Are grants for minority business owners in jeopardy?

Black female entrepreneurs and minority business owners have historically faced significant challenges in obtaining business capital.

Among these difficulties, the Fearless Fund stood out as a beacon of hope. Since 2018, the organization has provided much-needed financial assistance to Black women entrepreneurs through its Fearless Strivers Grant Contest. However, a recent lawsuit has cast a cloud of doubt over these efforts, jeopardizing the progress made thus far.

What is the Fearless Fund?

Fearless Fund was founded in 2018 by Arian Simone and Ayana Parsons. The Atlanta-based organization addresses women of color entrepreneurs’ lack of access to venture capital by providing grants, mentorship, and resources.

Its Fearless Strivers Grant Contest has assisted numerous Black women entrepreneurs on their path to success over the years. This program provides $20,000 grants four times a year to help these black women-led businesses grow and develop.

The Fearless Fund, with heavyweight investors and partners such as Mastercard, Bank of America, PayPal, and JPMorgan Chase & Co., supports Women of Color and Hispanic Heritage Month grants. Through its Fearless Pitch Contest, it also invests in early-stage, high-growth companies across the country.

Women of color business owners can also apply for and participate in the Get Ready Venture Program, a 12-week intensive training program focused on acquiring the training, knowledge, and skills needed to gain access to capital.

Why is the Fearless Fund Being Sued?

According to the Washington Post, the American Alliance for Equal Rights (AAER), led by Edward Blum, filed a lawsuit against the Fearless Fund in August with the U.S. District Court in Atlanta.

Blum, who spearheaded the repeal of affirmative action in higher education, claims the Fearless Fund discriminates against Black women entrepreneurs by limiting its Fearless Strivers Grant Contest to Black women entrepreneurs. The lawsuit specifically alleges a violation of Section 1981 of the 1866 Civil Rights Act, which makes it unlawful 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 the American Alliance for Equal Rights’ request to temporarily halt the Fearless Fund’s $20,000 grant.

The two majority judges agreed that the grant was “racially exclusionary” and may have violated the 1866 Civil Rights Act, which prohibits racial discrimination in contracting. The AAER’s use of Section 1981 in its claim against a fund intended to help women of color bridge the access gap to venture capital, according to one dissenting judge, was a “perversion of Congressional intent.”

How the Fearless Fund lawsuit impacts minority business owners

This lawsuit has the potential to have far-reaching consequences for the Fearless Fund and other organizations working to address disparities in capital access.

It is viewed as an attack on equity initiatives throughout the country, with the potential to undo decades of efforts to level the playing field and foster growth for minority entrepreneurs. This includes initiatives to provide minority business loans. Without these specialized resources, Black female entrepreneurs and other minority business owners may find it difficult to stay in business.

Why access to capital for Black women and other minorities matters

For many years, black female entrepreneurs and minority business owners have had limited access to capital, networks, and opportunities. Single Black women are 24 times less likely than white men to own a business. Furthermore, less than 1% of Black female entrepreneurs receive venture capital.

With little to no access to capital, Black women are more likely to use personal savings or credit cards to bootstrap their businesses. Despite being the country’s fastest-growing demographic, traditional small business financing is not always an option due to credit market challenges, according to the Goldman Sachs 2022 Black Womenomics report.

With discriminatory policies and limited opportunities perpetuating inequality, organizations such as the Fearless Fund were formed to provide grants, mentorship, and resources to minority business owners in order for them to thrive. Minority grants have been a lifeline for businesses that cannot obtain traditional financing or do not want to incur debt.

Bottom line

The Fearless Fund is still dedicated to assisting women of color entrepreneurs. Arian Simone is confident that the lawsuit will be dismissed, and she told CBS Mornings that they intend to fight back against this “attack to dismantle and address our economic freedom as people of color.”

Damon Hewitt, President and Executive Director of the Lawyers’ Committee for Civil Rights Under Law, is one of its supporters. In a recent Amicus brief, he called the lawsuit an attempt to “kneecap any effort to undo entrenched racial inequalities and further cement the status quo of inequitable market access.”

Frequently Asked Questions

• What is the Fearless Fund’s mission? The Fearless Fund’s mission is to close the funding gap for women of color entrepreneurs by encouraging the development and growth of their businesses.
• What is the size of the Fearless Fund? The Fearless Fund, founded in 2018 by Arian Simone and Ayana Parsons, has grown to a $42 million seed fund while remaining true to its mission of encouraging the growth of minority and women-owned businesses.
• Why is it more difficult for minorities to obtain small business loans? According to the national think tank Third Way, getting small business loans is more difficult for minorities due to a variety of factors, including: branch closures in underserved communities; a lack of collateral options to secure small business loans; stringent lending requirements; limited business relationships with banks; and low incentives for small business loans.

Key takeaways

• The Fearless Fund is an Atlanta-based organization that offers grants, mentorship, and resources to female entrepreneurs of color.
• The American Alliance for Equal Rights has filed a lawsuit against the Fearless Fund, alleging racial discrimination by limiting its Fearless Strivers Grant Contest to Black female entrepreneurs.
• Because of limited access to capital, the majority of minority-owned businesses have had to cover business expenses with personal funds.
• The lawsuit against the Fearless Fund has the potential to undo decades of work to level the playing field and promote minority business growth.