Obviously, over time this problem compounds and the lengthy cash cycle means sellers compensate by hiking margins up to 100-200% according to Kara.
This was the Vendease call to action and their marketplace approach has managed to attract not only the smaller restaurant segment of the market, as Frubana have, but also some of the medium and large international chains operating in Lagos, Abuja and Ibadan, with now over 1000 businesses onboarded.
Again with the data
Over time the Lagos based start up has gathered enough data to refine it’s own prediction engine for orders. This allowed the company to reach offtake agreements with some of its major customers in the hospitality sector and negotiating expedited payment terms, within 48 hours.
This has allowed the startup to retain customers by demonstrating convenience, transparency and access to the data insights for its users.
In fact, according to Kara, the platform can predict demand for some SKU’s up to 3 months in advance and for high turnover products, forecasting the next 12 hours is also possible.
But while it focuses on the demand side, it notes the market issues on the supply side are still problematic. Generally, in their market segment, demand outweighs supply significantly, and so working with actual producers at farm level has become part of their mission to address the imbalance.
“What started out as a procurement tool has now evolved into a data led fintech tool” serving both sides of the market he notes.
For me, this demonstrates the significance of the C2M model for the Food and Agriculture sector - it can start to give firm price, quality and quantity signals to growers. These signals reduce risk and encourage commercial growth.
Reaching further upstream has opened up some interesting fintech related opportunities already for the Vendease team. In 2020, the platform entered into a project with Grow Africa, which set out to provide financing of up to $3m upstream for small farmers who wanted to supply the Vendease marketplace.
As Kara notes, this will allowed the company to attract many small and medium sized producers who can rely on Vendease for timely payments and production financing. Vendease is targeting 10,000 smallholder producers using this facility.
This demonstrates where the magic of the C2M model happens.
Demand + Data => Bankability
The platform effectively becomes a credible offtaker in a structured trade finance transaction.
When Vendease start to raise capital in early 2022, this is one area they want to expand.