Venture capital firm, Fearless Fund, is on a mission to alter the landscape of venture capital funding for women of color-led startups. Co-founded by Arian Simone and Ayana K. Parsons, the firm has been instrumental in narrowing the funding gap for minority entrepreneurs. With a focus on pre-seed, seed-level, and series A financing Fearless Fund makes needed strides in a predominantly white industry.

Since its inception in 2019, the Fearless Fund has invested nearly $27 million in approximately 40 women of color-led businesses. This has collectively led to the employment of approximately 540 individuals, up from the initial 250 at the time of investment, according to the recent “impact report” released by the Fearless Fund.

“Less than 1% of venture capital funding goes to businesses owned by Black and Hispanic women,” stated Arian Simone, referencing a study by Digitalundivided. “Just to get that number over 2% would take billions of dollars. It takes trillions of dollars to really move the needle, which is why I think that policy changes need to take place in order to collectively get us up to speed.” Simone advocates for pension funds and other institutional investors to mandate venture capital firms to fund a certain number of minority-owned companies.

However, conservative activist groups are actively opposing initiatives like the Fearless Fund. Legal battles are being waged against corporate diversity initiatives, a trend that has intensified since the Supreme Court’s ruling on affirmative action in college admissions. Edward Blum, a conservative activist who previously filed affirmative action cases before the Supreme Court, is leading the lawsuit against the Fearless Fund. 

The lawsuit targets the Strivers Grant Contest, which grants $20,000 to Black women who run businesses, alleging that it violates a section of the Civil Rights Act of 1866 prohibiting racial discrimination in contracts.

Blum’s organization, the American Alliance For Equal Rights, has also filed lawsuits against law firms in Texas and Florida over fellowship programs for diverse candidates, claiming they are discriminatory. Blum argued, “A useful way of determining the fairness and ultimately the legality of a policy is to apply the shoe on the other foot test,” emphasizing that the legality of such policies should be evaluated impartially.

Ramifications of this lawsuit will have lasting and wide-reaching implications. The outcome will likely influence similar cases surrounding the constitutionality of diversity, equity, and inclusion in Fortune 500 companies.  

To defend against the lawsuit, the Fearless Fund has enlisted prominent civil rights lawyers, including Benjamin Crump, and filed in U.S. District Court in Atlanta. They argue that Blum’s group lacks standing because it represents three anonymous women who never applied for funding from the Fearless Fund and that the grants are donations protected by the First Amendment.

Despite the legal battle, the Fearless Fund continues to receive thousands of applications for its programs each week, highlighting the untapped potential of investing in women of color. Companies in its portfolio have found success in mainstream retail, targeting younger and more diverse customers.

JCPenney CEO Marc Rosen noted that their partnership with Thirteen Lune, an e-commerce platform promoting beauty brands created by people of color, is essential to reviving their beauty business. This partnership became crucial after Sephora left the chain for rival Kohl’s three years ago, as people of color constitute a third of JCPenney’s customer base.

However, overall funding for businesses owned by women of color has declined since the surge following the 2020 George Floyd protests. The combined share of venture capital funding received by Black and Latina founders briefly surpassed 1% in 2021 before dipping back below that threshold in 2022, as reported by Digitalundivided.

After the killing of George Floyd, the Fearless Fund, supported by J.P. Morgan Chase & Co., Bank of America, and Mastercard, briefly received unsolicited investor interest, but this trend has since largely reversed. “That was a small window of time,” Simone remarked. “Everybody was looking for the Fearless Fund.”

The Fearless Fund remains undeterred in its mission to empower women of color entrepreneurs, despite the legal and political challenges it faces.

UPDATE

Shortly after this article was published Fearless Fund secured a victory in court. On September 26th the preliminary injunction brought against Fearless Fund by the American Alliance for Equal Rights (AAER) was denied. Co-founder Arian Simone took to social media to express her happiness towards this historic win.

“Today in Federal Court – WE WON  ROUND 1!! This is who we do it for, the children are our future! Thank you for standing and supporting @fearless.fund! Thanks for your prayers and petitions, continue to stand with us. Today’s update – Preliminary injunction denied! We will continue to do the amazing work we do.”