Venture capital firm Fearless Fund and the American Alliance for Equal Rights (AAER) have entered into a settlement agreement that will result in the company shutting down its Strivers Grants program.
The program, originally sponsored by Mastercard, was meant to provide $20,000 to small businesses owned by black women. But AAER, run by conservative activist Edward Blum, sued Fearless Fund, alleging that the program discriminated against non-black founders and violated the Civil Rights Act of 1866, which bans the inclusion of race in contracts. In June of this year, a court ruled that Fearless Fund's contracts likely violated the law and upheld a preliminary injunction against the program.
In a statement sent to TechCrunch, Bloom said, “The American Equal Rights Union encouraged the Fearless Fund to open its grant competition to Hispanic, Asian, Native American and white women. [the firm] Instead we have decided to quit completely.”
“Race-specific programs like the one promoted by Fearless Fund are divisive and illegal. Opening up grant programs to all applicants regardless of race is enshrined in our civil rights laws and supported by an overwhelming majority of Americans,” he added.
“Fearless Fund and the Fearless Foundation are pleased to conclude this litigation and remain focused on supporting under-capitalized entrepreneurs who have been unfairly supported by traditional capital markets for too long,” Fearless Fund CEO Ariane Simone (pictured above) said in an emailed statement to TechCrunch.
“From the moment this lawsuit was filed, I made an unwavering commitment to help and empower women entrepreneurs of color in need. I remain committed to that pledge, and in fact, my commitment is stronger than ever,” Simone added.
The company's president, Rachel Nordlinger, told TechCrunch that Simone plans to announce a $200 million debt fund for people in need.
Many in the venture industry have been closely following AAER's lawsuit against Fearless Fund, with some investors and founders expressing surprise that civil rights laws enacted to help formerly enslaved people are being used against those very people.
The lawsuit aside, the landscape remains grim for Black founders. The Strivers Grant was meant to address disparities in funding and opportunity. According to Crunchbase, Black founders have raised less than 1% of all venture capital in any given year, and just 0.32% of all venture investment in the first half of this year.
The end of the grant program is the latest blow to the diversity, equity and inclusion movement this year, with the DEI Tech Foundation closing and companies redirecting efforts that once benefited minorities in other directions.
Blum and other conservative activists have successfully fought lawsuits to eliminate similar programs, most notably helping to end the use of race in college admissions, and his nonprofit AAER is currently suing other race-based programs that focus on hiring Latino interns, such as the Smithsonian Institution's Latino Museum Studies Program.
Meanwhile, Simone said Fearless Fund lost nearly all of its partners after the lawsuit came to light, and while the company once offered other grants to businesses owned by women of color, information about those grants is no longer available on the company's website.