Nigerian startup Vendease, backed by Y Combinator, is making significant changes to its business model and compensation structure to achieve sustainability and profitability.
Changes in Compensation Structure
Vendease recently announced a second wave of layoffs, reducing its workforce by about 44%. The company has shifted its compensation system from fixed salaries to performance-based remuneration, including an Equity Share Option Plan (ESOP) as an incentive. The new five-phase salary recovery plan was introduced in February where all staff received a uniform payment of ₦140,000, approximately $90. Future salaries will be incrementally increased based on performance targets.
Shift to a Software Model
In a sudden strategic change, Vendease is moving from logistics to a software-based business model. The aim is to reduce overheads by leveraging technology to streamline procurement, sales, and payment processes. This decision is driven by the high cost of traditional logistics in Nigeria due to poor infrastructure and expensive fuel. A company representative stated: "We only spend what we earn, which keeps us consistently at break-even and focused on profitability."
Leveraging BNPL as a Key Revenue Stream
Over the past year, one of Vendease's key revenue streams has been the 'Buy Now, Pay Later' (BNPL) product. This allowed food buyers to borrow funds when traditional lenders were reluctant to engage. Despite the successful implementation of the BNPL model with default rates lower than 1%, this revenue source alone has not been sufficient to offset rising business costs.
Vendease's restructuring and shift towards technology-led operations reflect a trend among Nigerian startups to adapt to challenging economic environments. With its new focus on technology and efficiency, the company aims to withstand inflation and economic uncertainty, setting new standards for digitalization in food sourcing.
