• Wednesday, February 21, 2024
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Startup transparency crucial for African tech investors – report

Events that shaped African tech in  2023

For African tech startups, transparency and consistent reporting are emerging as pivotal factors in attracting and retaining investor support, according to a recent report by Wimbart, a PR agency specialising in the tech and startup sectors across Africa and emerging markets.

The report highlights that a lack of clarity, vague performance metrics, selective reporting, absence of actionable insights, and inconsistent reporting timelines have left many investors frustrated with how startups communicate their progress.

According to the report, 71 percent of African tech investors will not invest follow-on funding in a startup failing to provide them with regular reporting updates.

Kola Aina, Founding Partner at Ventures Platform said “ In venture capital, investing in transparency is paramount, and consistent reporting is a sign of accountability. When startups regularly share their progress, challenges, and achievements, they are demonstrating a genuine commitment to transparency with investors.”

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“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,” Aina said.

The report underlines that effective investor relations communication is crucial for startups globally and in Africa. It not only secures funding but also helps maintain strong relationships with existing investors, build credibility, and attract new, long-term investors.

However, over 90 percent of the report’s respondents comprised venture capitalists, angel investors, accelerators and incubators from across the continent, it said.

Founders looking to shape positive perceptions of their leadership should pay close attention to the quality of their startup reporting. The report found that, on average, respondents rated the importance of startup reporting at 8.5 out of 10. Consistency and reliability were identified as the most vital attributes sought by investors during the reporting process.

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While Africa exhibits a growing appetite for entrepreneurship, there remain significant challenges, and effective communication with investors stands out as a critical aspect. The report highlights the need for founders to be intentionally accountable to existing investors by providing consistent and useful periodic investor updates.

“Consistent reporting of a startup’s performance enhances investor confidence. Through this, the startup builds trust, shows accountability to its stakeholders, and gives investors peace of mind. Investors can also support by analyzing the data to spot potential pitfalls ahead of time, allowing them to step in with vital strategies to support the startup’s success,” said Anna Ekeledo, Executive Director of AfriLabs.