A recent survey conducted by Wimbart among investors and startup founders has shed light on the increasing importance of reporting in African startups in 2024. The findings reveal that 88.9% of investors now evaluate the quality of startups based on the depth and consistency of their reports. This marks a significant shift in how investors assess companies, emphasizing the growing demand for transparency and data-driven insights.
The survey highlighted that nearly 89.0% of investors in 2024 receive regular reports from their portfolio companies. This is a noticeable increase from the 70.8% recorded in 2023. The trend signals a change in investor expectations, where the focus is no longer solely on growth and expansion. Instead, investors are prioritizing profitability and sustainability, particularly as global economic challenges continue to pose risks.
In 2024, sustainability reporting emerged as the top priority for 29.4% of investors, while financial reporting was ranked second at 22.2%. The rise of climate tech investments and the increasing importance of ESG (Environmental, Social, and Governance) goals, particularly among limited partners (LPs) and development finance institutions (DFIs), may explain this shift.
“With more climate tech investors entering the African market and ESG goals becoming a priority for large-scale funders, it’s not surprising that sustainability reporting is now a key concern,” the report noted.
The survey also revealed that regular reporting plays a critical role in assuaging investor concerns. Around 33.3% of investors said that consistent reporting helped ease worries about a startup’s financial stability. Additionally, 25.0% saw it as crucial for building a startup’s reputation for transparency, while 16.7% viewed it as a vital risk management tool that could prevent potential collapses by identifying problems early on.
Several other factors driving the need for more rigorous reporting included demands from limited partners (8.3%), increased regulatory requirements (8.3%), and market volatility and economic uncertainty (8.3%).
Despite the clear value placed on regular updates, some investors expressed frustration with the quality of reports they received. Around 27.8% felt that the reports lacked focus, while 22.2% were hesitant to deliver critical feedback, fearing it might sound overly negative or domineering.
When it comes to gauging the overall health of a startup through reporting, just over half (52.9%) of investors agreed or strongly agreed that they were getting a full picture of performance. This suggests that while reporting standards have improved, there is still room for growth in how these reports are structured and communicated.
From the founders’ side, 93.9% acknowledged that reporting to investors regularly is both understandable and necessary. However, 39.4% of founders admitted that they weren’t always clear on what their investors’ reporting requirements entailed. This disconnect highlights the need for better communication between both parties.
More than 60.0% of founders reported that providing regular updates improved their access to investor support. However, some felt that investors tended to focus on only a few metrics, often overlooking crucial aspects like customer acquisition costs (CAC), lifetime value (LTV), and fraud prevention strategies.
As investor demands for transparency and accountability increase, African startups are rising to the challenge, but a continued focus on streamlining reporting processes will be critical to ensuring success for both founders and investors in 2024 and beyond.
