Venture capital firm Fearless Fund and the American Alliance for Equal Rights (AAER) have reached an agreement that will see the firm close its Strivers grant program.
The program, initially sponsored by Mastercard, was intended to provide $20,000 to small businesses owned by Black women. But Fearless Fund was sued by AAER, led by conservative activist Edward Blum, alleging that the program discriminated against non-Black founders and violated the Civil Rights Act of 1866, which prohibits the use of race in contracts. In June of this year, a court ruled that Fearless Fund’s contract likely violated the Act and upheld a preliminary injunction on the program.
In a statement sent to Tech News, Blum said: “The American Equal Rights Alliance encouraged the Fearless Fund to open its grant competition to Hispanic, Asian, Native American and white women, but (the company) instead decided to end it entirely.”
“Programs that exclude people of a particular race, like the one promoted by Fearless Fund, are divisive and illegal. Opening grant programs to all applicants, regardless of race, is enshrined in our nation’s civil rights law and is supported by a significant majority of all Americans,” he added.
In an emailed statement to Tech News, Fearless Fund CEO Arian Simone (pictured above) said: “The Fearless Fund and the Fearless Foundation are thrilled to bring the case to a close and continue to focus on helping under-resourced entrepreneurs who have been underserved by traditional capital markets for far too long.”
“From the moment the lawsuit was filed, I made a commitment to remain steadfast in the task of helping and empowering women of color entrepreneurs in need. Today, I stand by that promise and, in fact, my commitment remains stronger than ever,” Simone added.
Rachel Noerdlinger, a representative for the company, told Tech News that Simone plans to announce a $200 million debt fund for those in need of financing.
Many within the venture industry have closely followed AAER’s lawsuit against Fearless Fund, with some investors and founders expressing surprise that a civil rights law enacted to help former slaves was now being used against that same population.
This lawsuit aside, the outlook for Black founders remains difficult. The Strivers grant was intended to address the disparity in funding and opportunities when it comes to accessing capital: Black founders raise less than 1% of all venture funding invested in a given year; in the first half of this year, they raised just 0.32% of all venture investment, according to Crunchbase.
The closure of this grant program is the latest blow to the diversity, equity and inclusion movement this year. Tech DEI foundations have closed and companies are reorienting initiatives that once benefited minorities toward other avenues.
Blum and other conservative activists have had success in suing similar programs. Most notably, she helped end the use of race in college admissions, and her nonprofit, AAER, is currently suing other race-based programs, such as the Smithsonian Institution’s Latino Museum Studies Program for its focus on hiring Latino interns.
Meanwhile, Simone said Fearless Fund lost nearly all of its partnerships after the lawsuit came to light. The firm used to offer other grants for businesses owned by women of color, but information about those grants is no longer available on its website.
