Mr Viral
A new report from Wimbart shows that African startups and investors are misaligned on how to communicate startup progress, complicating further fundraising efforts for startups.
While African startups have increased the frequency with which they report metrics to their investors, Wimbart’s Investor report shows that the information provided still lacks enough context for investors to understand their business.
This needs to change if Africa’s funding drop is to be reversed, as 88% of investors said they rely on information from investor reports when making future investment decisions, emphasising that the quality of reporting plays a crucial role in their judgement of a startup.
“It allows us to build enough data on the health of the company and enables us to cross-analyse with our own (due diligence) for follow-up investments,” an investor shared about startup reporting in the report.
The findings come as investors ask questions about how African startups operate and their likely returns in light of tough economic conditions across the continent. Over two-thirds of investors said they intensified their focus on portfolio startups’ reporting in the last 18 months, with a third attributing this to concerns about financial stability and sustainability.
According to the report—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 cap tables, believe that a standardised approach to reporting should be introduced and argue that investors fail to ask for critical metrics like customer acquisition cost (CAC), lifetime value (LTV), customer retention rate, churn rate, and fraud mitigation, which are essential for understanding the business’s long-term viability.
“I’d like them to ask for less—we send them plenty and they are just lazy, asking for it in different forms,” a founder said about 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 as several venture capital firms have invested in competing startups.
“Investors have to put together a list of requirements for startups straight away, but they should ideally have some standardisation because (founders) with eight or ten investors don’t want to do different reports,” Jessica Hope, the CEO of Wimbart, told 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 within Africa’s diverse tech ecosystem. The challenges and opportunities for fintechs in Accra differ from those in Abidjan, showing the need for flexibility in reporting that accommodates local market dynamics.
“I think there are certain standard metrics that are useful when capturing the health of company. It’s up to investors to collaborate to put together a standardised template that has nuance. It should be like an 80-20 rule, with 20% of the standard allowing for market peculiarities,” Hope said.
Kola Aina, the general partner of Ventures Platform, which has more than fifty African portfolio startups, said that open and consistent communication is key to “building mutual understanding, aligning expectations, and driving effective collaboration.”
Over 70% of the startups and investors surveyed were in the pre-seed and seed stages, highlighting the youth of Africa’s startup ecosystem. Notably, no investors were beyond Series B, and less than 5% of the startups surveyed have reached that 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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