Investing in The Digital Economy

Global venture funding reached a record $621bn in 2021, more than double the 2020 amount of $294B. CB Insights has studied the activities of investors over the past year. The publication believes that global brands will benefit from more standardized retail operations. Distribution and performance data collection will become easier and more reliable. Overall, improving digital access could open more new markets for retail tech investment and help brands connect with new groups of shoppers. The Report notes that investors are particularly focused on 3 key retail priorities:

• Online procurement platforms: These B2B platforms make it easier and more cost-effective for retailers to order inventory and have it delivered directly to their stores — many also offer financing and credit options for buyers. These marketplaces are seeing a marked pickup in Egypt, where Fatura, Cartona and Kuzlo have all raised early-stage rounds since September 2021.
• Online store setup: Investors are also focused on firms that help small businesses set up online shops. India-based Dukaan, which raised a Series A-II round in September 2021, helps businesses build e-commerce sites with no-code tools. Several other Indian companies have joined Dukaan in helping retailers sell online.
• Digital store management: These companies are helping retailers move their physical store management onto digital platforms in order to boost productivity and profitability. Nigeria-based Alerzo raised a Series A round in August 2021 and promises an “all-in-one” solution that enables retailers to track store performance, manage logistics, and accept cashless payments.

CB Insights also tracks the growth of Fintechs – below is its chart on the sectors which have achieved ‘unicorn’ status over last year. Fintechs are the winner by a large margin.

Gradually, Then Suddenly: The Sequel – CB Insights CEO Anand Sanwal On The Future Of Financial Services – CB Insights Research

Despite this cheery global report, Ernst and Young’s annual report on FDI in Africa (“The EY Africa Attractiveness Report”) shows a sharp fall in FDI on the continent due to the impact of the COVID in 2020. South Africa, followed by Morocco and Nigeria, received the most projects on the continent in 2020. The EY report does not provide data for 2021.

As far as Foreign Direct Investment (FDI) was concerned, according to the UNCTAD annual report on FDI (see below for the link), 2021 was a bumper year and a strong recovery in 2020. Of the total increase in global FDI flows in 2021 ($718bn), more than $500bn went to developed economies. Developing economies, especially least developed countries (LDCs), saw more modest recovery growth. FDI directed to developing economies increased by 30% to nearly $870bn, with a growth acceleration in East and South-East Asia (+20%), a recovery to near pre-pandemic levels in Latin America and the Caribbean, and West Asia. Inflows in Africa also rose. Most recipients across the continent saw a moderate rise in FDI; the total for the region more than doubled, inflated by a single intra-firm financial transaction in South Africa (Prosus bought about 45% of its SA parent Naspers) in the second half of 2021.