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71% of African technology investors would hesitate to invest further in a start-up that fails to provide regular reporting updates. This is according to a new report released by Wimbart, a leading agency specialising in tech start-ups across Africa and other emerging markets.
Titled “Start-up performance reporting in Africa: What do investors want to know?,” the report underscores the critical need for founders in the African tech ecosystem to prioritise communication with their existing investor base to secure long-term funding.
According to the report, a startling 29% of start-ups investors disclosed that they did not receive periodic reports from their portfolio companies. This finding gains even more significance when considering that the quality of start-ups reporting was rated an average of 8.5 out of 10 as a significant factor in shaping perceptions of leadership. Consistency and reliability emerged as the most crucial attributes for investors during the reporting process.
Published as Wimbart’s inaugural investor relations report, it explores the potential of consolidated investor reporting in boosting investor confidence and ongoing support for African technology start-ups.
The study drew participation from over 90% of respondents, comprising venture capitalists, angel investors, accelerators, and incubators from across the continent.
It represents the first pan-African investigation into the challenges faced in investor relations communications, offering a recommended approach for African start-ups to enhance their investor reporting practices.
Against the backdrop of a global downturn in investments, with macro-economic conditions leading to a 50% year-on-year decline in fundraising success for start-ups, Wimbart’s investor relations pan-African report is a timely resource for understanding investor expectations in start-ups performance reporting on the continent.
Commenting on the report, Jessica Hope, founder and CEO at Wimbart, stated, “Over the last decade, we’ve worked alongside a wide variety of stakeholders from across Africa’s tech space, providing us with a unique and holistic insight into the gaps throughout the ecosystem. In recent years, we’ve become increasingly familiar with anecdotal intelligence on the lack of consistent investor communications, and with our growing network of VCs, DFIs, and early-stage investors, we strongly believed it was the ideal time to accurately capture the problem and contextualise the narrative.”
Hope continued, “The resounding conclusion from our research is that, in light of the current funding climate, founders simply cannot afford to neglect consistent engagement with current and potential investors.
“Now more than ever, there is a huge need for clear, regular, and standardised updates to investors so they can not only accurately assess the health of their portfolio companies during this critical period but sustain the upward trend in funding we’ve experienced over the last 5 to 10 years.”
Wimbart, founded in 2015, has provided support to over 120 African-focused start-ups, scaleups, and investors, boasting high-profile names such as Andela, TLcom, Wasoko, Piggyvest, Sparkle, and Moove.
Kola Aina, founding partner at Ventures Platform, emphasised the importance of transparency in venture capital, stating, “In venture capital, investing in transparency is paramount, and consistent reporting is a sign of accountability. When start-ups regularly share their progress, challenges, and achievements, they are demonstrating a genuine commitment to transparency with investors.
“This reporting is also critical to keeping investors engaged and excited to help the company navigate challenges. In Africa especially, this credibility can serve as a crucial differentiator for investors seeking the most promising companies.”
Despite the burgeoning entrepreneurial spirit in Africa, effective communication with investors remains a critical challenge. The report has highlighted the necessity for founders to be intentionally accountable to existing investors by providing consistent and useful periodic investor updates.
Anna Ekeledo, executive director of AfriLabs, added, “Consistent reporting of a start-up’s performance enhances investor confidence. Through this, the start-ups builds trust, shows accountability to their stakeholders, and gives investors peace of mind. Investors can also support by analysing the data to spot potential pitfalls ahead of time, allowing them to step in with vital strategies to support the start-up’s success.”
The full report can be downloaded for free here.