Chowdeck, a Nigerian on-demand delivery platform has raised $2.5 million in seed funding to fuel its growth. As of March 2024, it crossed ₦2.4 billion in monthly GMV.
Here is our special report following a conversation with the CEO, Femi Aluko.
More than half of consumer spending in Nigeria is directed towards food and grocery. At 59% of monthly spend on food, Nigeria ranks 105th out of 105 countries surveyed by Picodi, a global e-commerce company. For context, food consists of a larger share of consumer spending in Nigeria than in the rest of the Big 4 in Africa with Kenyans (56.1%), Egypt (37.6%), and South Africa (21.3%). However, in dollar terms, Nigeria ranks the lowest spending $62 monthly while Kenya ($74), South Africa ($77/month), and Egypt ($114/month).
On the other hand, online shopping has been growing fast as the COVID-19 'pandemic has accelerated the shift towards a more digital world'.
One can say that Chowdeck is a product of COVID-19-induced demand for safe, fast and reliable food delivery.
On New Year's Eve in 2020, CEO Femi Aluko (formerly Principal Engineer at Paystack) who was stuck at home tried to order food online but faced limited options and unresponsive vendors. This experience, he said, “felt very off” and from that point, the desire for a Chowdeck was tacitly planted in his mind.
Luckily for Aluko, a work trip sponsored by his former employer took him to Dubai—a country with a more developed food delivery scene. “It blew my mind,” he told Bendada.com. “I was so excited and knew I had to replicate it in Nigeria.”
Aluko tapped former schoolmate, Lanre Yusuf—a designer and former colleague, Olumide Ojo—a frontend engineer to build Chowdeck which they launched in 2021.
Online food delivery is a perfect culmination of Nigeria's love for food and the growth in online shopping. In the next five years, the online food delivery market is projected to grow at an annual rate of 15% resulting in a market volume of $5.7 billion by 2029. What's more is that despite the prevalence of incumbents, user penetration is below 15%.
Chowdeck is one startup poised to maximise the market. "We have been growing really fast," Aluko told Bendada.com.
Last year, Chowdeck onboarded Chicken Republic, West Africa's largest fast-food chain. This move has led to an increase in order volume of 250% on Chowdeck.
In six months (starting October 2023), their gross merchandise value (GMV) grew by 140% from ₦1 billion (~$1.2 million) to ₦2.4 billion (~$1.7 million) in March 2024.
They have expanded to eight cities in Nigeria—Lagos, Abuja, Ibadan, Port-Harcourt, Ilorin, Benin City, Abeokuta and Asaba.
Chowdeck processes more than 14,000 deliveries daily through a network of 6,000 riders for their 500,000 users.
Aluko says each order turns a profit. Chowdeck's revenue isn't solely based on passing delivery fees to riders. Aluko mentions that additional revenue streams include restaurant commissions, service fees and occasional contingency surge fees. This multi-pronged financial model allows them to offer competitive rider pay while ensuring business sustainability.
Nearing its third year of operation, Chowdeck has secured $2.5 million in seed funding to fuel its growth across Nigeria. This round includes backing from prominent investors Y Combinator and Goodwater Capital as well as angel investors like Simon Borrero and Juan Pablo Ortega (co-founders of Rappi, Latin America's largest delivery platform), Sudeep Ramani (founder and CEO of Sportybet), Ayo Arikawe (co-founder and CTO of Thrive Agric) and Karthik Ramakrishnan. Notably, Chowdeck’s seed round was also backed by Shola Akinlade and Ezra Olubi (co-founders of Paystack). Olubi signed one of the first four cheques that Chowdeck got before launching.
"Chowdeck is not only addressing the crucial need for an efficient and reliable on-demand delivery service in Nigeria, the team embodies innovation and a commitment to excellence," Akinlade (Paystack CEO) said in a statement seen by Bendada.com. "Apart from investing financially into the company, our experience with building Paystack puts us in a great position to provide a lot of practical support and I am excited to see what it is to come from the Chowdeck team."
