Fearless Fund, an Atlanta-based fund that invests solely in women founders of color, has responded to the suit filed against it by the American Alliance for Equal Rights (AAER), accusing it of racial discrimination.
In a statement, the fund said that it was “proud of the work [it has] done at the Fearless Fund and Fearless Foundation with the consistent and invaluable support from our corporate partners, investors, mentors, and advisors,” adding that it is “firm in [its] purpose to provide a gateway to economic freedom.” Fearless Fund also noted that of the $288 billion that venture investors put to work in 2022, less than 0.4% of it was raised by women of color.
Arian Simone, the fund’s co-founder and CEO, also went on CBS this morning to talk more about the lawsuit, calling it “an attack to dismantle and address our economic freedom as people of color.” She added that the fund’s response is simple: It will continue the work it is doing to help support women of color.
In its lawsuit, AAER accused Fearless Fund of racial discrimination over a grant program that offers $20,000 to Black-women-owned small businesses. AAER argues the grant violated Section 1981 of the 1866 Civil Rights Act, which states private contracts must be made and enforced without regard to race.
When we contacted AAER’s founder Edward J. Blum last week, he said he was initially reached by a woman-owned business that wanted help to challenge Fearless Fund’s grant program. “It is to be hoped that other programs like this one end these practices and offer the benefits to all small businesses regardless of the owner’s race,” he said at the time.
This is not the first time Blum-associated groups have sued organizations for implementing policies that regard race. He is perhaps best known as the man who challenged affirmative action in educational institutions, alleging that Harvard’s admission policies discriminated against Asian Americans by taking race into account.
Several founders and investors we spoke to said AAER’s suit could be the first of many, as funds focused on solely backing diverse founders have grown prevalent in recent years.
Grants are often the only way many overlooked founders raise capital for their businesses. Investing in diversity might also now come with heightened legal risk, Bernard Coleman, a lawyer at The Coleman Law Firm, told TechCrunch last week.
“The outcome of the American Alliance for Equal Rights’ lawsuit against Fearless Fund has the potential to reshape venture capital investments, spotlighting the intersection of civil rights legislation and startup funding practices,” he said at the time. “As the legal proceedings unfold, the implications for venture capital investments and startup support will undoubtedly be closely watched by stakeholders across the business landscape.”
Fearless Fund recently announced a multi-million-dollar fundraise for its efforts from Costco and Mastercard, the latter of which is the sponsor of the fund’s the Strivers Grant Contest that’s being challenged in the lawsuit.
I sat down with Alex Wilhelm and Mary Ann Azevedo to discuss this story further on Equity this week.