One scene for observing a rising buzz in the restaurant business in Lagos is at Ikota, a few miles into the relatively upscale Lekki area on the city’s island. Once dominated by Nigerian fast food chain, Mega Chicken, the neighborhood is welcoming familiar names Domino’s, and The Place, with the fast-rising Blackbell about to finish construction. FilmHouse, Nigeria’s biggest cinema chain, is setting up within the same hundred yard radius.
Brands in such restaurant clusters want to tap into large foot and vehicular traffic, and stake a claim for the 5 trillion naira ($12 billion) Nigerians spend eating outside the home. Nigerians spend most of their household budget eating out, per 2019 figures from the statistics agency.
But besides selling food, restaurants share a common feature: procurement and inventory management problems. Filling that need is proving to be a business opportunity in itself and Vendease, a startup founded in 2020 to address these issues has now received investment from two of Africa’s biggest tech investors, namely TLcom Capital, and Partech Partners.
From a marketplace to a direct supplier
After getting into the winter cohort for Y Combinator’s accelerator program last year, Vendease raised $3.2 million in seed money to fit their idea to the market. A small pivot has happened along the way, changing focus from matching restaurants with producers to now being a bulk-buyer (from producers) and direct supplier to restaurants.
It’s a shift to a more asset-heavy business model, requiring warehousing and attention to the sensitive requirements for food storage. It makes the startup one among many distributors that restaurants can buy food materials from. Yet, the use of software to digitize the process for restaurants sounds appealing to investors.
Andreata Muforo, partner at TLcom Capital, a pan-African venture capital firm that was one of Andela’s early investors, mentioned “affordability, convenience, and reliability” as the reasons for interest in Vendease. Cyril Collon, Partech’s general partner, says the startup has “huge scope for growth in Nigeria and beyond.”
Both firms led a $20 million equity round in Vendease, per a statement. An additional $10 million was raised from the local finance market. The startup is present in eight cities across Nigeria and Ghana, and says its revenues have grown five times over the last 12 months.
Will ‘restaurant-tech’ become a thing?
A $30 million round for a restaurants-focused startup in Africa is not usual as fintech dominates investor interests. This year, more than a third of startups that have raised their first-ever million dollar round are in fintech.
That said, Vendease and Orda, a payment processing startup for restaurants, point to an apparent recognition of the value in Nigeria’s food sector. Orda raised $1.1 million earlier in the year. Two of its investors, Hustle Fund, and Magic Fund, are also investors in Vendease.
All of this comes within a year that has not been as favorable to venture funding of startups globally. There has also been the much talked about failure of Kune, the Kenyan food delivery startup pilloried for its founder’s hubris a year ago. None of that is playing on the minds of the Vendease co-founder and CEO, Tunde Kara, who believes his company is building for a need common across Africa.
“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.