Related Article: Paystack alumni have founded over fourteen African startups
With this fresh capital, Chowdeck plans to solidify its dominance in existing markets before expanding to new cities. While immediate expansion isn’t on the cards, CEO Aluko confirmed to Bendada their intention to enter new Nigerian cities before the year’s end. Specific locations, however, remain undisclosed. “We're data-driven,” he explained. “We conduct surveys and other research to identify the optimal markets for expansion.”
Additionally, the seed funding will enable the YC-backed startup to also improve its overall operations for a better delivery experience. Aside from food, Chowdeck started delivering groceries and medications last year.
“We want to guarantee timely deliveries for most of our orders,” Aluko emphasized. Currently, Chowdeck boasts a delivery window of 22 to 30 minutes.
This goal is what inspires the high incentive of delivery workers at Chowdeck. The riders earn about ₦100,000 ($73) and ₦150,000 ($109) weekly—comparable to the salaries of senior civil servants in Nigeria.
CEO Femi Aluko sheds light on how this high earning potential is fueled: “One thing that has helped us scale this far with limited funding is that we currently pay our riders the same amount we charge for deliveries, sometimes slightly lower. This strategy incentivises riders to prioritise efficient delivery.”
Navigating challenges in the Nigerian [food] delivery market
Aluko admits that one of the startup’s biggest challenges is hiring riders as fast as the orders are growing. For instance, Chowdeck moved from processing 4000 orders to 10,000 within two weeks. “We need more riders to join our network – this is why we heavily emphasize our incentives,” he said.
Beyond rider relations and delivery speed, Chowdeck is prioritising improvements in customer support. According to Aluko, “Our support system experiences breakdowns sometimes due to a surge in inquiries”. The latest funding will allow Chowdeck to address this crucial area and provide enhanced support for its growing customer base.
However, Chowdeck's rapid expansion presents challenges beyond its operations. The platform's booming user base has pushed vendors to rapidly scale their businesses. The CEO highlights this issue: “Some of our vendors went from handling 13 online deliveries daily to nearly 500 on Chowdeck alone.”
This increase puts a strain on vendors, requiring them to quickly expand their operations. They must secure more foodstuff, maintain quality and hire additional staff like chefs and servers. While Chowdeck doesn't directly manage its vendors' operations, Aluko emphasizes its efforts to support them. They are exploring ways for vendors to access loans or additional funding to keep pace with the growth.
“We want all sides to win; customers, vendors and riders,” he added.
Nigeria's high food inflation (37.92% in February 2024, according to the National Bureau of Statistics) has impacted food costs nationwide. A roadside vendor in Jos, an agrarian city in north-central Nigeria, for example, doubled the price of a rice and meat plate due to rising ingredient costs. This trend has also affected Chowdeck vendors, prompting price adjustments on the platform. However, Aluko said they have not noticed any user decline. “It’s probably cheaper to order online than to take a cab, bus or keke to buy from a restaurant,” he said.
While Chowdeck is striving to dominate the Nigerian food and grocery market, some of its major competitors have exited in the last year. In December, Jumia Foods ceased operations in the country and across the continent. The shutdown came exactly a month after Bolt Foods, another major player left the market.
Despite this, Chowdeck emphasizes its strong "unit economics" – the profitability of each delivery. CEO Aluko said, "We might not be the cheapest, but we pride ourselves on efficiency."
Related Article: Y Combinator backed at least six African food delivery startups in two years
Building a workforce amidst the brain drain in Africa
Africa's ongoing mass migration, as highlighted by the International Monetary Fund, poses a significant challenge for startups due to the loss of young, skilled workers.
Recognising this obstacle, Chowdeck is taking a proactive approach to building its workforce. They are not attempting to curb the overall trend but rather focusing on cultivating their talent pool.
In a move that goes against the grain of industry layoffs, the YC-backed startup recently launched a graduate trainee program. Targeting recent graduates in critical fields like engineering, finance, operations, and customer success, this program aims to build a steady pipeline of talent.
"This program is a strategic investment in our future," the CEO explained. "By nurturing fresh talent, we can avoid the reactive hiring practices that often lead to rushed decisions under tight deadlines."
With an ambitious goal of hiring around 40 graduates upon completion, this program has the potential to double Chowdeck's workforce.
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