An Atlanta-based federal court recently blocked the application process for grants benefiting Black women entrepreneurs. The sponsoring venture capitalist firm, Fearless Fund, was ordered to halt the Strivers Grant Contest on Saturday (Sept. 30).
The $20,000 grant required a minimum of 51% Black female business ownership.
Fearless Fund’s mission centers on providing “pre-seed, seed level or series A financing, to women of color-led businesses, per their website. The company says in 2018, female entrepreneurs only received about 2.2% of $130 billion in venture capitalist funding. For women of color, the slice of the money pie was reportedly less than 1%.
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However, the 2-1 court decision is a temporary block as Fearless Fund handles a legal fight brought by the American Alliance for Equal Rights (AAER). The American Alliance sued Fearless Fund, citing racial discrimination and violation of the Civil Rights Act 1866 (Section 1981). This article requires companies to have a “guarantee of race neutrality” in “contracts.”
Given that Fearless Fund has a 51% ownership requirement, AAER claims the company’s grant program is “racially discriminatory” and wants to end it. Their suit argues that the submission entry for the contest equates to a “contract.”
AAER is led by Edward Blum, a conservative legal strategist who most recently led the fight to end affirmative action policies based on race and ethnicity with his nonprofit, Students for Fair Admission.
AAER & Fearless Fund React To Court Blocking Grant Applications
The US Appeals Court’s decision came just days after US District Judge Thomas W. Thrash denied AAER’s request to block the program.
Fearless Fund disagreed with the new ruling on Sunday, per AP.
“We strongly disagree with the decisons and remain resolute in our mission and commitment to address the unacceptable disparities that exist for Black women and other women of color in the venture capital space,” Fearless Fund stated.
Their legal representatives have denied that the grants serve as contracts, claiming the First Amendment protects the awards as donations.
However, the majority opinion from the court argued that Fearless Fund does not have “the right to exclude persons from a contractual regime based on their race.”
One dissent opinion, provided by Judge Charles R. Wilson, calls the AAER’s use of the 1866 Civil Rights Act in the lawsuit a “perversion of Congressional intent.” His reasoning highlights that the act was brought about to help protect Black people from economic exclusion — as Fearless Fund does with its grants.
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Meanwhile, the American Alliance for Equal Rights praised the court’s decision.
“The members of the [AAER] are gratified that the 11th Circuit has recognized the likelihood that the Fearless Strivers Grant Contest is illegal,” Edward Blum said. “We look forward to the final resolution of this lawsuit.”
After the AAER sued Fearless Fund in early August, over 70 entities in the venture fund community signed an open letter slamming the suit.
It read, in part:
“This approach to twist efforts to counter the impacts of racial and gender discrimination as harmful to women of color is not only transparent, unoriginal, and unconvincing, but it also unjustly targets Black Women while threatening the civil rights of all women…”
This is a developing story.