Venture capital firm Fearless Fund and the American Alliance for Equal Rights (AAER) have entered into a settlement agreement that will see the firm shutting down its Strivers Grant program.
The program, initially sponsored by Mastercard, aimed to provide $20,000 to small businesses owned by Black women. But Fearless Fund was sued by AAER, run by conservative activist Edward Blum, alleging the program discriminated against non-Black founders and violated the Civil Rights Act of 1866, which bans the use of race in contracts. In June this year, a court ruled that Fearless Fund’s contract likely violated the Act, and upheld a preliminary injunctio on the program.
In a statement sent to TechCrunch, Blum said, “The American Alliance for Equal Rights encouraged the Fearless Fund to open its grant contest to Hispanic, Asian, Native American, and white women, but [the firm] has decided instead to end it entirely.”
“Race-exclusive programs like the one Fearless Fund promoted are divisive and illegal. Opening grant programs to all applicants, regardless of race, is enshrined in our nation’s civil rights law and supported by a significant majorities (sic) of all Americans,” he added.
In an emailed statement to TechCrunch, Fearless Fund’s CEO, Arian Simone (pictured above), said, “The Fearless Fund and the Fearless Foundation are pleased to end the case and continue to focus on helping under-resourced entrepreneurs who have been ill served by traditional capital markets for far too long.”
“From the moment the lawsuit was filed, I pledged to stand firm in helping and empowering women of color entrepreneurs in need. I stand by that pledge today and in fact my commitment remains stronger than ever,” Simone added.
Rachel Noerdlinger, a representative for the firm, told TechCrunch 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, and some investors and founders expressed their surprise that a civil rights act enacted to help the formerly enslaved was now being used against that very population.
This lawsuit aside, the landscape for Black founders remains difficult. The Strivers Grant was meant to address the disparity in funding and opportunities when it comes to accessing capital: Black founders raise less than 1% of all invested venture funding in any given year — in the first half of this year, they raised only 0.32% of all venture investment, according to Crunchbase.
The closing of this grant program is the latest blow to the diversity, equity and inclusion movement this year. DEI tech foundations have shuttered and companies are refocusing initiatives that once benefited minorities towards other avenues.
Blum and other conservative activists have been successful in suing away similar programs. Most notably, he helped end the use of race in college admissions, and his non-profit, AAER, is currently suing other race-based programs, such as the Smithsonian Institute’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 out. The firm used to offer other grants for businesses owned by women of color, but information on those grants is no longer available on its website.