Ikota, a few kilometers into the rather posh Lekki district on the city’s island, is one location for watching an increasing buzz in the restaurant industry in Lagos. The neighborhood, which was formerly dominated by the Nigerian fast food business Mega Chicken, is now receiving well-known restaurants like Domino’s and The Place, and the quickly-rising Blackbell is soon to complete construction. The largest network of movie theaters in Nigeria, FilmHouse, is establishing itself in the same 100-yard area.
Brands in these restaurant clusters seek to capitalize on the heavy foot and vehicle traffic and lay a claim to the $12 billion that Nigerians spend on eating out each year, or 5 trillion naira. According to statistics from the agency for 2019, the majority of Nigerians’ household budget is spent on eating out.
However, in addition to serving food, restaurants have an issue with inventory and procurement management. Filling that need is proving to be a lucrative business opportunity in and of itself. To address these issues, Vendease was founded in 2020 and has since received funding from two of Africa’s largest tech investors, TLcom Capital and Partech Partners.
Vendease raised $3.2 million in venture capital after being accepted into the winter cohort of Y Combinator’s accelerator program last year in order to adapt their product to the market. Along the way, there has been a slight shift in emphasis from connecting producers with restaurants to being a bulk buyer from farmers and a direct supplier to restaurants.
It’s a change to a more asset-heavy business model that necessitates warehousing and careful consideration of the delicate needs for food storage. The startup is now one of many distributors from which restaurants may purchase food products. Investors may be drawn to the idea of using tech to digitize restaurant operations.
The grounds for interest in Vendease, according to Andreata Muforo, partner at TLcom Capital, a pan-African venture capital firm that was one of Andela’s early investors, were “affordability, convenience, and reliability.” General partner of Partech Cyril Collon claims that the company has “great potential for expansion in Nigeria and beyond.”
According to a release, both companies sponsored a $20 million stock round in Vendease. It was possible to raise an additional $10 million on the local financial market.
The firm, which operates in eight cities around Ghana and Nigeria, claims that in the past year, its revenues have increased five times.
Given that fintech dominates investor interests, a $30 million round for a firm in Africa that focuses on restaurants is unusual. More than a third of the firms that have received their first million-dollar round so far this year are in the fintech sector.
Vendease and Orda, a restaurant payment startup, indicate an apparent understanding of the value in Nigeria’s food business despite this. Earlier this year, Orda raised $1.1 million. Hustle Fund and Magic Fund, two of its investors, also have stock in Vendease.
“It is more than just placing orders for supplies, we want to transform how the entire sector works and remove the bottlenecks that stunt the growth of restaurants and food businesses,” Kara said.
All of this occurs within the context of a year that has not been very encouraging for venture funding of businesses globally. Additionally, there was the much-discussed failure of Kune, the Kenyan food delivery firm that was criticized a year ago for the hubris of its founder. None of that is on the mind of Tunde Kara, the co-founder and CEO of Vendease, who thinks that his business is meeting a demand that is prevalent throughout Africa.