Y Combinator-supported Nigerian food procurement startup Vendease has amended its employee compensation structure and is currently seeking additional capital, as reported by TechCrunch.
This follows the recent layoff of approximately 44% of its workforce, which involved around 120 employees, marking its second round of job reductions within five months. In the latest update, the startup has transitioned from the traditional salary model to a performance-based pay system, augmented by an Equity Share Option Plan (ESOP), according to internal documents reviewed by TechCrunch.
The five-year-old startup, which secured $30 million in a Series A funding round led by Partech Africa and TLcom Capital, stated that the restructuring is essential for steering towards profitability.
Documents indicate that Vendease’s new compensation model includes a five-phase salary recovery plan. In February, all employees received a salary of ₦140,000 (approximately $90), irrespective of their previous pay levels. Between March and May, the company plans to increase employee wages to 30% of previous levels, contingent upon meeting performance targets, though these targets have not been specified. From June to August, compensation will rise to 60% of previous salaries, increasing to 90% from September to November, with full salary restoration expected by December, again dependent on the achievement of company and employee performance objectives.
The unpaid salary portions will convert into share options under the ESOP, with 50% vesting over ten months and the remainder over three years. However, employees can exercise these options only at a board-approved fair market value, according to the employee agreement.
Vendease confirmed the changes to employee compensation, asserting that it is currently at a break-even point and nearing profitability. A company spokesperson explained that Vendease has restructured its business and operations, focusing on leveraging technology to facilitate operations rather than managing them directly. The spokesperson added that the changes are designed to boost employee productivity as the company moves towards financial sustainability, stating, “We only spend what we earn, which keeps us consistently at break-even and focused on profitability.”
With a workforce reduced to just over 150 employees, Vendease is emphasizing internal restructuring, seeking fresh capital, and implementing AI-driven efficiencies to lower costs and maintain operations. The company also aims to shift its focus towards software-driven growth and expand its sales, payments solutions, and credit marketplace while gradually phasing out warehousing and logistics operations.
Founded in 2019 by Tunde Kara, Olumide Fayankin, Gatumi Aliyu, and Wale Oyepeju, Vendease was created to optimize food procurement for African restaurants and food businesses. The startup claimed to have reduced inefficiencies in the food supply chain, which cost businesses billions annually. By 2022, the company had moved 400,000 metric tonnes of food for over 2,000 customers, reportedly saving them $2 million in procurement costs and reducing wastage-related losses by nearly $500,000 in Nigeria, its primary market.
However, the past two years have been challenging for Vendease and many Nigerian startups without foreign exchange-denominated revenue. Since its Series A in September 2022, Vendease’s revenue in Nigeria’s naira has tripled. Yet, the currency’s significant depreciation over the past three years has negated these gains in dollar terms, while inflation has driven up operational costs, squeezing profitability for this capital- and people-intensive business.
Among Vendease’s main revenue sources over the past year has been its buy now, pay later (BNPL) product. Traditional lenders often shy away from food businesses due to volatility and fragmentation. Vendease leverages its supply chain expertise to underwrite loans through its marketplace, connecting financial institutions with food businesses. The company reports a default rate of less than 1% over the past two years and claims to have issued over $70 million in credit as of September 2024.
When CFO Mohamed Chaudry joined in January 2024, BNPL was identified as a potential profitability driver. However, despite some recent modifications, the credit product alone does not appear to be sufficient to achieve profitability.
Chaudry’s appointment also prompted an ongoing restructuring to tighten financial controls and extend the company’s cash runway, which, according to sources, may last only a few more months.
As a result, the company is in discussions with existing and new investors to raise a bridge round to fund technology growth and expansion rather than operational expenses. Meanwhile, sources indicate Vendease has considered a potential sale to other players in the HORECA (Hotels, Restaurants, and Catering) and FMCG sectors.
Nevertheless, the company disputes these claims, maintaining that they are the ones receiving acquisition interest. “It’s normal to get approached for M&A, especially when you’re a fast-growing business operating in a unique space like food. Yes, Vendease has been approached, but the founders are focused on scaling, not selling anytime soon,” a spokesperson stated.
