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    HomeAnalysis & OpinionsFor African Startups, Monthly Reports Are a Necessity for Landing Follow-on Funding

    For African Startups, Monthly Reports Are a Necessity for Landing Follow-on Funding

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    As the investment landscape in Africa tightens and less than 5% of seed-stage startups successfully advance to later funding stages, a new report sheds light on the evolving role of investor reporting. The findings, part of a study conducted by Wimbart, a PR agency specializing in African and emerging markets, highlight how Africa-focused investors are increasingly reliant on regular reports from startups to assess the ‘quality of founder’ — a critical determinant in follow-on funding decisions.

    With the capital environment becoming more competitive, 72.2% of surveyed investors confirmed that they have ramped up their reporting requirements over the last 18 months. The motivations behind this trend varied, with key drivers including concerns over financial stability (33.3%), the need for greater transparency (25%), and enhanced performance monitoring and risk management (16.7%). Other reasons cited were demands from limited partners (8.3%), increased regulatory scrutiny (8.3%), and market volatility (8.3%).

    The frequency of these reports has also shifted. In 2023, nearly two-thirds (64.7%) of investors received monthly updates from portfolio companies. By 2024, that figure had plummeted to 27.8%, with a greater reliance on quarterly reports, which increased from 29.4% to 50% over the same period. The shift suggests both investors and startups are adjusting to balance the time-intensive nature of detailed reporting with the need for oversight in a high-stakes market.

    Despite these intensifying demands, not all investors have increased their reporting requirements. A significant minority (27.8%) have kept their reporting unchanged, citing confidence in the existing frameworks of their portfolio companies or stable market conditions.

    Determining the ‘Quality of Founder’ Through Reports

    Investors now see performance reporting as a key tool in determining whether a founder is suitable for follow-on investments. An overwhelming 88.8% of investors agreed that the quality of these reports plays a significant role in assessing a founder’s ability to execute business objectives. One investor highlighted the importance of past performance metrics, stating, “For performance tracking and risk assessment, in the case of the founding team starting a new venture, looking at previous reports helps assess a founder’s track record.”

    Indeed, the term “quality of founder” surfaced repeatedly throughout the report, underscoring its significance. African investors are now looking beyond the numbers, using reports to gauge founders’ discipline, focus, and ability to respond to challenges facing their startups. Yet, a disconnect exists between investors and founders, with 60% of investors identifying the founders themselves as the biggest obstacle to meaningful reporting. The most common complaints included a lack of focus in the reports shared (27.8%) and a perceived lack of action or accountability from founders (16.7%).

    When it comes to understanding the overall health of a portfolio company based on its reports, just over half (52.9%) of investors felt they were receiving a full and accurate picture. However, this leaves a significant portion of investors expressing doubts about the clarity or completeness of the updates they receive.

    Focus on Early-Stage Funding and Founder Accountability

    The report also reveals a strong emphasis on early-stage funding, with 70.6% of investors primarily focusing on pre-seed and seed-stage companies. This focus mirrors the early-stage nature of Africa’s startup ecosystem, where venture capital firms are heavily concentrated on supporting nascent businesses.

    Founders, for their part, seem to recognize the necessity of regular updates, with 93.9% agreeing that investor updates are crucial for maintaining good relationships and securing future rounds. However, only 42.4% of founders believe that their investors truly understand their businesses or markets well enough to fully value the reports provided. This gap between what founders share and what investors interpret is a recurring theme in the African startup ecosystem.

    Time commitment and effort remain a sticking point for founders. More than half (57.6%) cited the effort required as the biggest barrier to creating detailed reports. However, this effort is not without reward — 60.6% of founders said that they received direct intervention or support from investors as a result of their reporting.

    Tension Over Reporting Details

    One of the most contentious issues between founders and investors is what exactly should be included in these reports. While 70% of founders use standardized templates to streamline the process, many feel that key performance metrics such as customer acquisition costs (CAC), customer retention rates, and lifetime value (LTV) are being overlooked by investors. Several founders also expressed concerns that investors lack sufficient market knowledge to ask the right questions, hindering productive discussions about performance.

    Interestingly, 12% of founders reported “confidentiality concerns” as a significant reason for hesitating to share certain details in their reports. Some fear that investors might not handle sensitive information securely, which could create potential conflicts of interest in competitive sectors. Given recent controversies surrounding opaque CEO salaries and mismanagement of funds, it’s unlikely that investors will ease up on their demands for transparency anytime soon.

    A Call for Greater Collaboration

    The report concludes by calling for more proactive communication between investors and founders. Founders suggested that investors provide more actionable insights, increase responsiveness, and offer greater mentorship. As Africa’s startup ecosystem continues to mature, these tensions over reporting are likely to remain a central issue in determining the long-term success of both investors and the startups they back.

    For investors operating in African markets, the reports serve as a vital tool for gauging founder quality, tracking performance, and managing risk in relation to their startups. For founders, the ability to effectively communicate their progress — and challenges — could make all the difference when it comes to securing the next round of funding in a highly competitive market.

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