On Tuesday, in Atlanta, Senior U.S. Judge Thomas Thrash ruled in favor of the Fearless Fund, allowing it to continue its grant program exclusively for Black women entrepreneurs amidst a lawsuit claiming it illegally excluded other races. The judge denied a preliminary injunction that would have obstructed the grants, asserting that the lawsuit was unlikely to prevail. He declared his intention to issue a written order by the week’s end.
The Fearless Fund, albeit a small player in the approximately $200 billion global venture capital market, emerged victoriously in a ruling that symbolizes a significant triumph amidst the ongoing battle over corporate diversity policies. This lawsuit may potentially serve as a test case, particularly in the context of the U.S. Supreme Court’s recent ruling in June, which put an end to affirmative action in college admissions, shifting the considerations on race to the workplace.
Edward Blum, founder of the American Alliance for Equal Rights and an anti-affirmative action activist, spearheaded the injunction against the Fearless Fund. According to the Associated Press, expressing his disagreement with the decision, Blum announced, “Our nation’s civil rights laws do not permit racial distinctions because some groups are overrepresented in various endeavors, while others are under-represented,” as per his statement. He also informed that the alliance intends to appeal the decision.
In contrast, Fearless Fund CEO and co-founder Arian Simone, speaking outside the courthouse and alongside the Rev. Al Sharpton after the ruling, affirmed, “We will continue to run the nation’s first venture capital fund that is built by women of color for women of color.”
The Fearless Fund’s exclusive grant program, dubbed the Fearless Strivers Grant Contest, awards $20,000 to Black women entrepreneurs. The alliance contends that this program breaches the Civil Rights Act of 1866, which prohibits racial discrimination in contracts, and maintains that its members are being unjustly excluded based on race. Furthermore, according to AP, Judge Thrash identified the grants as “charitable donations,” intended to acknowledge and convey that Black women business owners have encountered discrimination. He recognized donating money as an “expressive conduct” that is safeguarded under the First Amendment, and critiqued the alliance, stating, “That’s not the way it works.”
Gilbert Dickey, an attorney for the alliance, spotlighted that the grant program did not extend to other racial minorities, such as Hispanics, and asserted, “This case is about whether they can exclude everyone else solely on the basis of race.”
The Fearless Fund, a venture capital firm, was instituted with the primary objective of dismantling hurdles present in venture capital financing for enterprises spearheaded by women of color. Fearless Fund operates the grant contest quarterly, with eligibility requiring a business to be at least 51% owned by a Black woman, among other conditions. According to data from the nonprofit advocacy group digitalundivided, a scant less than 1% of venture capital funding is allocated to businesses under the ownership of Black and Hispanic women. Prior to the recent ruling, the Fearless Fund confronted the stark possibility of discontinuing its grant program, a critical initiative designed to financially empower Black female entrepreneurs, amidst the legal challenges and allegations of racial exclusion. The favorable decision from Judge Thrash not only brought respite to the firm but also ensured the perpetuation of their grant offerings, sustaining their mission to elevate businesses owned by women of color.
According to AP, Mylan Denerstein, representing the fund, argued that the section of the 1866 Civil Rights Act cited by the plaintiff was originally meant to assure formerly enslaved Black people the same rights as whites to enforce contracts post-Civil War, claiming, “The plaintiff is attempting to turn this seminal civil rights law on its head.”
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