Are grants for minority business owners in jeopardy?
Key takeaways
- The Fearless Fund is an Atlanta-based organization that provides grants, mentorship and resources to women of color entrepreneurs
- The American Alliance for Equal Rights sued the Fearless Fund in 2023, alleging the organization engages in racial discrimination by limiting its Fearless Strivers Grant Contest to Black female entrepreneurs
- The lawsuit resulted in a settlement in September 2024 and the Fearless Fund agreed to close its grant program that was in question
- The lawsuit against the Fearless Fund has the potential to undo decades of efforts to level the playing field and foster growth for minority entrepreneurs
Historically, Black female entrepreneurs and minority business owners have faced significant hurdles in securing business capital. Black entrepreneurs are three times more likely than white entrepreneurs to get rejected by traditional funding sources, according to data from Goldman Sachs.
Amid these challenges, the Fearless Fund emerged as a beacon of hope. Starting in 2018, the organization offered business grants for Black women through its Fearless Strivers Grant Contest and provided much-needed financial support. But a recent lawsuit settlement caused the organization to close one of its grant programs. While the organization continues to offer other grant programs, the settlement has cast a shadow of uncertainty over these efforts, and the future for similar grant programs serving minority groups.
What is the Fearless Fund?
Arian Simone and Ayana Parsons founded Fearless Fund in 2018. The Atlanta-based organization addresses the lack of access to venture capital for women of color entrepreneurs, offering grants, mentorship and resources.
Over the years, its Fearless Strivers Grant Contest supported numerous Black women entrepreneurs in their journey toward success. This program awarded $20,000 grants four times a year, contributing to the growth and development of these Black women-led businesses.
With heavy-hitter investors and partners, including Mastercard, Bank of America, PayPal and JPMorgan Chase & Co., the Fearless Fund supports Women of Color and Hispanic Heritage Month grants. It also invests in early-stage, high-growth companies nationwide through its Fearless Pitch Contest.
Additionally, women of color business owners in the FINTECH or Workforce Development industries can apply for and participate in the Get Venture Ready Program, which is a 12-week intensive training program focused on acquiring the training, knowledge and skills needed to gain access to capital.
Why was the Fearless Fund sued?
According to The Washington Post, the American Alliance for Equal Rights (AAER), led by Edward Blum, filed a lawsuit with the U.S. District Court in Atlanta against the Fearless Fund in August 2023.
Blum, who spearheaded the overturning of affirmative action in higher education, alleges the Fearless Fund engages in racial discrimination by limiting its Fearless Strivers Grant Contest to Black women entrepreneurs. The lawsuit cites explicitly a violation of Section 1981 of the 1866 Civil Rights Act, which makes it illegal to consider race when making or enforcing private contracts.
Appeals court pauses grant
On September 30, 2023, the 11th U.S. Circuit Court of Appeals granted a request by the American Alliance for Equal Rights to temporarily block the Fearless Fund from awarding its $20,000 grant.
The two judges in the majority agreed the grant was “racially exclusionary” and may violate the 1866 Civil Rights Act, which bars racial discrimination in contracting. The one dissenting judge disagreed, writing that the AAER’s use of Section 1981 in its claim against a fund meant to help women of color bridge the gap in access to venture capital was a “perversion of Congressional intent.”
Fearless Fund grant program closes
On September 30, 2023, the 11th U.S. Circuit Court of Appeals granted a request by the American Alliance for Equal Rights to temporarily block the grant program in question. The Fearless Fund/Foundation then asked the court to uphold a previous ruling that would allow the program to continue.
Instead, in January 2024, both parties had to present their case to a panel of three judges. On June 3, 2024, the 11th Circuit Court decided to uphold the decision to put the grant program to an end. On September 11, 2024, both parties settled the case and Fearless Fund agreed to close this specific grant program.
How the Fearless Fund lawsuit impacts minority business owners
This lawsuit could have far-reaching consequences on the Fearless Fund and other organizations working to address disparities in access to capital.
It’s seen as an attack on equity initiatives across the country and has the potential to undo decades of efforts to level the playing field and foster growth for minority entrepreneurs. This includes initiatives to provide business loans to minorities. Without these dedicated resources, Black female entrepreneurs and other minority business owners may struggle to keep the doors open.
While the result of the lawsuit only required one of the Fearless Fund’s grant programs to close, there is more to be done if we want to see the continuation of similar grant programs. “We need the lawmakers and the legislators to put laws in place that protect the right to fund marginalized communities, so everyone can achieve the American Dream,” said Arian Simone, CEO of the Fearless Fund, in a CBS Mornings interview.
Why access to capital for Black women and other minorities matters
For years, access to capital, networks and opportunities has been limited for Black female entrepreneurs and minority business owners. Single Black women are 24 times less likely to be business owners than white men. And less than 1 percent of Black women entrepreneurs receive venture capital.
With little-to-no access to capital, Black women are more likely to bootstrap their businesses with personal savings or use credit cards. While they are the fastest-growing demographic in the country, securing traditional small business financing is not always an option, thanks to credit market challenges, according to the Goldman Sachs 2022 Black Womenomics report.
With discriminatory policies and limited opportunities perpetuating inequality, various organizations like the Fearless Fund launched to provide grants, mentorship and resources to allow minority business owners to thrive. Grants for minorities have been a lifeline for businesses that can’t get traditional funding or don’t want to take on debt.
- Venture capital funds managed by a person of color with strong credentials are judged more harshly than white counterparts (PNAS)
- Black female founders received just 0.34% of total VC funding in the first half of 2021 (Crunchbase)
- Black business owners (50%) were almost three times as likely to be denied financing compared to white business owners (18%) in 2022 (Federal Reserve)
- Within the past five years, limited access to capital has left the majority of minority-owned businesses to cover business expenses with personal funds (Federal Reserve)
Bottom line
The Fearless Fund remains committed to supporting women of color entrepreneurs. Arian Simone is confident they will defeat this lawsuit and told CBS Mornings they plan to fight back against this “attack to dismantle and address our economic freedom as people of color.”
Among its supporters is Damon Hewitt, President and Executive Director of Lawyers’ Committee for Civil Rights Under Law, who, in an Amicus brief filed in September 2023, called the lawsuit an attempt to “kneecap any effort to undo entrenched racial inequalities and further cement the status quo of inequitable market access.”
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