With communication gaps challenging the investor-startup reporting dynamics, 83.3% of investors believe they’ve clarified their reporting requirements, with just two-thirds of founders (66.7%) agreeing.
This is according to Wimbart’s second annual report titled “Startup Performance Reporting in Africa: Aligning Startup and Investor Expectations.”
According to the report, this misalignment may explain why almost a third of investors claim that a lack of focus on shared reports is one of the reasons they don’t intervene or give feedback; essentially, these are the questions that need to be asked in terms of clarity and structure.
This misalignment is also exacerbated by the fact that almost a fifth (18.2%) of startups claim that their investors do not understand their business and market enough to value their reporting metrics and data.
“This, in addition to the confusion on clarity and quality of reporting, may be the reason behind only 60% of startups receiving direct support or intervention from their investors,” the report reads.
“There’s a Catch-22 scenario here: There is a high demand for increased VC support by founders, however as the data suggests, some investors claim they don’t receive the quality of reporting they need to provide meaningful feedback (which will likely be a contributing factor when it comes to providing direct support or intervention for their portfolio companies).”
The report further notes that there is no complete, one-stop-shop standardised approach, and it is likely that different investors use different tactics for different portfolio companies.
Whilst any reporting and communications process must allow for nuance and flexibility, these issues around lack of standardisation when it comes to investor reporting in the African tech space may go some way to explaining the misalignment in perceptions the survey picked up.
With this advice in mind, Wimbart’s report noted that the overwhelming majority of startups they spoke with (69.7%) said they use a standardised template whereas 30.3% have to modify it.
“The majority of both factions claim they have a standardised approach to reporting… yet both call for improvements in standardisation. We can see here where the misalignment is causing friction,” Wimbart said.
“This disconnect creates ongoing challenges for investor confidence and highlights a gap between what founders report and what investors find valuable.”
According to the Partech Africa VC funding report, startups in 2023 secured $3.5 billion in total funding, marking a 46% drop from the previous year, spread across 547 deals.
“This very sharp decline highlights the impact of the funding winter on the ecosystem,” Wimbart said.
Moving into 2024, the situation hasn’t improved much where African tech startups raised $780 million in the first half of the year, according to Africa: The Big Deal, making it the quietest period for funding since late 2020.
“As we are now firmly in the year’s second half, it’s becoming apparent that 2024 may close with even less funding,” the PR agency added.
The report also revealed that there had been a sharp increase, almost 20%, in investors receiving regular reporting, up from 70.8% in 2023 to 89% in 2024.
This, the report added, is perhaps a reflection of the current challenging economic climate and the need for investors, who may have seen the portfolio’s overall worth diminish, to have a realistic understanding of what their current portfolio companies are doing.
Speaking on the report, Wimbart CEO and Founder Jessica Hope said this year’s report takes a step forward by incorporating the voices of startup founders, opening up the dialogue.
One thing that is clear from the 2024 survey, she further said, is that continuous due diligence in Africa’s tech ecosystem is intensifying, with investors prioritising long-term sustainability and solid financial performance over quick returns.
“The reality is that in today’s tough fundraising environment, startup founders cannot afford to overlook clear and consistent reporting – it’s not just beneficial but essential,” she said.
“By keeping the lines of communication open and transparent, startups can build and maintain the trust and support they need from their investors. Without this, access to funding and all-important network support may become increasingly hard to access.”
In 2023, Wimbart released the first edition of the Investor Communications Report, establishing a baseline for improving investor communications within the ecosystem.
Wimbert’s team surveyed investors only, and the research found that 71.4% of investors surveyed said they would not consider follow-on investments if their portfolio companies consistently failed to update them.
“In this current market, where capital is more complex to come by, inflation is hitting most African markets, so-called “tourist-VC” money is contracting, and startups are shuttering – this is concerning, and it should give pause for thought,” the report reads.
“If startups want and need their present investors to support them during the current downturn, they must continue to get better at keeping them updated.”
For the follow-up 2024 edition, the PR agency extended the survey to startups in a bid to gain a more comprehensive understanding of the dynamic between investor <> startup reporting.
“Including startup insights has provided a more balanced picture, revealing compelling findings highlighting both the progress and challenges,” Wimbart said.
“One data point in particular stood out, suggesting some trust issues between the two parties.”
According to Wimbart, a small but not insignificant percentage of surveyed founders (12%) stated that “confidentiality concerns” were among the most significant barriers to sharing investor updates.
Furthermore, almost half of startups (40%) went on record to say that they didn’t feel their investors understood their business and market enough to value their reporting metrics and data submission.
When asked if investor reporting had led to a positive intervention, two-thirds of startups (60.6%) said “yes”.
Over the last 18 months, the African tech ecosystem has faced significant challenges.
The report showed that when it came to the question of whether the quality of a startup’s reporting significantly shapes an investor’s impression/perception of its leadership and management, the sentiment remained the same where 88.9% of investors judge a startup by the quality of the reporting; essentially, it is the ultimate litmus test.
