1y ago

They invest in Black women. A lawsuit claims it’s discrimination.

www.washingtonpost.com /business/2023/08/26/dei-lawsuit-black-businesses-fearless-fund-edward-blum/

Brianna Wise-Riley was working an administrative job with the Fulton County Superior Court when her manager gave her a great idea. Noting the food trucks parked near their office, her boss said: What if a nail salon could bring a manicure to you?

Six months later, the 29-year-0ld bought an old school bus on Facebook Marketplace, painted it white, tore out the floor and seats, and added manicure stations. She found success booking weddings and parties, and now she’s looking to scale up. She recently learned about a grant program for Black, female entrepreneurs run by Fearless Fund, an Atlanta-based venture capital firm.

The firm had planned to name the latest round of grant winners before Labor Day. But Fearless Fund has agreed to delay the awards as it finds itself ensnared in the nation’s rapidly expanding legal brawl over affirmative action.

Edward Blum, whose lawsuit prompted the U.S. Supreme Court to strike down the use of racial preferences in college admissions, targeted the Fearless Fund in early August, claiming it engaged in “explicit racial exclusion” by operating a grant program “open only to Black females.” The lawsuit — which asked the court to prevent the fund from selecting its next round of grant winners — is one of the most prominent in a flurry of recent lawsuits and legal claims by conservative activists aimed at applying the Supreme Court’s insistence on race-blind college admissions practices to the corporate sphere of hiring, contracting and investment.

On Tuesday, Blum also sued two corporate law firms, alleging that their fellowship programs — aimed at students of color, those who identify as LGBTQ+ and students with disabilities — exclude applicants based on race, and demanding that the programs be shut down.

“Laws must apply equally to every racial and ethnic group in the country,” Blum said in an interview with The Washington Post. If not, he said, they become “the request for one group’s idea of social justice.”

Blum’s lawsuits are “the beginnings of a very broad attack” on employers’ diversity efforts, said David Gans, director of the human rights, civil rights and citizenship program at the progressive Constitutional Accountability Center, a nonprofit law firm and think tank. “I think conservative litigators are going to be looking for ways to kind of extend the reasoning and rationale of the affirmative action cases into new contexts.”

The legal battle is sparking concern among those who say efforts such as the Fearless Fund’s are essential for expanding economic opportunity to people of color and others. Wise-Riley, for instance, said she has struggled to find financing to expand her business.

The lawsuit against Fearless Fund “doesn’t make sense,” Wise-Riley said in an interview with The Post during a Fearless Fund event this month in Atlanta. “Everyone should be afforded the same opportunities. Why can’t we be included?”

Fearless Fund is one of dozens of firms geared toward combating the well-documented racial imbalance in U.S. venture capital: Last year, 1.1 percent of the $214 billion in venture capital funding allocated went to companies with Black founders, according to data from Crunchbase. In 2019, research from Stanford University concluded that founders of color face more bias from professional investors the better they perform.

Ayana Parsons and Arian Simone, the two Black women who founded Fearless Fund, said they got used to hearing the word “no” when they were starting out.

Parsons, 43, leads the Board and CEO Inclusion practice at Korn Ferry and is a former corporate executive. Simone, 42, is a serial entrepreneur and angel investor, with a background in marketing and public relations. Despite their deep experience in business, they estimate they took 300 meetings with potential investors before getting their first $5 million in funding.

Now Fearless Fund is backed by Mastercard and Bank of America, and has invested in more than 40 businesses in the past four years, including popular brands like the Slutty Vegan restaurant chain and the Lip Bar makeup company. The firm has doled out more than $26 million in investments and $3 million in grants.

“We know women such as ourselves have been overlooked. We’ve been marginalized. We’ve been underfunded and unsupported,” Parsons said in an Aug. 10 news conference about the lawsuit. She noted that Black women are starting businesses at a higher rate than any other demographic, “yet they lack access to capital, access to resources, access to strategic networks and the education needed to scale their businesses.”

Fearless Fund has lined up a heavyweight defense team with expertise in civil rights, including the NAACP Legal Defense Fund, Gibson, Dunn & Crutcher and Ben Crump, the attorney who represented the families of George Floyd and Tyre Nichols in their civil suits over the men’s killings at the hands of police.

The lawsuit against the Fearless Fund, Crump told The Post, “is an attack by the enemies of equality, to say ‘You will never be equal.’”

