Tech Media vs the Industry: Part 1

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Tech Media vs the Industry

In mid-September, TechCabal, the Africa-focused tech publication, published an exclusive disclosing Kuda Bank’s financials, which were private; the second publisher to do so within 12 months. The article caused a frenzy on Twitter.

“Why should journalists publish financials of a private company?” said one person on Twitter. “It doesn’t sit well with me that journalists got their hands on a company’s financials,” said another person in a now-deleted tweet. “What's the legal way to obtain confidential and private company data when said company is unwilling to share?” wrote another startup CEO.

These sentiments are wild — even from a casual news reader's perspective.

These sentiments also show a lot of lack of understanding about journalism and the kind of stories journos can write. Importantly, it shows what the domestic tech industry expects from regional publications. If the story about Kuda appeared in an international publication, it’s fine; but TechCabal, a regional publisher? How dare you!

Consider this: FTX’s financials were accessible to its investors, yet the company collapsed last year after business journalists had a quick look at its balance sheet. And in early 2022, financial reporting by The Information uncovered problems at Fast, the checkout company. African tech readers keenly followed these reports. Nobody asked: “Why should journalists get their hands on FTX financials?”

Here’s another example. Sometime in 2020, a Nigerian health tech startup had just raised a substantial amount of money. Excited, one of its Middle Eastern investors let the news slip to Reuters. The wire service wrote a quick ~150-word article. TechCabal republished it, as did everybody else. The startup’s Nigerian investors were displeased, and demanded the publication take down the report because “the story wasn’t ready for publishing.” What they really meant was: we want this story to go to TechCrunch first.

You see, startups and their investors take funding announcements very seriously. With their limited appreciation of external communication, funding disclosure is the one thing they try to choreograph. And they typically want to get published in the biggest industry news publication first. For African tech, TechCrunch trumps Reuters.

It’s unclear if startups and their investors are conscious of this practice. What we know is in the last six years, the industry has tried to control what news gets told and where those stories should be published. It explains why there’s usually pushback to any critical reporting or scoop that deviates from what the industry’s loudest social media users expect. 

The rift between tech media and the industry it covers is not new. Over the last decade, Silicon Valley has had a testy relationship with tech journalists since media reports took down Theranos and its founder Elizabeth Holmes. In Africa, the relationship has unraveled slowly but intensely over the last few years. Yet, unlike their American counterparts, there’s no pre-existing atmosphere filled with media conspiracy to explain the growing mistrust.

A better explanation is the nature of tech investing on the continent. Africa has a population of 1.2 billion and a GDP of $3.14 trillion, yet domestic capital is significantly limited and wary of risky investments. Combined, VC firms on the continent manage a tiny fraction of funds compared to their foreign counterparts. Yet these VCs are trying to court the attention of international investors. For over a decade, they’ve been trying to inspire a gold rush by proving to the world that African tech is the next frontier.

These VC firms typically operate funds with short lifecycles — they need to invest and exit their investment in startups within a finite number of years. This reality creates some urgency on the part of the firm and its portfolio companies.

But there’s one complication: exit options for the nascent African tech industry are limited. Internationally, exits via a stock market listing are common. But only 29% of investors expect it to happen in Africa, according to a 2021 survey by the African Private Equity and Venture Capital Association (AVCA). At least 74% of investors surveyed expect exits through acquisitions. But startups’ dollar valuations are too expensive, and somewhat unreasonable, for domestic private equity firms or corporate M&A deals; and stock exchanges outside of South Africa and Egypt are not appealing enough to regional startups.

This leaves VCs with one option: secondaries — selling their stake to other investors, preferably international investors. Selling secondaries requires serious information asymmetry because valuation is mostly an art driven partly by hype/momentum as well as fundamentals.

Realizing this, founders and VCs have a greater incentive to curate the kind of information that gets to international investors. This happens everywhere, obviously. However, it’s a bigger problem in Africa due to the continent’s shaky media industry. Also, there are very few business journalism outlets, as regional and international publications prioritize (geo)politics and conflict reporting over anything else. And with the media industry’s struggling business model globally, fewer international publications care about Africa at all. So when PR agencies, startups, and investors look to get published, they go to only a handful of publications, only two internationally.

Hence, startup founders and their investors can attempt, unsuccessfully, to curate news coming out of the continent. This isn’t necessarily a sinister practice — some of them might not even be conscious of this behavior. Yet, when seen holistically, this practice is negative. It attempts to ruin the credibility of local media — some disrespectfully call the top publications “blogs” — and the truthfulness of their journalism.

For example, a few weeks ago, Techpoint published a report about an alleged cybersecurity breach at Flutterwave. The first reaction on social media was to call it “fake news” until the company itself released a classic “non-denial denial,” admitting that an incident did occur.

The reactions to the Kuda and Flutterwave stories are not isolated incidents. That’s the typical reaction to every critical report from this part of the world in the last four years. It’s no wonder that despite all the work culture, bullying, and financial improprieties reports from the last five years, there have been minimal or no consequences, not even stronger corporate governance checks. Reckless startup founders know this and will exploit the current environment until the media outs them.