Vendease, a Nigerian food procurement startup backed by Y Combinator, has made significant changes to its employee pay structure and is seeking fresh capital to navigate profitability, TechCrunch has learned. This move comes after the company laid off 44% of its workforce, around 120 employees, last month, marking its second round of job cuts in five months.

According to internal documents seen by TechCrunch, the startup has replaced traditional salaries with a performance-based pay system, supplemented by an Equity Share Option Plan (ESOP). The new compensation model includes a five-phase salary recovery plan, where employees will receive a flat ₦140,000 (~$90) salary in February, regardless of previous pay. From March to May, employees' wages will increase to 30% of former levels if they meet performance targets, with further increases to 60% and 90% in subsequent months, contingent on company and employee performance goals.

The unpaid portions of the salaries will convert into share options under the ESOP, with 50% vesting over ten months and the rest over three years. However, employees can only exercise these options at a board-approved fair market value, according to the employee agreement. The company confirmed the changes, stating that it is now at a break-even point, even close to profitability.

A company spokesperson explained that the restructuring is intended to encourage employee productivity while the company grows more financially sustainable. "We only spend what we earn, which keeps us consistently at break-even and focused on profitability," the spokesperson added. With slightly over 150 employees left, Vendease is betting on internal restructuring, fresh capital, and AI-driven efficiency to cut costs and sustain operations.

Vendease, founded in 2019, aimed to streamline food procurement for African restaurants and food businesses. By 2022, it had moved 400,000 metric tonnes of food for over 2,000 customers, saving them $2 million in procurement costs and cutting wastage-related losses by nearly $500,000 in Nigeria, its main market. However, the last two years have been brutal for Vendease and many Nigerian startups without FX-denominated revenue, with the naira's sharp depreciation wiping out revenue gains in dollar terms.

One of Vendease's main revenue drivers within the past year has been its buy now, pay later (BNPL) product, which leverages its supply chain knowledge to underwrite loans via its marketplace, connecting financial institutions with food businesses. The company claims a default rate of under 1% over the last two years and has issued over $70 million in credit as of September 2024.

Despite some recent tweaks, the credit product alone doesn't seem to be enough to get Vendease to profitability. The company is in talks with existing and new investors to raise a bridge round, which will be used to fund technology growth and expansion rather than operational expenses. Meanwhile, sources suggest that Vendease has explored a potential sale to other players in the HORECA (Hotels, Restaurants, and Catering) and FMCG sectors, although the company disputes this, stating that it's the other way around and that the founders are focused on scaling, not selling anytime soon.

The ongoing restructuring efforts and search for fresh capital highlight the challenges faced by Vendease and other startups in the Nigerian market. As the company navigates this critical phase, it remains to be seen whether its new pay structure, BNPL product, and technology-driven efficiency measures will be enough to drive profitability and long-term success.