Chowdeck, a Nigerian on-demand delivery service, has secured $2.5 million in seed funding, which it will use to strengthen its position in the Nigerian market.
Investors such as FounderX Ventures, True Culture Funds, Hoaq Fund, Levare Ventures, Haleakala Ventures, YCombinator, Goodwater Capital, and True Culture Funds alongside angel investors like Ayo Arikawe, Co-founder and CTO of Thrive Agric; Shola Akinlade, Co-founder and CEO of Paystack; Ezra Olubi, Co-founder and CTO of Paystack; Sudeep Ramani, Founder of Sportybet; Karthik Ramakrishnan (Amazon); Simon Borrero and Juan Pablo Ortega, co-founders of Rappi.
Co-founder and CEO Femi Aluko, a former principal engineer at Paystack, got inspiration for the startup in 2021 after witnessing the speed of food delivery services during a visit to Dubai. That speed of delivery and execution has helped the two-year-old startup quickly grow to 500,000 users in eight Nigerian cities. It has added 200,000 users in the last six months alone.
Last year, it signed exclusive deals with Nigeria”s largest QSR brand, Chicken Republic, and followed that up with the addition of Shoprite. Those deals have helped the startup gain more users and strengthen its position in the Nigerian market.
With fresh funding, it plans to scale its services to more Nigerian cities before the end of 2024.
“We know that Nigerians love good food, and we just want to make it as easy as possible for them to access the food they desire. Chowdeck was birthed to fulfil this purpose, and we are committed to delivering truly excellent experiences for our customers, vendors, and riders,” Aluko said in a statement.
Nigeria’s on-demand delivery landscape has witnessed significant growth thanks to rising urbanisation rates, increased Internet and smartphone penetration, and changing customer habits. Statista projects revenues in the online food delivery market to hit $2.83 billion in 2024, with the market growing at 15.03% between 2024 and 2029.
Still, Nigeria’s food delivery market poses major challenges to industry players, with incessant fuel scarcity, bad roads, and heavy traffic in major cities hindering service delivery. A struggling economy also means that potential customers are strapped for cash.
As an example, both Jumia Food and Bolt Food elected to leave the Nigerian market in 2023, citing a need to streamline resources and focus on profitability. Still, Chowdeck, which launched the same year as Bolt Food, has been on an upward trajectory.
Join over 3,000 founders and investors
Subscribe to the Equity Merchants newsletter and start receiving tips and resources for startup success.
Aluko attributes this rise to the startup’s focus on unit economics and its speed of execution. Where competitors often subsidise delivery fees, Chowdeck often charges higher, ensuring it makes no loss on any transaction.
While its higher delivery charges may discourage potential users and slow down its expansion plans, Aluko is not worried and insists that Chowdeck exists to solve the convenience problem.
“Think of someone who wants to save an extra 30 minutes going to the restaurant; that is Chowdeck’s ideal customer.”
It has also adopted a hyperlocal model that has helped it cut delivery time to an average of 30 minutes, a feature that has won it so many admirers.
Currently processing 14,000 deliveries daily and growing 1,000% year-on-year, Chowdeck’s growth has come with operational challenges as partner restaurants need to scale operations to meet demand.
With small business financing hard to come by in Nigeria, Aluko disclosed that the startup connects some restaurants to lending partners but declined to disclose the exact figures.
The startup has also received a lot of attention thanks to its rider compensation. It currently has 3,000 riders, some of whom earn as much as ₦400,000 ($343) monthly, 13 times the national minimum wage.
Aluko states that this approach is sustainable as riders pay is determined by the delivery fee it charges.
“Our business is built on profitable unit economics,” he said. “Chowdeck is not the cheapest delivery platform. We charge customers what we think a delivery is worth and pay riders almost the same amount,” he added.