Blum, who has taken eight cases to the Supreme Court, describes himself as a matchmaker who brings together plaintiffs, lawyers and funders to advance the argument that any consideration of race or ethnicity is unconstitutional. He told The Post that he did not actively seek out the Fearless Fund case. Rather, he said, a woman-owned business emailed him describing the Fearless Fund. The lawsuit cites three female business owners, one from New York and two from Virginia, who argued that they could have benefited from the Fearless Fund grants but were ineligible because they are not Black. The lawsuit does not name the women, and Blum declined to identify them.

Blum said the fund’s grant program fails what he described as the “shoe-on-the-other-foot test.” Meaning: Would a fund aimed solely at benefiting businesses that are 51 percent owned by White males be considered fair and legal? It would not, Blum said, so a venture fund aimed at businesses owned primarily by Black women shouldn’t be, either.

That use of race to preclude a business from receiving money from the fund is a “compelling reason to look deeply at that particular policy,” Blum said. A legal team agreed that the case was actionable, he said, and that it could have wider public policy implications.

As Blum targets race-based programs outside the world of education, he’s starting with a pair of Black, female founders in Atlanta — a city that has played a critical role in the fight for civil rights and has the country’s highest concentration of Black-owned businesses.

“It feels like he’s bullying them,” said Fatima Goss Graves, president and chief executive of the National Women’s Law Center, which is consulting on Fearless Fund’s legal team. And, she said, the Fearless Fund case is just the beginning. “I think he has a broader agenda and a broader plan to dismantle any effort by organizations to do work to provide equal opportunity in this country.”

The lawsuit claims that the venture capital firm’s practice of awarding $20,000 grants, business support services and mentorship to Black women-owned businesses violates a section of the Civil Rights Act of 1866 that guarantees “race neutrality” in contracts. That legislation, which was passed after the Civil War to protect the rights of people freed from enslavement, is also being used in similar lawsuits — along with the Civil Rights Act of 1964 — to claim that companies’ attempts to eradicate racial inequality qualify as discrimination.

Federal laws that were intended to ensure equal opportunity and rights for people of color “are now being used as a weapon to deny them rights,” said Kenneth Davis, professor of law and ethics at Fordham University. “It’s the height of irony.”

On Aug. 17, the Fearless Fund held a town hall with its portfolio companies, local representatives, legal counsel and other allies to discuss the lawsuit. About 400 people filled the brightly lit event room at the Gathering Spot, a private club and co-working space in Atlanta geared toward professionals from underrepresented backgrounds. Dressed in cocktail attire, attendees clinked glasses and snapped selfies with Crump and the Fearless Fund founders.

The mood was defiant and celebratory.

“We are being attacked, collectively,” Gathering Spot co-founder Ryan Wilson told the crowd of mostly Black investors and business owners. People nodded, offering a chorus of “mhmm’s.” “We’re in a fight, a real fight, with folks that are deeply organized. And they’ve got a lot of money,” Wilson said.

Parsons told the crowd that the lawsuit reflects efforts to close down key pathways to Black economic progress, which are already studded with barriers.

“The stock market, homeownership, these are great tools, but they cannot unlock generational wealth in the way that entrepreneurship can,” she said.

When someone onstage asked the audience how many of them were born with a trust fund, the answer was laughter. A single hand went up.

In 2020, just 3 percent of U.S. businesses were Black-owned, according to data from the Pew Research Center, while 86 percent were White-owned. Black business owners are 12 times more wealthy than Black people who don’t own businesses, according to research from the Congressional Black Caucus Foundation.

In the wake of George Floyd’s murder in 2020, companies made pledges to improve racial equity in their ranks, committing $340 billion to the cause between May 2020 and October 2022, according to an analysis by the McKinsey Institute for Black Economic Mobility. Investment swelled in the start-up world as well: A record $5.1 billion in funding was allocated to Black-founded start-ups in 2021, according to Crunchbase. But interest and commitment eroded quickly, with funding for Black-founded start-ups plunging 50 percent in 2022, Crunchbase reported, as corporate diversity efforts became a political lightning rod and employers backpedaled.

“We have no choice but to get into policy work,” Simone told the audience at the Gathering Spot. “One Fearless Fund is not enough. We need Fearless Funds.”

Emphatic support for Fearless Fund’s mission was on display throughout the event. When it came time for questions, attendees instead offered rallying cries, including Arlan Hamilton, founder of Backstage Capital. Hamilton, who built her VC fund while she was homeless, said the lawsuit against Fearless Fund landed “like a dagger to my heart.” She said she feels like her work, and that of others, is “being threatened.”

