Investor-Founder Disconnect Poses Major Threat To African Tech Funding
Amid a global downturn in investments whereby macroeconomic conditions have forced a massive decline in fundraising success, the importance of founder-investor relations and communication has come to the fore.
There is a consensus among investors in Africa’s tech ecosystem that there is a preference for founders who reprioritise communication efforts with their existing investor base to support their long-term funding requirements, a new report shows.
The report titled “Startup Performance Reporting in Africa: What do investors want to know?”, developed by Wimbart; a notable PR agency specialising in tech and startup sectors across Africa and emerging markets, put forward that 71 percent of African tech investors will not invest follow-on funding in a startup failing to provide them with regular reporting updates.
According to the report, nearly a third (29 percent) of startup investors stated they did not receive periodic reports from their portfolio companies. These findings are made especially more pertinent for founders considering when asked whether the quality of startup reporting was a significant factor in shaping perceptions of leadership, the average rating provided was 8.5 out of 10. Consistency and reliability were also ranked as the most important features for investors during the reporting process.
Published as Wimbart’s inaugural investor relations report, “Startup Performance Reporting in Africa” explores the potential of consolidated investor reporting in boosting investor confidence and ongoing support in African technology startups. Since launching in 2015, Wimbart has supported 120+ African-focused startups, scaleups and investors, among which are notable names such as Andela, TLcom, Wasoko, and Piggyvest.
With over 90 percent of the report’s respondents comprising venture capitalists, angel investors, accelerators and incubators from across the continent, it offers a unique pan-African study to identify the pain points in investor relations communications and propose an optimised approach for African startups to adopt, distilling understanding of investors expectations in startup performance reporting on the continent.
Speaking on the report, Jessica Hope, Founder and CEO at Wimbart says, ‘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.”
Despite a healthy appetite for entrepreneurship in Africa, there are still many challenges, and effective communication with investors is critical; founders therefore need to be intentionally accountable to existing investors by providing consistent and useful periodic investor updates, the report emphasises.
“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 & 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 – 10 years,” Hope added.
Expanding on this, Kola Aina, a Founding Partner at tech funder Ventures Platform, asserts that transparency holds utmost importance in the realm of venture capital, and providing consistent reports signifies a strong commitment to accountability. “When startups regularly share their progress, challenges, and achievements, they are demonstrating a genuine commitment to transparency with investors,” Aina reiterates.
Featured Image Credits: Vecteezy