VC firm Fearless Fund has encountered a hurdle in distributing grants to Black women business owners. On Monday, an appeals court ruled against Fearless, maintaining a preliminary injunction on the program.
The court ruling indicated that Fearless Fund’s Strivers Grant likely violates the Civil Rights Act of 1866, which prohibits racial considerations in contracts, according to the Atlanta Journal-Constitution. The Strivers Grant, awarded to businesses owned by Black women, was challenged in August by the American Alliance for Equal Rights (AAER), which argued that the grant discriminated against non-Black women founders since it was exclusive to Black women.
The AAER, founded by conservative activist Edward Blum who was instrumental in overturning affirmative action in universities, brought the lawsuit against Fearless Fund. Based in Atlanta, Fearless Fund has been fighting the lawsuit but was temporarily prohibited from continuing the grant program last October. Both parties presented their arguments in January, with Blum asserting the grant violated the Civil Rights Act of 1866, while Fearless Fund contended that the grant was a charitable donation protected under the First Amendment.
While the ruling currently halts Fearless Fund’s grant distribution, it is not the definitive conclusion to the case. Fearless Fund is exploring further actions, including a potential trial, as noted by its representatives. The firm disputes the court’s decision, stating through their lawyer, Alphonso David, that the Strivers Grant does not violate the Civil Rights Act of 1866.
“As the dissenting judge highlighted, the discrimination in access to funding that Fearless Foundation seeks to address is longstanding and irrefutable,” David stated. “This is the first court decision in the 150-plus year history of the post-Civil War civil rights law that has halted private charitable support for any racial or ethnic group.”
Arian Simone, CEO of Fearless Fund, reaffirmed the foundation’s commitment to contesting the lawsuit.
“America is supposed to be a nation of freedom to achieve, earn, and prosper. Yet, our attempts to level the playing field for underrepresented groups have been stifled,” Simone said. “We must continue this fight for the next generation of girls who deserve to grow up in an America where their dreams can be realized instead of outlawed.”
Blum also issued a statement, saying, “The American Alliance for Equal Rights is grateful that the court has ruled that the Fearless Fund’s racially exclusive grant competition is illegal … Programs that exclude individuals based on race, like those designed by the Fearless Fund, are unjust and polarizing. Significant majorities of all Americans believe that an individual’s race should not influence our nation’s public policies.”
The lawsuit against Fearless Fund has caused concern among diversity advocates in the startup and venture capital world. Numerous founders and investors expressed to Truth Voices the irony of the Civil Rights Act of 1866, which aimed to assist the formerly enslaved, now being used against the very community it intended to help. They also feared the broader implications for diversity-focused venture funds as organizations reconsider how they structure their diversity initiatives. The full impact remains uncertain.
Dar’shun Kendrick, a lawyer and Georgia state representative, emphasized that Fearless Fund still has a viable case despite the disappointing ruling. She noted that the ruling only prevents the fund from issuing grants at present and does not address the actual merits of the case, leaving room for further argument.
However, prominent voices in the tech sector have largely remained silent on Fearless Fund’s situation, marking a shift from previous outspoken support for diversity, equity, and inclusion (DEI). Earlier this year, Simone told Inc. that the fund had lost nearly all its partnerships, retaining only those with JPMorgan and Costco. Even Mastercard, sponsor of the contested Strivers Grant, has not publicly commented on the lawsuit.
“There are those who see justice as equality and those who see it as equity, which means bringing everyone to a state of equality,” Kendrick remarked, stressing that the battle is not over.
This article was updated to include Blum’s statement.