Wise-Riley left the town hall with mixed emotions. She felt “motivated,” she said, energized by the success stories shared by Black entrepreneurs, especially women whose businesses had been transformed by investments from Fearless Fund. But she also felt “disheartened” about the lawsuit and other forces seeking to halt efforts to level the playing field for Black professionals.

“They are bridging a gap that shouldn’t have existed in the first place,” she said.

Now it’s up to the U.S. District Court for the Northern District of Georgia to decide whether Fearless Fund’s approach to closing that gap is acceptable or unconstitutional. In the coming months, Judge Thomas W. Thrash Jr., who was appointed by President Bill Clinton in 1997, is expected to decide whether Fearless Fund can continue issuing grants while the lawsuit unfolds.

59 comments

I ask you, how do you help ppl of a subjugated class without specifically helping that subjugated class?
- You help economic classes and people in need. If the people in need are primarily of a specific demographic than that demographic will be helped the most… along with everyone else who needs it. And you won’t get poor people from demographics that aren’t being helped fighting you. You’ll get their support instead.
- Remove the underlying systemic issues that prevent that class and everyone else from succeeding
  
  How does that fix the decades of setbacks? It doesn't resolve the damage that has already been done.
  We made redlining illegal yet housing inequality is still more prevalent with black ppl. We desegregated schools yet schools are just as segregated now as in the 60s
  
  To do that you often need to take actions that specifically support the subjugated class at the exclusion of the dominant class. The exact action that the Supreme Court says you can’t do.
  
  And how do you propose we undo systemic issues of the past? How do we rectify the damage done to a community in the past that continues to have ramifications today? The continued influence of your community being descended from those who were enslaved, those who were denied pay, those who were paid less than minimum wage and had no access to higher education and were discriminated against in housing and employment?
  It's not some byproduct of random chance that black families and communities have significantly lower intergenerational wealth than white families and communities. Its the result of 3 centuries of extensive continuous and ongoing systemic discrimination and exploitation. Those families and communities deserve not merely to be allowed to exist but to be uplifted and to have active government intervention to promote their welfare. Grants should be given to black businesses, housing developments should be made for black neighborhoods, preferential mortgage rates should be given to black families, businesses should be encouraged to be diverse and inclusive through affirmative action, universities should be encouraged to be diverse and inclusive through affirmative action, money is the vehicle by which all systemic power exists in American capitalism. Without real changes without real money then the systemic injustice of the past and present will continue to have an effect into the future.
  
  How can you do that without identifying the ones that predominantly affect people of color?
  If you have to keep lifting up the poor white people who are a majority while you're trying to lift up poor Black and Hispanic and native American people who are a minority then how can you actually resolve the systemic imbalance between the two groups?
- Make the help tied to income inequality. We’ve been doing it for years.
  
  Except some problems don't happen because you don't have money, they happen because of your demographics. Every 20 years they do a study on hiring and time and time again employers would rather hire a white felon over an educated black person. It literally doesn't matter if the black person had a degree from Harvard and has millionaire parents. If hiring managers can identify that they're black, all of that is immediately negated.
- You can tie the aid to being the descendant of someone previously wronged by discrimination.
  E.g., did your [great] grandfather serve in the military but get denied access to GI bill benefits since they lived in a state with segregated education - you should be eligible for similar benefits.
  E.g., did your parents/grandparents lived in an area that faced economic stagnation due to redlining / other policies which targeted neighborhoods - you should eligible for aid/loans.
  If laws/polices can be tailored to discriminate against black people without mentioning race, they can also be tailored to redress grievances without mentioning race. Tie the aid to being a victim (or descendant) of specific acts of discrimination. Sure there will be a few white people that qualify for the aid, but just like the white people hurt by the original discriminatory policies, they'll be a rounding error.
  
  If there are white people who qualify due to their own generational poverty, they should receive benefits. The systemic finger on the scales clearly didn't benefit them. This has always been about money. That the money in past generations flowed to white families is a consequence of their greed. The racism was incidental. They weren't doing it for the poor white subsistence farmers in the next town over. These power structures were instituted by and for the rich. The rich just happened to be white. Plenty of their white neighbors got left behind.
- This is a great question. Another: How do you keep any race from claiming they can be racist because they're disenfranchised? I'm sure white Americans would be waving their Irish heritage around like, "Only 10% of CEOs are over 60% Irish!! We got to stick together"
  
  There is a great deal of data about black disenfranchisement in America. It's very easy to find if you look.
  Its not at all a question of "everyone can claim they were discriminated agaisnt." America specifically and directly brutalized black people in multiple, systemic ways for centuries, and its still ongoing today in more subtle ways, like whats listed in the article.
  They have a specific and necessary need for redress, and it's reasonable to provide it.

