Chesler and Simon spent two years refining the business model for Imperfect Foods before launching. And from day one, the mission of minimizing food waste was central to their business. In order to make it all work, they knew that they had to define a business model that also combined strong margins, lower prices, and an incredible customer experience. Without all of those pillars, it would be too easy for customers to choose another option (or for investors to dismiss the company). As Chesler said, “It only works because mission is woven into the DNA of our company. If we were just a financially driven company that donates money to charity on the side, it’s too easy to strip out and it doesn’t work.”

😬The “Oh Shit” Moment: Expanding the “mission” = disgruntled customers

When the company was founded it actually began as Imperfect Produce and in 2019 transitioned to Imperfect Foods - a rebrand that enabled the company to carry more products and staples for customers like milk, eggs, rice, and flour. The company made this change quietly and immediately got blowback from their mission-aligned customers and employees with questions on why not everything fit into a food waste story or why third party brands were suddenly offered. The lesson? For a brand with a highly mission-focused member base and team, the messaging is critical. Chesler and Simon took the steps to explain to customers and employees alike why they were shifting strategy and the overall benefits to customers, the community, and the mission - soon re-invigorating the love for the Imperfect brand.

🖼The Big (and small) Picture: Path to $100M in revenue

Imperfect Foods was born out of a non-profit that Chesler and Simon founded while at Brown University called the Food Recovery Network to minimize food waste in college dining halls. It was through this network that Chesler and Simon discovered the massive supply of “ugly produce” that is wasted each year (6 billion lbs!) and set to work on building a business to address this waste. Interestingly, Chesler and Simon didn’t immediately see this as a billion dollar opportunity. In fact, during a business plan class at Brown his senior year, Chesler chose not to present his work on Imperfect because the criteria for the class was that the business reach $100M in revenue in 5 years, a milestone he didn’t think possible for his fledgling produce business. The irony? Chesler later got to email his professor saying that Imperfect Foods hit that $100M milestone after only 2 years. Perhaps a great demonstration that sometimes great opportunities aren’t obvious from the outset, but reveal themselves along the journey.

👉🏼 Up next this Thursday: we chat with Byron Ling, Partner at Canaan and early investor in Mirror on how the connected fitness start-up launched a platform that caught the eye of Lululemon

👉🏼 ✨Hot Deal Time Machine✨⏳ is a 30-minute weekly Clubhouse show where we travel back in time to the early stages of some of today’s hottest deals. Hear from founders and investors on the original pitch and thesis…and how things actually played out, Thursdays @ 8PM ET