A survey done on investors and startup founders by Wimbart reveals that in 2024, 88.9% of investors determine the quality of African startups by the depth and regularity of their reports.
- The survey also notes that 89% of investors in 2024 receive regular reporting from their portfolio companies, compared to 2023 when the figure was at 70.8%.
- This indicates that investors are shifting away from simply letting a startup grow and expand – instead looking for insights that point towards profitability as economic challenges persist.
- In 2024, sustainability reporting by African startups took the lead with 29.4% of investors prioritizing it; financial reporting was second with 22.2%.
“With climate tech investors on the rise on the continent, as well as ESG goals becoming more important to LPs, DFIs, and other large-scale funders, this is perhaps not surprising,” the report said.
About 33.3% of investors said that startups reporting to them allayed their concerns about financial stability. Another 25% said they perceived reporting as an essential shard in a startup’s reputation of transparency. 16.7% of investors saw reporting as a risk management practice that could save a startup from collapse if failures are spotted early.
“Other reasons for an intensification of reporting requirements include ‘Demand from limited partners for more detailed information’ (8.3%), ‘Increased Regulatory Requirements’ (8.3%), and ‘Market Volatility and economic uncertainty’ (8.3%),” the report added.
Some investors also noted that delivering feedback to their portfolio startups were hindered in some ways – with 27.8% of investors citing the reports shared as ‘unfocused’, 22.2% afraid to share disconcerting news or sounding overbearing.
Portfolio Health
“Furthermore, when or comes to investors feeling like they understand a portfolio company’s health when it comes to reporting, just over half (52.9%) either strongly agree or agree that they are ‘receiving the full picture of a startup’s performance in their reporting,” the survey notes.
“We have found that some founders struggle with reporting due to a lack of streamlined internal systems for collecting key metrics or having standardized templates. Some believe reports should only be shared for major milestones, overlooking the primary objectives of regular updates,” said Damilola Teidi-Ayoola, Head of Platform & Network – Ventures Platform.
On the flip side, 93.9% of founders surveyed said that sharing regular reports with investors was understandable and necessary. However, 39.4% of founders did not think their investors’ reporting requirements were clear.
More than 60% of the founders said that regularly reporting their startups’ performances helped them receive more support from investors. Some founders also feel that investors ask for a few metrics, ignoring important ones like customer acquisition costs (CAC), lifetime value (LTV), and fraud mitigation.
“Investors need to be empathetic and realistic in demanding reports – granular and frequent reports impede productivity, especially at an early stage. On the founders’ side, adequate reporting helps with accountability and even help avoid tunnel vision and blind spots,” said Odunoluwa Longe, a partner at TLP advisory.
“I think there is no other solution other than cross-pollination. People need to meet, build those relationships of trust, and share their expectations on both sides,” said Anas Ben Mejdoub, Head of Community – London Africa Network.
