Nigeria’s YC-backed Chowdeck hopes to scale food delivery, a notoriously difficult market, with $2.5 million in funding

Food is important to Nigerians, with households spending almost 60% of their income on it, the highest figure in the world, according to official reports. This strong affinity for food, coupled with the rise of online shopping, sets the stage for the Nigerian food delivery market to reach $2-3 billion by 2032.

Despite the promising market size, there is no clear leader yet. However, Lagos-based Chowdeck, backed by Y Combinator and with an initial investment of $2.5 million, aims to make its mark in a space that has burned heavyweights like Jumia and Bolt.

Founded by Femi Aluko, Olumide Ojo and Lanre Yusuf, Chowdeck offers consumers the opportunity to order food and have it delivered to their doorstep within an average time of 30 minutes. CEO Aluko explained that the inspiration for launching the startup came from his experience of fast deliveries and exceptional customer service during a work trip to Dubai.

Aluko explained: “Ordering food in Nigeria usually took one or two hours. But whenever 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 ₦60,000 billion in food products and household items, per the country’s main official statistics agency.

Aluko and his co-founders first experimented with the concept by using a few bikes 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 over 3,000 participants and over 500,000 users (Aluko claims over 100,000 are active on the platform).

Less competition, more growth

Chowdeck’s remarkable growth is evident, especially in a competitive market where, upon launch, major players like Jumia Food and Bolt Food were already firmly established with thousands of customers.

Additionally, given the industry’s reputation for low profit margins and infrastructure issues such as traffic and poor road conditions leading to delays in delivery times, the key question was how Chowdeck intended to overcome these obstacles and carve out its niche.

Later entrants into a market have the advantage of learning from the experience of previous players. Unlike its predecessors, Chowdeck recognized from the outset the importance of maintaining positive unit economics. While other food delivery platforms often rely on steep discounts, Chowdeck has opted for a different approach: optimizing its business model to ensure sustainability by minimizing discounts and offering them only on behalf of its partner restaurants when necessary.

“We took the time to determine the right economics for our delivery business, so we don’t like to offer unrealistic discounts,” said Aluko, former principal engineer at Stripe subsidiary Paystack. “This approach allowed us to focus on selling and targeting the right customers rather than trying to capture everyone, which could have compromised our economic 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 releases contributed in part to Chowdeck’s double user growth over the past six months.

Prioritize convenience

Aluko points out that the appeal of Chowdeck lies in its convenience. While it’s not necessarily the most cost-effective option, he added that Chowdeck targets customers who value time and are willing to pay for fast deliveries.

The startup’s delivery system relies on factors such as geolocation, offering various vehicle options from bicycles to motorcycles, and enforcing strict regulations on sellers and riders. (For example, suppliers must accept orders within five minutes; otherwise, the order will be canceled and the supplier’s priority will decrease.)

Similarly, Chowdeck uses automated processes to streamline customer-passenger connections, using internal data for daily demand forecasting and assessment of required supply. If, for example, the average courier makes eight deliveries per day and the platform plans 10,000 deliveries, at least 1,250 couriers must be available for that day.

Chowdeck’s logistics setup not only benefits small food vendors and large quick-service restaurants like Burger King and Chicken Republic, but also extends to supermarkets such as ShopRite and pharmacies. The startup, operating in eight cities, applied lessons from its flagship business to launch delivery services in the supermarket/grocery store and pharmacy verticals. By 2023, Chowdeck had over 1,500 active suppliers across all three verticals; in addition, it introduced a relay service for intra-city parcel transportation in Lagos.

Passenger earnings

Last year, the platform’s annual gross merchandise value (GMV) across these verticals was more than 7 billion yen ($5.8 million). In October, it reached a major milestone, crossing the billion yen ($830,000) mark for the first time. By March 2024, this figure had doubled, reaching 2.4 billion yen ($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, with a participation rate of 24%, saw its revenue jump 1,200% between 2022 and 2023, according to Aluko.

As a fast-growing company, Chowdeck intends to use the newly raised capital to improve its operational efficiency and expand its reach to more cities across Nigeria. Yet the on-demand delivery service is also committed to leveraging this investment to improve the experience of its customers, suppliers and especially delivery workers, whose income currently exceeds three to five times Nigeria’s monthly minimum wage, Aluko noted.

“After a few months of building Chowdeck, it was clear what level of impact we were going to have and what would be the initial problem that we could solve at scale in the country, especially in terms of profits,” remarked Aluko. “For many people, including us, it was interesting to see our riders being paid between ₦$100,000 to $200,000 per month ($83 to $170) consistently and profitably.

The seed round attracted investment 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 (from Rappi), Shola Akinlade and Ezra Olubi (from Paystack) have also joined the list of investors.