Y Combinator-backed Nigerian food procurement startup Vendease has changed its employee pay structure and is seeking fresh capital, TechCrunch has learned.
This after laying off 44% of its workforce — around 120 employees —last month, marking its second round of job cuts in five months. In the latest development, the startup has now replaced employees’ traditional salaries with a performance-based pay system, supplemented by an Equity Share Option Plan (ESOP), according to internal documents seen by TechCrunch.
The five-year-old startup, which raised $30 million in its Series A round led by Partech Africa and TLcom Capital, said the restructuring was necessary to navigate to profitability.
Vendease’s new compensation model includes a five-phase salary recovery plan, the documents say.
In February, all employees received a ₦140,000 (~$90) salary, regardless of previous pay. From March to May, the company will raise employees’ wages to 30% of former levels if they meet performance targets, though it hasn’t specified these targets, the documents say.
Compensation will increase to 60% of former salaries from June to August and 90% from September to November, with full salary restoration expected by December again contingent on company and employee performance goals.
The unpaid portions of the salaries will convert into share options under the ESOP, with 50% vesting over ten months and the rest over three years. But 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 insisting that it is now at a break even point, even close to profitability.
“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,” a company spokesperson told TechCrunch.
It says the changes are intended to encourage employee productivity while the company grows more financially sustainable. “We only spend what we earn, which keeps us consistently at break-even and focused on profitability,” the spokesperson added.
With slightly over 150 employees left, Vendease is betting on internal restructuring, fresh capital, and AI-driven efficiency to cut costs and sustain operations. As the company points out, this also means focusing more on software-driven growth and 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 set out 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, it had moved 400,000 metric tonnes of food for over 2,000 customers, it said, saving them $2 million in procurement costs and cutting wastage-related losses by nearly $500,000 in Nigeria, its main market.
But the last two years have been brutal for Vendease and many Nigerian startups without FX-denominated revenue. Since its Series A in September 2022, its 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 there.
His appointment also set off the ongoing restructuring to tighten financial controls and extend its cash runway, which, according to sources, may only last a few more months.
As such, the company is in talks with existing and new investors to raise a bridge round, money it will use 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.