The Y Combinator-backed Nigerian food procurement business, Vendease is trying to stay afloat by making some financial changes.
After laying off roughly 120 workers, or 44% of its workforce, last month, the company has now redesigned its pay structure, linking payments to performance and offering stock to replace lost income. It is also looking for further funding to increase its cash runway. The company has replaced a fixed salary with a staged recovery plan that only pays those who meet unspecified goals, according to internal documents accessed by BrandSpur news brand.
All remaining workers, regardless of prior compensation, received a flat ₦140,000 (~$90) in February. If they achieve performance targets between March and May, they can receive up to 30% of their initial pay. The percentage rises to 60% between June and August, then to 90% between September and November, with full pay restoration anticipated by December—but only if the business and its employees meet financial goals.
Under an Equity Share Option Plan (ESOP), employees will be compensated with share options to make up for lost wages. Most of these options vest over three years, while half do so over 10 months. Employees’ immediate benefits are limited, though, as they can only cash out at a market value that has been approved by the board. The company maintains, however, that its financial situation is better.
According to a spokesperson on behalf of the company: “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.”
In 2019, Vendease was introduced to make food purchases easier for restaurants in Africa. In addition to saving companies millions on procurement expenses, it had transported 400,000 metric tonnes of food by 2022. However, the economic environment has evolved.
Although the startup’s naira income has tripled since 2022, the gains have been erased in dollar terms due to inflation and currency weakness. Vendease has had to reconsider its expenditures and intensify its focus on software-driven efficiency due to increased operational costs. The company offers short-term lending to food businesses that banks generally shun, and its Buy Now, Pay Later (BNPL) service is one of its main sources of income.
According to the company, it has given out more than $70 million in credit with a less than 1% default rate. However, BNPL is insufficient on its own to improve the situation.
Continuing, Mohamed Chaudry has advocated for financial restructuring to reduce expenses and increase the company’s cash runway since taking over as CFO in January. To raise money for a bridge round, Vendease is now negotiating with investors. The money will likely be used to advance technology rather than pay for operating costs.
According to reports, the company has looked into selling to significant firms in the FMCG and hospitality industries. This is denied by Vendease.
The spokesperson went on to reveal: “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.”
To stay solvent, Vendease is relying on its BNPL model, lean operations, and new funding. It is now unknown if this approach will be sufficient to sustain the business or if more layoffs are unavoidable.
