Venture capital fund ends grant program supporting black women after Reuters lawsuit

By Nate Raymond

(Reuters) – An Atlanta-based venture capital fund agreed on Wednesday to stop operating a program that gave grants to small businesses run by black women to settle a lawsuit from an anti-affirmative action group that alleged to be discriminated against on the basis of race.

Fearless Fund agreed to settle the case after a federal appeals court in June agreed with the non-profit American Alliance for Equal Rights that the program likely violated a Civil War-era law prohibiting racial discrimination in contracting .

The nonprofit was founded by Edward Blum, who, through another group, led the litigation that led the conservative-majority U.S. Supreme Court last year to ban race as a factor in college admissions.

The lawsuit against Fearless Fund was filed in August 2023 and concerned the fund’s Fearless Strivers Grant Competition, which awarded black women small business owners $20,000 in grants and other resources to grow their businesses.

According to the Fearless Fund, black women-owned businesses in 2022 received less than 1% of the $288 billion that venture capital firms deployed.

The fund, led by CEO and founding partner Arian Simone, said its goal is to address this disparity. Fearless Fund counts JPMorgan Chase (NYSE: ), Bank of America and MasterCardas investors, and the fund has invested nearly $27 million in 40 startups led by women of color since 2019.

Lawyers for Blum’s group argued that by only considering black women for grants, the Fearless Fund adopted a categorical racial barrier against other applicants, violating Section 1981 of the Civil Rights Act of 1866.

A trial judge initially sided with Fearless Fund. But a 2-1 panel of the 11th U.S. Circuit Court of Appeals in Atlanta found the program likely violated the law, warranting a preliminary injunction pending further litigation.

Blum said in a statement Wednesday that her group “encouraged the Fearless Fund to open up its grant competition to Hispanic, Asian, Native American and white women, but Fearless decided instead to end it entirely.”

Alphonso David, a lawyer for Fearless Fund, in a statement called the settlement agreement “very limited” because it does not limit or refer to any other investment or charitable activity of Fearless Fund in the future.

“The Fearless Fund can now continue its work to expand economic opportunity,” he said.