A report by Wimbart, a leading PR agency specializing in African startups, revealed that despite receiving regular updates, a significant number of investors remain dissatisfied with the quality and consistency of communication they receive from startups they’ve invested in.
The report highlights a growing demand among investors for more effective and transparent communication. Many investors expressed frustration with the lack of timely information, unclear reporting, and inconsistent updates, which hinders their ability to make informed decisions and track the progress of their investments.
To ensure effective communication between African startups and their investors, the survey explored investors’ preferences ranking in order of importance. Two factors emerged as top priorities: “Consistency” and “Reliability.”
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These highlight investors’ emphasis on accurate, dependable data. “Consistency,” which ranked as number 1, reveals that investors want startups to avoid conflicting or contradictory information in their reports. Therefore, startups should ensure their communications align with previous reports and external sources to maintain trust.
The second top factor, “Reliability,” focuses on the credibility of the data backing a startup’s performance and projections. Investors want to ensure that the startup has a track record of delivering on promises made in earlier reports. This makes it crucial for startups to back their claims with credible sources and a history of accurate reporting.
Next in importance are “Comprehensiveness” and “Usability.” which stress the need for detailed, insightful information on the startup’s business model, market analysis, potential, and risks. Investors appreciate reports that are not only thorough but also easy to digest, providing a clear snapshot of essential information. However, without consistency and reliability, these factors lose significance.
“Brevity” ranks fifth, indicating that while investors appreciate concise reports, they do not want startups to compromise on necessary details. Startups should balance providing sufficient information without overwhelming investors with unnecessary details.
Based on feedback from African investors, several recommendations have emerged for improving investor communications:
1. Standardize Reporting Formats
Investors suggest startups create a consistent template for reports that integrates feedback from investors, allowing easier comparison across portfolios. For startups with multiple investors, reports can be streamlined to reduce duplicated efforts while still addressing the core needs of each investor.
2. Ongoing Updates of Key Highlights and Challenges
Startups should maintain an ongoing list of highlights (achievements), lowlights (challenges), and specific requests for help. Reporting becomes a continuous process rather than tied to rigid cycles, with time-sensitive updates shared proactively.
3. Transparency in Communication
Investors value honesty and want both good and bad news reported. Startups should communicate key performance indicators (KPIs), risks, and challenges, along with forward-looking insights, to maintain transparency. Asking for support when needed is essential to building strong investor relationships.
4. Focus on Relevant KPIs
Startups should prioritize reporting a few key metrics that matter most to their business, like historical revenue trends and financial/operational data. Investors want to see how these metrics contribute to the company’s success and its competitive advantages as it grows.
5. Anticipate Questions
After completing a report, startups should anticipate common investor questions and address them upfront. This adds clarity and comprehensiveness to their updates.
6. Regular Updates and Quarterly Reviews
Providing monthly updates keep investors engaged, while comprehensive quarterly reports covering financials, company performance, challenges, and opportunities give a holistic view of the business.
7. Concise Reports Focusing on Fundamentals
Keep reports brief and focused on core business aspects. Summaries of key financial metrics should be simple and easy to read, prioritizing essential information to help investors make informed decisions.
To sustain the trend of investor funding, Africa-focused startups must become deliberate in ensuring effective communication with existing and potential investors as it is critical to attracting and maintaining credibility and lasting relationships, which are key factors for attracting long-term funding.
Notably, by following these best practices above mentioned, startups can strengthen their investor relations, foster trust, and improve overall communication.