“We saw a marked difference in investors’ priorities between 2023 and 2024 in the KPIs they prioritised in their reporting,” the survey reads.
“In 2023, the primary KPI for investors was financial reporting.”
In contrast, in 2024, the sustainability KPI took the lead, with 29.4% of investors marking it as their primary KPI, financial reporting took second place, with 22.2% followed by Operational and Future KPIs with 16.7% each.
On investor insights, considering the tough market conditions, 72.2% of investors confirmed that they have had to intensify portfolio reporting requirements over the last 18 months.
The primary reasons for doubling down on reporting requirements were “Concerns about financial stability and sustainability of portfolio companies” at 33.3%, “Need for greater transparency and accountability” at 25% and “Enhanced performance monitoring and risk management” at 16.7%.
Other reasons for an intensification of reporting requirements included “Demand from limited partners for more detailed information”, “Increased regulatory requirements” and “Market volatility and economic uncertainty” at 8.3% each.
The report further indicated that there was also a change in the frequency of reporting, as stated by investors, over the past 12 months.
In 2023, 64.7% of investors received monthly updates and by 2024, this number had drastically dropped to 27.8%.
Meanwhile, in 2023, 29.4% of investors were recorded as receiving quarterly updates, compared to 50% in 2024.
This level of detail was notable, although almost one-third (27.8%) of investors had not intensified reporting during this period.
“Much like our results in 2023, investors in 2024 still want more from their portfolio companies,” Wimbart said.
There’s a blame game of sorts, where between ‘Lack of focus of report shared’ (27.8%), ‘Lack of action and accountability from founder’ (16.7%) and other insights such as the tendency to only share good news were given anecdotally, with 60% of investors identifying founders themselves for being their biggest barriers to providing feedback.
Commenting further, Ventures Platform Founding Partner Kola Aina noted that in Africa’s dynamic startup ecosystem, local investors have a unique advantage in bridging the gap between investors and founders.
“Our presence in the market enables us to provide hands-on, tailored support that goes beyond capital, and our willingness to collaborate without overbearing interference fosters stronger partnerships,” he said.
As the report reveals, he added that open and consistent communication is key to building mutual understanding, aligning expectations, and driving effective collaboration.
“This approach can be cultivated through regular dialogue, a Socratic approach to providing strategic guidance when necessary, and a commitment to protecting founders’ interests,” Aina said.
“By adopting this communication style, both investors and founders can work and win together. Founders who master this will be empowered with the support and resources they need to scale, benefiting from investors’ experience locally and from supporting multiple startups.”
On founder insights, startups in the pre-seed stage are 50%, seed stage 28.6%, Series A 9.5%, Series B 7.1%, and Series C+ 4.8%.
For investors, the report shows that 35.5% primarily invest in the Pre-seed stage, Seed stage 35.5%, Series A stage 11.8%, Series B stage 17.6%, while 0% invest in the Series C+ stage.
When it comes to the overarching question of “why” updates should be shared with the cheque-writers, the research revealed that founders think sharing updates makes sense, with 93.9% of respondents agreeing that sharing regular investor updates is necessary.
However, there was a dilution of consensus when it came to the “how” investors understand the reporting given to them, with just 42.4% of founders believing their investors have a good enough understanding of their business and market to value their reports.
“The miscommunication between the two continues when it comes to reporting requirements: clarity to some, and ambiguity to others, with two-thirds (66.7%) of founders stating that the reporting requirements from their investors are clear,” the report reads.
“However, quite a significant proportion, one-third (33.3%), find them unclear or not entirely clear.”
Looking further into the levels of detail and time commitment founders are willing to commit to their investor reporting, the data further revealed that founders are on the fence when it comes to weighing up input versus output(s).
“There is most certainly a case of rewards for determined efforts, with 57.6% of founders stating that ‘Effort and time required’ is the biggest barrier to creating reports for their investors, but importantly, 60.6% also say their company has received direct intervention or support from an investor as a result of their reports,” the study shows.
AfriLabs ED Anna Ekeledo added that effective communication between startups and investors is key to fostering trust and securing the resources needed for growth.
The findings in this report, she said, highlight the pressing need for standardised reporting frameworks, which will not only address the concerns raised by founders but also provide investors with the clear, consistent data they require to make informed decisions.
“At AfriLabs, we are committed to promoting transparency and sustainability across the African tech ecosystem, ensuring that both startups and investors can thrive together in today’s challenging market environment,” Ekeledo said.
To address these gaps, the report outlines key recommendations to improve investor-startup relationships, including:
- Investors communicate reporting requirements, cadence and expectations to founders as well as provide templates to help founders meet reporting expectations.
- Startups to avoid vanity metrics and focus on meaningful metrics such as customer acquisition cost [CAC], lifetime value [LTV], and customer retention rate to demonstrate a deeper understanding of the business.
- Both parties must maintain an open line of communication to give nuance to the data and build the trust needed to build businesses together.
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