Fearless Fund, the venture capital firm started by Black women to invest in women of color that a conservative group sued alleging racial discrimination, announced their legal team Thursday and hit back at the court challenge.
The lawsuit was filed earlier this month by a nonprofit affiliated with a conservative activist at the center of litigation that led in June to the U.S. Supreme Court striking down affirmative action in college admissions. The latest lawsuit has been seen as a potential vehicle to attack affirmative action programs in business.
The lawyers declined to discuss their legal strategy Thursday. But Arian Simone, the fund’s CEO and co-founder, said during a press conference in New York:
“We are not scared, we are fearless.”
On Aug. 2, the American Alliance for Equal Rights (AAER) sued the Fearless Fund alleging that a program awarding $20,000 small business grants to Black women violates the Civil Rights Act of 1866. The complaint says the conservative group “has members who are being excluded from the program because they are the wrong race.” AAER bills itself as a non-profit, membership-based organization “challenging distinctions and preferences based on race and ethnicity.
The group also filed a motion for a temporary restraining order and preliminary injunction to stop the firm from closing the application period for the program or awarding grants as scheduled at the end of August.
Fearless Fund was founded in 2019 by three Black women: entrepreneur Arian Simone, organizational consultant Ayana Parsons and actress/businesswoman Keshia Knight Pulliam, who is best known as Rudy on “The Cosby Show.”
The program at the center of AAER’s lawsuit is the Fearless Strivers Grant Contest, which is being run in partnership with Mastercard, though the financial giant is not named as a defendant.
Edward Blum, president of AAER, told The Atlanta Journal-Constitution that his group was first contacted by a woman-owned business asking for legal representation to challenge Fearless Fund. In total, three white and Asian women business owners are part of the lawsuit, alleging the contest is “racially exclusive, thus violating our nation’s civil rights laws,” Blum said.
Blum is also behind another group, Students for Fair Admissions, that successfully challenged affirmative action in college admissions policies.
“This lawsuit [against Fearless Fund] is part of a broader attempt to litigate the next wave of anti-affirmative action cases,” said Anthony Michael Kreis, an assistant professor of law at Georgia State University. “I think that you’ll see this as part of a broader litigation theme or litigation strategy by anti-affirmative action, anti-DEI groups … to try to get rid of these programs in the private sector.”
Fearless Fund is being represented by Gibson Dunn & Crutcher, the Global Black Economic Forum and civil rights lawyer Ben Crump. Two other law firms as well as the National Women’s Law Center and the NAACP Legal Defense fund are consulting on the case. Crump said he has been asked why the Fearless Fund was targeted, not other funds that may have a similar focus.
“The conclusion seems to keep coming back to the fact that he thought they would be the easiest ones to pick off. Oh, was he wrong,” Crump said.
Venture capital funding for Black-owned startups is a fraction of what is invested in tech firms started by white-founders. The disparity is especially true for businesses founded by Black women.
Between 2009 and 2017, only 0.0006% of VC funding went to businesses started by Black women, according to nonprofit advocacy group Digitalundivided. Fearless Fund aims to help bridge that gap.
In 2021, record levels of funding for Latina and Black women improved things slightly. Their combined share of venture capital rose above 1% for the first time, according to the 2022 Project Diane report from Digitalundivided.
Fearless Fund raised more than $25 million for its Fund I, and has so far raised about $16 million for its Fund II, according to a Securities and Exchange Commission filing from May. The firm has invested in more than 40 companies founded by Black, Latina and Asian women over the past four years, including Slutty Vegan, Partake Foods, Live Tinted and The Lip Bar. On average, the fund’s investment ranges from $500,000 to $1.2 million, Simone told CBS News.
But that’s a small drop in the bucket of VC funding nationally, which totaled more than $70 billion in 2023 alone, not including certain corporate investments, according to Crunchbase. Less than 1% of that sum has gone to Black-founded companies so far this year.
At Thursday’s press conference, Simone added that Fearless Fund has given out more than 340 grants totaling more than $3 million.
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