Nigerian food procurement startup Bendase supported by Y combinations is changing employee wage structures and seeking fresh capital, TechCrunch learned.
This comes after graduating from 44% of the workforce (about 120 employees) and then marking second round of employment cuts in five months a month. According to an internal document seen by TechCrunch, in the latest development, the startup has replaced the employee's traditional payroll with a performance-based pay system.
The five-year-old startup, which raised $30 million in the Series A round led by Parttech Africa and TLCOM Capital, said restructuring was needed to navigate profitability.
Vendease's new compensation model includes a five-level payback plan, according to the document.
In February, all employees received salaries of 140,000 (~$90) regardless of their previous pay. From March to May, the company will raise employee wages to 30% of its previous level if it meets performance targets, but these targets have not been specified.
The compensation will increase to 60% of previous pay from June to August, and 90% from September to November, with a full pay recovery by December conditional on company and employee performance targets.
The unpaid portion of the salary will be converted into stock options under the ESOP, with 50% entitled for 10 months and the rest for three years. However, employees can exercise these options only at fair market values approved by the Board, according to the employee contract.
The company has confirmed that the change to employee payments is now on break, even when it is close to profitable.
“Vendease has rebuilt both its business and operations. We are a software company and we want to focus on promoting Opex-heavy operations with technology rather than dealing with it ourselves,” a company spokesperson told TechCrunch.
The change aims to promote employee productivity, but says the company is experiencing more financially sustainable growth. “We're only spending what we've acquired, so we're consistently broken and focused on profitability,” the spokesman added.
With just over 150 employees remaining, Vendease is betting on reducing costs and maintaining operations on internal restructuring, fresh capital and AI-driven efficiency. As the company notes, this also means gradually phase out its warehouse and logistics business while focusing on software-driven growth and doubling sales and payment solutions and credit marketplaces.
Bet on BNPL for floating
Founded in 2019 by Tunde Kara, Olumide Fayankin, Gatumi Aliyu and Wale Oyepeju, Vendease was founded to streamline food sourcing for restaurants and food businesses in Africa.
The startup claimed it could eliminate inefficiencies in the food supply chain, which costs billions of dollars a year. By 2022, it had moved 400,000 tonnes of food to over 2,000 customers, saving $2 million in its main market, Nigeria, and reduced waste-related losses nearly $500,000.
However, the past two years have been brutal for many Nigerian startups without revenues controlled by Vendease and Forex. Nigerian Naira's revenues have tripled since Series A in September 2022, but the sudden depreciation of currencies over the past three years has wiped out these profits on dollar terms. Inflation has further increased operating costs and narrows down the profitability of capital and talent-intensive businesses.
One of Vendease's major revenue drivers within the past year is to buy now. Traditional lenders often avoid the food business due to volatility and fragmentation. However, Vendease leverages supply chain knowledge to undertake loans through markets that connect financial institutions with the food business.
We have claimed a default rate of less than 1% over the past two years, and as of September 2024, we have issued more than $70 million in credits.
When CFO Mohamed Chaudry joined in January 2024, he helped identify BNPL as an important path to profitability. However, despite some recent tweaks, credit products alone do not seem to be enough to get a Ben Diese out there.
His appointment also began an ongoing restructuring to strengthen financial management and extend the cash runway.
So the company will discuss and use it to raise bridges with existing and new investors and fund the growth and expansion of technology rather than operating expenses.
Meanwhile, sources say Vendease has investigated potential sales to Horeca (hotels, restaurants, catering) and other players in the FMCG sector.
However, the company disputes this and claims it is the opposite. “It's normal to approach M&A, especially a rapidly growing business where you run in a unique space like food. Yes, Vendease has been approached, but the founders are focusing on scaling rather than selling right away,” the spokesman said.