A new report from Wimbart shows that African startups and investors are misaligned on how to communicate startup progress, further complicating startup fundraising efforts.
While African startups have increased the frequency with which they report metrics to their investors, the Wimbart report for investors shows that the information provided still lacks enough context for investors to understand their business.
This must change if the decline in Africa’s funding is to be reversed, as 88% of investors said they rely on information from investor reports when making future investment decisions, highlighting that the quality of reporting plays a crucial role in assessing a startup- hate.
“It allows us to build enough data about the health of the company and allows us to cross-check with our own (due diligence) for further investment,” one investor said of reporting startups in the report.
The findings come as investors are asking questions about how African startups are performing and their likely returns in light of the continent’s tough economic conditions. More than two-thirds of investors said they have increased their focus on portfolio startup reporting in the past 18 months, with one-third attributing this to concerns about financial stability and sustainability.
According to the report, now in its second year, founders and investors agree on the importance of reporting but differ on the type of information that should be shared, suggesting a need for clearer communication to align expectations.
Startup founders, who often have multiple firms and angel investors on their equity tables, believe a standardized reporting approach should be introduced and argue that investors are failing to request critical metrics such as customer acquisition cost (CAC), lifetime value (LTV), customer retention rate, churn rate and fraud reduction, which are critical to understanding the long-term viability of the business.
“I wish they would ask for less — we send them a lot and they’re just lazy, asking for it in different forms,” one founder said of investors.
This communication gap can be traced to a lack of trust, with some founders fearing that investors might share confidential information about their startups because several VC firms have invested in competing startups.
“Investors need to immediately draw up a list of requirements for startups, but ideally there should be some standardization because (founders) with eight or ten investors don’t want to do different reports,” said Jessica Hope, CEO the Wimbart. TechCabal.
Investors also agree that a standard approach to reporting will help solve the reporting problem. However, a standard approach to reporting could overlook the nuances in Africa’s diverse technology ecosystem. The challenges and opportunities for fintechs in Accra differ from those in Abidjan, showing the need for flexibility in reporting that adapts to local market dynamics.
“I think there are certain benchmarks that are useful when capturing the health of the company. It is up to investors to collaborate to create a standardized template that has nuances. It should be like an 80-20 rule, with 20 percent of the standard allowing for market idiosyncrasies,” Hope said.
Kola Aina, general partner of Ventures Platform, which has more than fifty African startups in its portfolio, said open and consistent communication is key to “building mutual understanding, aligning expectations and fostering effective collaboration.”
Over 70% of the startups and investors surveyed were in the pre-seed and launch stages, highlighting the youth of Africa’s startup ecosystem. Notably, no investors made it past Series B and less than 5% of the startups surveyed reached this stage.
Wimbart, a 10-year-old public relations firm, has been a key player in Africa’s tech ecosystem, supporting startups like Moove and M-KOPA and investors like Ventures Platform to communicate effectively with journalists and the public.
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