![Nigerian YC-backed Chowdeck hopes to scale up food delivery, a notoriously difficult market, with $2.5 million in funding 1 Nigerian YC-backed Chowdeck hopes to scale up food delivery, a notoriously difficult market, with $2.5 million in funding](https://www.trendfeedworld.com/wp-content/uploads/2024/04/Nigerian-YC-backed-Chowdeck-hopes-to-scale-up-food-delivery-a.jpeg)
Food is important to Nigerians as households spend almost 60% of their income on it, the highest globally, according to figures official reports. This strong affinity for food, coupled with the rise of online shopping, is paving the way for the Nigerian food delivery market. reach potential $2 billion to $3 billion by 2032.
Despite the promising market size, there is no clear leader yet. However, Lagos-based Chowdeckbacked by Y Combinator and armed with a $2.5 million seed investment, is looking to make its mark in a space that burned heavyweights like Jumia and Bolt.
Founded by Femi Aluko, Olumide Ojo and Lanre Yusuf, Chowdeck offers consumers the convenience of ordering food and having it delivered to their home within an average of 30 minutes. CEO Aluko said the inspiration for launching the startup came from his experience with fast deliveries and exceptional customer service during a business trip to Dubai.
Aluko explains: 'Ordering food in Nigeria usually takes one to two hours. But every time I ordered food during my three-month stay in Dubai, I always received it on time. If there were any delays, the restaurant would call me to apologize. It was impressive to see and I wondered if we could replicate the same level of service in Nigeria.” In the first half of 2023 alone, Nigerians spent more than ₦60 trillion in food and household items, per the countries top agency for official statistics.
Aluko and his co-founders initially experimented with the concept by using a few bicycles and partnering with two restaurants. After refining their approach, they officially launched the first version of the product in October 2021. Since then, the platform has seen significant growth, with more than 3,000 riders participating and over 500,000 users (Aluko says there are more than 100,000 are active on the platform).
Less competition, more growth
Chowdeck's remarkable growth is clearly visible, especially in a competitive market where major players such as Jumia Food and Bolt Food already had a strong position with thousands of customers at launch.
Furthermore, given the industry's reputation for tight profit margins and infrastructural challenges such as traffic and poor roads causing delays in delivery times, the key question was how Chowdeck planned to overcome these obstacles and carve out its niche.
Later entrants to a market have the advantage of learning from the experiences of previous players. Unlike his predecessors, Chowdeck recognized from the beginning the importance of maintaining a positive unit economy. While other food delivery platforms often relied on deep discounts, Chowdeck took a different approach: optimizing its business model to ensure sustainability by minimizing discounts and only offering them on behalf of its partner restaurants when necessary.
“We took the time to figure out the right costs for our delivery business, so we're not big on offering unrealistic discounts,” explains Aluko, a former chief engineer at Stripe subsidiary Paystack. “This approach kept us focused on selling and targeting the right customers, rather than trying to reach everyone, which could have compromised our economy and marketing strategies.”
By the end of 2023, Jumia Food and Bolt Food had exited the Nigerian market for various business reasons, leaving Glovo as Chowdeck's main competitor. Both exits partially contributed to Chowdeck's nearly doubled user growth over the past six months.
Convenience first
Aluko emphasizes that the appeal of Chowdeck lies in its convenience. While not necessarily the most cost-effective option, he added that Chowdeck is targeting customers who prioritize time and are willing to pay for fast deliveries.
The startup's delivery system relies on factors such as geotagging, offering diverse vehicle options from bicycles to motorcycles, and enforcing strict rules for sellers and riders. (For example, suppliers must accept orders within a five-minute window; failure to do so will result in order cancellation and reduced priority for the supplier.)
Similarly, Chowdeck uses automated processes to streamline connections between customer and rider, using internal data for daily demand forecasting and assessment of required supply. For example, if an average rider makes eight deliveries per day and the platform expects 10,000 deliveries, there must be at least 1,250 riders available for that day.
Chowdeck's logistics setup not only benefits small food vendors and larger quick service restaurants like Burger King and Chicken Republic, but also extends to grocery stores like ShopRite and pharmacies. The startup, which operates in eight cities, has applied the learnings from its flagship business to launch delivery services in supermarkets/supermarkets and pharmacies. By 2023, Chowdeck had more than 1,500 active suppliers across the three vertical markets; In addition, it introduced an intra-city parcel delivery relay service in Lagos.
Merits of riders
Last year, the platform's annual gross merchandise value (GMV) across these verticals was over ₦7 billion ($5.8 million). In October, it reached a milestone, crossing the ₦1 billion ($830,000) mark for the first time. By March 2024, that figure had doubled to ₦2.4 billion ($2 million). Lagos generates 80% of Chowdeck's volumes, while the remaining 20% comes from other cities: Abuja, Port Harcourt, Ibadan, Benin City, Ilorin, Abeokuta and Asaba.
Chowdeck, which has a 24% take-up rate, saw its revenues, which come from supplier commissions, service fees, peak charges and delivery fees, increase by 1,200% between 2022 and 2023, according to Aluko.
As a fast-growing company, Chowdeck plans to use the newly raised capital to improve its operational efficiency and expand its reach to more cities in Nigeria. Yet the delivery service on request also aims to leverage the investment to improve the experience for its customers, suppliers and especially delivery drivers revenues currently amount to three to five times Nigeria's monthly minimum wageAluko noted.
“After a few months of building Chowdeck, it was clear how much of an impact we would have and what teething problems we could solve at scale in the country, especially around revenue,” Aluko noted. “For many people, including us, it was interesting to see how our riders were paid in between ₦100,000-200,000 monthly ($83-$170) regularly and profitably.”
The seed round attracted investments from notable backers including YC, Goodwater Capital, FounderX Ventures, HoaQ Fund, Levare Ventures, True Culture Funds and Haleakala Ventures. Founders such as Simon Borrero and Juan Pablo Ortega (of Rappi), Shola Akinlade and Ezra Olubi (of Paystack) also joined the investor list.