Will Africa produce the next DoorDash for Y Combinator?

Since 2021, Y Combinator has backed at least eight African food delivery startup, especially in the most recent cohorts. Is YC's bet geared towards producing the next DoorDash?

Will Africa produce the next DoorDash for Y Combinator?

Around this time in 2013, DoorDash, a San Francisco-based food delivery startup got into the Y Combinator summer batch. Five years down the line, DoorDash raised $535 million Series D at a $1.4 billion valuation, becoming a unicorn.

By 2019, the company was valued at over $12.6 billion. At the time of its Series G in the same year, DoorDash has raised a total of $2.5 billion in VC funding, with 325% growth year-over-year. “I think the numbers speak for themselves,” DoorDash CEO Tony Xu said at the time. “If you just run the math on DoorDash’s course and speed, we’re on track to be number one.”

In February 2020, DoorDash announced that it confidentially filed for an IPO. The company's last private valuation was $16 billion as of June 2020. The company finally went public on the New York Stock Exchange at a $39 billion valuation in December of the same year—marking the first-ever exit of more than $10 billion for a YC company.

“I wish I could say that I knew right then and there that they would be a huge success, but I did not. At the conclusion of interviews, we stack-ranked all of the new companies, and I placed DoorDash in the bottom half of the batch,” Paul Buchheit, a partner at Y Combinator wrote after the IPO.

DoorDash is one of the accelerator's top 50 companies by revenue.

Now that Y Combinator has seen “huge success” in the sector, the accelerator has invested in about 94 startups offering food and groceries delivery, globally. At least eight of them are African startups, mostly based in Nigeria.

This year, only six African startups got into Y Combinator's bi-annual accelerator. Five of these startups are offering fintech services except Chow Central, a Lagos-based virtual restaurant chain provider. “Chow Central started as a fun experiment shortly after we graduated from University. We created a virtual restaurant page on Twitter to sell affordable meals and also help underutilized restaurants get sales during the COVID lockdown,” according to its founders; Tosin Onafuye, Christopher Obasi and Adeyemi Onafuye.

The 18-month-old says it currently records $80,000 in monthly revenue.

Last year, Y Combinator backed two other African food delivery startups Chowdeck and FoodCourt (formerly known as CoKitchen); both were in the summer batch, just like Chow Central. Still in 2022, for its winter batch, Y Combinator selected another two Ibadan-based food delivery startups Heyfood and Sendme; as well as Ethiopian beU Delivery.

Vendease is arguably the first YC-backed food delivery company in Africa. In 2021 when Vendease got into YC, it was described by its founders as “Amazon Prime for restaurants in Africa”. So far, the company has raised about $33.2 million in VC funding, including a Series A which was closed last September in a round led by Partech Africa and TLcom.  

Vendease says its digital procurement engine makes it easier for restaurants in eight cities across Nigeria and Ghana to buy food supplies at considerably cheaper rates than open market prices, with guaranteed 12-hour delivery.

“Restaurants and food businesses play a vital role in communities across the continent,” according to Andreata Muforo, Partner at TLcom.

Across Africa, it is important to note that not only YC-backed startups are playing in the sector, but some of the other players in the food delivery business are also Jumia Foods, Bolt Eats, Glovo, Orda, Eden Life and Jise.

It is quite a competitive market especially because of the increasing low purchasing power of Africans which has been increased by the economic downturn. Also, in Nigeria, the recent fuel subsidy cut is taking a toll on businesses; especially those offering logistics-related services, as well as rising food costs.

Last year, the last point was listed as one of the reasons for the closure of Kenya-based food delivery startup Kune Food. “...coupled with rising food costs deteriorating our margins, we just couldn’t keep going,” CEO Robin Reecht said.

Regardless, some entrepreneurs and investors including Y Combinator still believe in the future of cloud kitchens in Africa.

In 2021, there were 23.2 million users of platform-to-consumer online food delivery in Africa, according to Statista. The data analytics platform also disclosed that about 39.1 million restaurant-to-consumer online food delivery users were recorded in the same year; by next year, the number is projected to reach 53.8 million. Meanwhile, the online food delivery market in Africa is projected to reach $7.45 billion at the end of this year.  

“The aim of YC and any other investor is simple; to identify the next doordash in Africa and replicate similar success—Doordash’s revenue rose to $2.1 billion in Q2 of 2023,” says Johnpaul Nwobodo, an Investment Associate at Proximity VC.

“The last mile delivery is in its nascent stage. A lot of logistic infrastructure has to be put in place to get it on par with standard. For now, companies are leveraging location-specific approaches,” he added.  Nwobodo argues that the location-specific model enables these startups to provide efficient services; including faster delivery considering other local factors like traffic congestion in Lagos.

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