African start-ups are finding it difficult to raise capital due to their lack of effective investor relations, according to a new report that has highlighted the critical role of engaging and communicating with institutions and wealthy individuals.
Investor relations is a strategic responsibility whereby organisations manage communications between their executive leadership and the financial community.
The concept is designed to provide an accurate account of company affairs to investors, which helps them make informed decisions about whether to invest in the business or not.
The Startup Performance Reporting in Africa report published by the London-based public relations (PR) agency Wimbart says investors are interested in updates that offer actionable insights and a balanced view of both achievements and challenges faced by start-ups.
The survey, which sought to identify the limitations of existing investor relations and communications reporting frameworks, involved active investors of all stages on the continent in a bid to bring their pain points to light.
According to the report, 71 percent of African technology investors would hesitate to invest further in a start-up that fails to provide regular updates.
A disquieting 29 percent of start-up investors revealed that they did not receive periodic reports from their portfolio companies even as the quality of those that reported was rated at an average of 8.5 out of 10.
“For start-ups in Africa and across the globe, effective investor relations communication is critical to securing funding, maintaining solid relationships with their existing investors, building credibility, and attracting new and long-term investors,” reads the report.
"As the continent continues to witness a surge in entrepreneurial activities, fostering transparent and engaging communication with potential investors becomes even more essential.”
Among the frustrations with startups that investors cited are lack of clarity and focus, vague performance metrics and absence of actionable insights.
Others were selective reporting as well as inconsistent reporting timelines, with all the surveyed investors saying they would like to receive updates from the start-ups they invest in monthly.
“The resounding conclusion from our research is that, in light of the current funding climate, founders simply cannot afford to neglect consistent engagement with current and potential investors,” said Wimbart Founder and CEO Jessica Hope.
