Nigerian food procurement startup Vendease, backed by Y Combinator, has introduced a new employee pay structure and is seeking additional funding, as reported by TechCrunch.
This development comes after the company laid off 44% of its workforce, approximately 120 employees, last month, marking its second round of job cuts in five months. According to internal documents viewed by TechCrunch, Vendease has replaced traditional employee salaries with a performance-based pay system, supplemented by an Equity Share Option Plan (ESOP).
The five-year-old startup, which raised $30 million in its Series A round led by Partech Africa and TLcom Capital, stated that the restructuring is necessary to achieve profitability. Vendease’s new compensation model includes a five-phase salary recovery plan, as outlined in the documents.
In February, all employees received a salary of ₦140,000 (~$90), regardless of their previous pay. From March to May, employee wages will increase to 30% of their former levels if they meet performance targets, although these targets have not been specified. Compensation will rise to 60% of former salaries from June to August and 90% from September to November, with full salary restoration expected by December, contingent on company and employee performance goals.
The unpaid portions of salaries will be converted into share options under the ESOP, with 50% vesting over ten months and the remaining portion over three years. However, employees can only exercise these options at a board-approved fair market value, according to the employee agreement.
The company confirmed the changes to employee pay, stating that it has reached a break-even point and is close to achieving profitability. A spokesperson for Vendease told TechCrunch, “Vendease has restructured both its business and operations. We’re a software company, and we want to focus on facilitating OPEX-heavy operations with technology rather than handling them ourselves.”
The spokesperson added that the changes aim to encourage employee productivity while the company becomes more financially sustainable. “We only spend what we earn, which keeps us consistently at break-even and focused on profitability.”
With slightly over 150 employees remaining, Vendease is betting on internal restructuring, fresh capital, and AI-driven efficiency to reduce costs and sustain operations. The company is shifting its focus towards software-driven growth, doubling down on its sales and payments solutions, and credit marketplace, while gradually phasing out warehousing and logistics operations.
Betting on BNPL to stay afloat
Founded in 2019 by Tunde Kara, Olumide Fayankin, Gatumi Aliyu, and Wale Oyepeju, Vendease aimed to streamline food procurement for African restaurants and food businesses. The startup claimed it could eliminate inefficiencies in the food supply chain, which cost businesses billions annually.
By 2022, Vendease had moved 400,000 metric tonnes of food for over 2,000 customers, saving them $2 million in procurement costs and cutting wastage-related losses by nearly $500,000 in Nigeria, its main market.
However, the last two years have been challenging for Vendease and many Nigerian startups without FX-denominated revenue. Since its Series A in September 2022, the company’s revenue in Nigeria’s naira has tripled, but the currency’s sharp depreciation within the last three years has wiped out those gains in dollar terms. Inflation has further increased operational costs, squeezing profitability for the capital- and people-intensive business.
One of Vendease’s main revenue drivers within the past year has been its buy now, pay later (BNPL) product. Traditional lenders often avoid food businesses due to their volatility and fragmentation. But Vendease leverages its supply chain knowledge to underwrite loans via its marketplace, which connects financial institutions with food businesses.
The company claims a default rate of under 1% over the last two years and has issued over $70 million in credit as of September 2024. When CFO Mohamed Chaudry joined in January 2024, he helped identify BNPL as a key path to profitability.
However, despite some recent tweaks, the credit product alone doesn’t seem to be enough to get Vendease to profitability. Chaudry’s appointment also triggered the ongoing restructuring to tighten financial controls and extend the company’s cash runway, which, according to sources, may only last a few more months.
As a result, the company is in talks with existing and new investors to raise a bridge round, which will be used to fund technology growth and expansion rather than operational expenses. Meanwhile, sources also say Vendease has explored a potential sale to other players in the HORECA (Hotels, Restaurants, and Catering) and FMCG sectors.
The company, however, disputes this and insists it’s the other way around. “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,” said a spokesperson.
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