Heyfood, the Ibadan-based food delivery startup backed by Y Combinator, is expanding to Abuja and Benin in the coming months. The startup, which will sidestep Lagos, a hotbed of competition for food delivery startups, believes the planned expansion will grow revenue exponentially.

CEO Taiwo Akinropo and cofounder Demilade Odetara are raising money to finance its expansion. They expect to close those talks soon. Since its launch three years ago, the startup raised an undisclosed amount of funding from Y Combinator, Olumide Soyombo’s Voltron Capital, GoodWater Capital, and Ventures Platform.

Investors will be happy to hear that the startup is cashflow positive despite challenging unit economics in the sector. The startup’s margins range between 10% and 15%, and its monthly gross merchandise value (GMV) sits between ₦150 million and ₦400 million, with an average order value of ₦7,000. 

“In the last 12 months, we have grown our GMV by 5X, and our target is to multiply that by 15,” Akinropo said.

Yet efficiency remains top of mind for the company. 

“We have good capital efficiency and have achieved [multiples] with what we raised. We run on the local naira that we generate. We do not lose any money on operations.” 

Chowdeck and FoodCourt—also YC-backed companies—have reported being profitable after fulfilment. 

These claims of operational efficiency continue to drive interest in the food and grocery delivery sector despite Jumia Food and Bolt Food’s exit in late 2023.  

How Heyfood strategically picks cities 

HeyFood, which claims to have over 1,000 listed vendors (including restaurants and grocery stores) and about 50,000 active customers monthly, charges a commission on goods sold and delivery fees. 

The numbers are impressive because, unlike its peers, HeyFood sidestepped Lagos, the country’s commercial capital, in favour of  Ibadan, Nigeria’s third-largest city. Its expansion will also strategically sidestep Lagos.

Gaining market share in cities like Abuja and Benin is a more cost-effective approach for Heyfood.

With over four food delivery startups fighting for market share in Lagos, discounts and exclusive partnerships are common ways of winning turf. However, as Jumia’s Francis Dufay highlighted in 2023, this strategy is expensive. 

“In Ibadan, if you give customers a promo, they will take it. If you don’t give them promo but offer them a good experience, they will still take it because they can afford it.“ 

It’s consistent with a view Akinropo shared in a 2023 interview with TechCabal, in which he claimed the startup tries to keep its customer acquisition cost at ₦1,000 and avoids marketing through promotions as often as possible. However, it offers 5% to 10% discounts on its app, lower than the 30% to 35% discounts its competitors offer in Lagos. 

Yet, Akinropo insists that the company’s decisions are more about its strategy and less about avoiding a price war. 


Why Ibadan makes sense for Heyfood

“Ibadan has a large middle class, including well-to-do remote workers who earn as much as $5,000. Some of them moved to Ibadan to escape the hustle and bustle of Lagos.”

This relatively high purchasing power is why Chowdeck’s recent exclusive deal with Chicken Republic, which mandated HeyFood to delist the restaurant from its platform, had “less impact than expected.”  

HeyFood, self-described as the  “Doordash of Africa,” says it is following the American giant’s strategy of acquiring market share in suburbs before working its way into bigger cities.

Taiwo admits that this approach appears to be a slow burn,  but argues that it aligns with their ethos of playing the long game.  “Doordash was founded in 2012, and even up until 2020, they were not the largest food delivery service,” he said. “But right now they are by far the largest.”

How Heyfood won the Ibadan market

“We introduced the concept of store agents in the space,” Akinropo claims of a strategy that’s now widely used by multiple competitors. 

Due to low digital literacy and the absence of order management devices in restaurants, HeyFood placed agents in each restaurant to facilitate order placements and fulfilment. It was a tough adjustment for the store owners, who wondered why strangers sat in their restaurants all day. “That was until they realised how much money we were making them.”

The eventual success of these local restaurants is part of why HeyFood is optimistic about cities without a large presence of big food chains like The Place or Chicken Republic. 

“Chicken Republic and Dominoes are in the mix, but a lot more local guys  like Iya Meta, Jollof Square, Chef Kabz, and the likes are our star restaurants.” 

HeyFood believes it can repeat its success with these vendors in new cities.

Retaining drivers is a moving target 

But Taiwo concedes that the company’s biggest challenge is from riders. “They are the most fickle side of the business and make them more susceptible to churn.” He recalls how the company a rival poached some of its riders by offering them more money than they earned at HeyFood. On HeyFood drivers typically ₦50,000-₦200, 000 monthly depending on how many trips they make. “But when this competitor came, it offered them sign-up bonuses as much as ₦50,000. They also got bonuses every week in addition to their pay.”

Not looking to spend more money than it can afford, HeyFood’s strategy for retaining drivers by offering employee benefits.”We have a healthcare fund for the riders. We celebrate birthdays with them. We sometimes offer them lunch and generally make them feel heard,” Taiwo said.

However, with another fuel price hike, HeyFood is faced with another driver problem. According to Akinropo, the company is considering financing electric vehicles for riders to keep their margins attractive.

Ultimately, HeyFood has come a long way. Taiwo recalls a day when cofounder Odetara called his girlfriend to place an order so they could round up the daily order to 50.

“We have had bigger milestones since then, Taiwo said. “And we are looking forward to more.”

Moonshot by TechCabal is gathering Africa’s most audacious builders and thinkers in Lagos, Nigeria. You can get tickets here.

Ngozi Chukwu Reporter

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