The Path Dependence Feedback Loop and Investing in Women

What if I told you the reason women are still fighting for venture capital funding isn’t just about bias or discrimination? What if I told you it’s about a system that was designed not considering women at all? Perhaps not deliberately at the start, but certainly as a result.

Welcome to the path dependence feedback loop, and why investing in women requires more than just good intentions, vibes, and Inshallah.

Normally, when I have a new thought, I microdose the idea by dropping bits and pieces of it into conversations and on panels to gauge people's reactions. And I must say, this is one of the least popular of the lot. But, I like it 😀

I always say that history repeats itself until we stop repeating patterns, and understanding history lends to transforming the present. #Bars

So, let’s talk about the path dependence feedback loop. What is it? It is a theoretical framework that explains how a choice, once made, becomes the default over time, making it difficult to change. Here’s how it works:

Some sources suggest that it takes at least 7 years to decades for the path dependence feedback loop to cement. Examples of this are addiction, innovation, and even the use of wood in building homes in LA.

Now, let’s go back into history to the first VC created, shooing away the temptation to say the first investment in innovation was by Queen Elizabeth I into exploration voyages in the 1800-1900, because, you know… because of everything. That particular episode in history didn’t end well for us. Let's leave that aside and dive right in.

When the choice was made, probably for practical reasons

In 1946, an MIT professor and a group of others created modern VC with the American Research and Development Corporation (ARDC). Modern VC  was a creation of the post-World War II world, a time when global organisations like the United Nations (1945) and the IMF (1944) were also being established.

For context, in the same post-war society, there were major labour shortages because of the war. The government of the time encouraged women to work, where before this, the thought was so wild, they would probably have slapped a knee and laughed themselves out of the room. 

But now we needed labour, but the roles they were willing to part with were strictly gender-segregated, so-called “pink-collar jobs.” These were repetitive tasks seen as “women’s work,” such as clerical, secretarial, and assembly roles.

* Rolls eyes into the abyss.

Then the choice became the default over time

They dug 10 toes into this, so far that even in rare cases where women entered male-dominated fields, they were paid significantly less. Women’s earnings were often dismissed as “petty cash”, money for holidays or small expenditures like crisps and biscuits. MIND YOU, this thing ran so deep that women were routinely fired for being pregnant or getting married.

In the early 1960s, women began to push back. They said ‘Boyyyyy bye’,  teachers and some civil servants were the first to win equal pay in 1961 and 1962, respectively. However, these early victories only applied where women and men were employed in the exact same jobs. Most other women in the public sector still had jobs that were gender-segregated. Women in these workplaces remained excluded from any ongoing debates about equal pay, as did women in the private sector.

Expertise developed, industries specialized, and economies scaled

Let’s fast forward to the first widely recognized VC investment into a female founder. Katherine Maher’s “The Software Group,” founded in 1979, received backing from Kleiner Perkins Caufield & Byers.

1979? In the U.S, this means VC had approximately 33 years of building systems, processes, and an industry around investing in men, and probably directly from men as the most likely custodians of extreme wealth, access and networks.

Now, bringing back the concept of the path dependence feedback loop, it’s clear that the system was designed not necessarily to exclude women, but rather not to consider women at all. Which, to be honest, is worse.

It became more difficult and costly to switch paths

Looking at Africa, the first notable VC investment in African tech was in 2007, when Egyptian startup Souq.com (an e-commerce platform) received funding from Jabbar Internet Group and other investors. Souq.com was later acquired by Amazon in 2017; this investment marked a significant milestone in the African tech ecosystem.

Another early example is Naspers' investment in South African tech companies in the late 1990s and early 2000s, though these were more corporate investments than traditional VC deals. 

The formalization of VC activity in Africa began to gain momentum in the early 2010s, with the rise of funds like Flat6Labs, Helios Investment Partners, TLcom Capital, and Partech Africa.

I imagine the reason we see investments so far into the 2000s on the continent is that, in post-World War II Africa, we were not thinking about VC; we were fighting for independence.

It was only in the early 1960s that most African nations began to gain their independence. Let’s hazard a guess that some deals happened in the year 2000 in Africa. We inherited 54-year-old structures, systems, processes, capital, and culture; then proceeded to copy-paste them onto ourselves.

I am suggesting that the fact that women are still scrapping for VC money globally is because systems have been designed and put in place that just don’t be thinking about women.

However, we are already making excellent strides in the African ecosystem because we have the benefit of being young (25 years), and the benefit of knowing the history.

We are asking the right questions, we have some brilliant women and funds leading the charge on this, and there is movement. It is small, but a win is a win.

But what we have to come to terms with is this: without doing the painful work of uprooting the system, investing in women will forever be a footnote. The panel will forever be in a side room under the stairs, right after lunch at 2 pm, with only women in the audience.

We have to do the hard things: make commitments to invest in women, make those investments, hold each other accountable, tell the stories, and give women money.

I did some very light research on how to disrupt or get out of path dependence feedback loops, and good old AI said ( Ranked based on what I think would work most): 

Perhaps in future articles, we can explore each of these, but for now, they speak for themselves.

All the screenshots in the article are excerpts from another article I found from 2014. The dangers of path dependence: How it limits individual and group thinking 

I would love to hear your thoughts on this, and what disrupting the loop and creating a new path would look. Also, feel free to share some of your ideas on what you’d like me to talk about next.

Okay, 

Mbyyeeee.