It's also somewhat ironic that the plaintiffs are women. It should be obvious that after they've finished dismantling the systems that help minorities, the systems that help women will be the next target.
- "I didn't think the leopards would eat MY face!"
- I'm not sure if the plaintiffs are white women but ...scholars say the greatest beneficiaries of affirmative action policies are white women, from college campuses to the American workplace.

Man, after the EEOC ruling, it was obvious this, or something like it, would appear.
And frankly, on the pure merits, this chucklefuck is right: selecting businesses based on their owners' skin color is discrimination based on race.
But like colleges will surely find a slightly different metric to give preference to BIPOC and other disadvantaged groups, lenders that want to lend to businesses owned by BIPOC individuals will do the same. Perhaps, in this case, instead of "Is the person black?" they can ask, off the top of my head, "Will lending or investing in this business help overcome systemic racism or help lift traditionally oppressed populations out of poverty?"
Meanwhile, Justice Thomas will get a new boat and vote accordingly.
- I don’t see why a venture capitalist can’t make their own decisions on how to invest their money. You can’t force me to make any specific investment.
  
  According to the article, the suit rests on a federal law, part of one of the early civil rights acts, that demands ~~contacts~~ CONTRACTS be race-neutral.
  The original intent, of course, being to eliminate things like preventing black people from buying houses and such.
  
  Well you see it's because you don't agree with my version of speech so that means I'm being victimized. /s
- 'Affirmative action' is still racism. Judge people on merit, not factors beyond their control, like race or sex.
  
  If one black person doesn’t get funded, that might just be that person. If only 1% of funding is supporting black entrepreneurs, that’s looking like a systemic problem. Systemic problems require systemic solutions, because the bootstraps aren’t working.
  Should VCs who allocate less than 14% of their funding to African American enterprises be subject to an investigation and lawsuits over racist practices, and if so, how much should the penalty be? Should they be forced by the government to find only AA businesses until they constitute 14% of their portfolio?
  If less than 14% of applications are coming from African Americans, how can we create the opportunities so that we know systemic racism isn’t playing a role?
  
  Except that people who are still discriminated against from birth have fewer opportunities to increase their own merit. Affirmative action helps to correct this imbalance by providing opportunities where they would not be found otherwise, due to multi-generational discrimination. The benefits are not primarily to the people today who receive this kind of assistance, but to future generations.
  
  Meritocracy is a lie. To capitalists your merit includes your race, your gender, your sexual orientation, your ethnicity and your nationality. Minorities require affirmative action to equally have access to society.

The lawsuit cites three female business owners, one from New York and two from Virginia, who argued that they could have benefited from the Fearless Fund grants but were ineligible because they are not Black.
But if the money went to three non-Black women, wouldn't the fund be practicing explicit gender discrimination? The money should skip right over them and go to white men, taking their argument even further.

Oh for fuck's sake, what's next, the United Negro College Fund?!
- Don’t give them any ideas lol

Edward Blum must get really hard when he thinks of fucking over BIPOC

They really can't stand seeing a bad removed winning.
Here's to these entrepreneurs surpassing these racists
- I’ve said it before and I’ll say it again. It is a tale as old as the nation itself. The moment that black people start making a little bit of progress a reactionary white movement develops and tears any of that progress down. Time and time again the same pattern repeats itself in the history books.

TLDR: Systemic Racism is illegal. Who knew?

The lawsuit against Fearless Fund “doesn’t make sense,” Wise-Riley said in an interview with The Post during a Fearless Fund event this month in Atlanta. “Everyone should be afforded the same opportunities. Why can’t we be included?”
That's why the fund exists to help people who don't have the same opportunities due to their race or gender.

It is racist to treat people different on grounds of skin colore. Regardless of anything else. Same with the fact that its sexist in that context.
- Then maybe colleges and business communities shouldn't be so racist towards black people that they have to find ways to get an equal footing.
- Imagine if the races were reversed. It was only meant to help white women. They'd be saying something along the lines of how racist it was. But it's okay to be racist against whites these days.
  
  Y’know, usually I just ignore whiny bs like this, but not today. Why? Because three Black people were shot and killed today by a damn white supremacist Neo-Nazi while they were out shopping, and students at an HBCU had to stay inside their dorm rooms because the same shooter had been on their campus first. Shut the ENTIRE fuck up, today of all damn days, about “racist against whites.” No one is out there shooting y’all up at Dollar Stores, grocery stores, or churches just for being white.

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