According to a 2024 report by Wimbart, a PR agency specializing in African startups, 71% of investors in the African startup ecosystem receive regular investment reports from their portfolio companies, while 29% do not.
Despite this, many investors are still dissatisfied with the quality and consistency of the communication they receive, demanding for improved communication.
Wimbart’s inaugural report, based on a survey of African startup investors, revealed that among those who do receive reports, 65% get them monthly, 29% quarterly, and only 6% bi-monthly. However, data shows a strong preference for monthly updates, with all respondents indicating that they would like to receive them more consistently.
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When asked “How important do you consider investor Relations Communications?” given a scale of 0 to 10, all investors rated the importance at 8 or above, with an overall average rating of 9.3 out of 10.
For startups in Africa and across the globe, effective investor relations communication is critical to securing funding, maintaining strong relationships with existing investors, building credibility, and attracting new long-term investors. As entrepreneurial activities surge across Africa, transparent and engaging communication with potential and current investors becomes increasingly essential.
African venture capitalists (VCs) are known for their commitment to going above and beyond in supporting their portfolio companies, offering invaluable introductions, assistance with recruiting top-tier talent, and identifying C-suite candidates.
However, to fulfill this role effectively, VCs must have a deep understanding of their portfolio companies’ current challenges and progress. Regular, clear investor communication offers a platform for VCs to proactively extend their networks, provide tailored support, and collaborate with startups to drive growth and success within the dynamic African business landscape.
Unfortunately, not all startups are meeting investor expectations. In Wimbart’s analysis of investors responses on their biggest frustrations with startups, while the majority of startups provide regular reports, the report highlights six major frustrations investors face in their interactions with their portfolio companies.
Key Challenges
1. Lack of Clarity and Focus
Many investors expressed frustration with overly lengthy and convoluted reports that lacked clear and focused communication of a company’s progress or challenges. As one investor stated, “It’s more of a sales pitch rather than factual information that highlights the challenges.” Unclear financial and operational information was another common issue.
2. Vague Performance Metrics
Investors also expressed the need for clearly defined and measurable performance metrics. They want updates that include specific indicators of success or challenges, such as revenue growth trends, customer acquisition numbers, and product milestones. Vague metrics make it difficult to gauge performance. On a scale of O to 10, investors rated “Financial KPIs” as the most important metric, with an average score of 9.4.
3. Absence of Actionable Insights
Investors seek updates that provide more than just data they want actionable insights and recommendations. Many startups presented raw information without offering a clear plan of action or requesting input from investors, limiting opportunities for collaboration.
4. Selective Reporting
Several investors were dissatisfied with reports that only highlighted successes while neglecting to mention significant challenges or obstacles. One investor referred to this as “cherry-picking KPls to hype the narrative.” Investors appreciate transparency and prefer a balanced approach that presents both achievements and struggles, enabling them to offer more meaningful support.
5. Inconsistent Reporting Timelines
Investors emphasized the importance of receiving updates consistently. Some startups provided sporadic updates, making it difficult for investors to stay informed. Feedback suggested that early-stage companies, in particular, often struggle with maintaining regular reporting due to limited resources.
6. Inconsistent Frequency
Almost a third of investors surveyed do not receive consistent periodic investment reports. Of those who do, 65% receive them monthly, 29% quarterly, and only 6% bi-monthly. However, all respondents expressed a preference for monthly updates from their portfolio companies.
This report identifies the challenges and gaps in current investor reporting frameworks and proposes an optimized approach for startups to adopt. By prioritizing consistent, transparent, and actionable investor communications, startups can build stronger relationships with investors, fostering growth and success in a competitive and evolving market.
To sustain the recent trend of increased investor funding in Africa, startups must be deliberate in their efforts to communicate with both existing and potential investors. Regular, clear, and concise communication is essential for attracting and maintaining investor confidence, which is critical to securing long-term funding from both local and international sources.