An appeals court rules that VC Fearless Fund cannot issue grants to Black women, but the fight continues

VC firm Fearless Fund has faced a setback in its plans to issue grants to Black women business owners. On Monday, an appeals court ruled against Fearless, upholding a preliminary injunction in place on the program.

The court ruling said that Fearless Fund’s Strivers Grant likely violates the Civil Rights Act of 1866, which bans the use of race in contracts, as first reported by the Atlanta Journal-Constitution. The Strivers Grant is issued through the fund’s foundation arm and awards grants to businesses owned by Black women. It was sued last August by the American Alliance for Equal Rights (AAER), which argued that the grant discriminated against non-Black women founders since only Black women could apply.

The AAER was founded by Edward Blum, the conservative activist who helped successfully overturn affirmative action in universities. Fearless Fund, which is based in Atlanta, vowed to fight the lawsuit but was temporarily barred from continuing to deploy these funds last October as the case continued to travel through the courts. Fearless Fund challenged that injunction, and in January, both parties argued their case in the court of appeals. Blum once again asserted that the Strivers Grant violated the Civil Rights Act of 1866, while Fearless Fund claimed the grant was a charitable donation that would be protected under the First Amendment.

While today’s ruling means that Fearless Fund can’t issue grants, it is not necessarily the final word on the case. Fearless is evaluating its options regarding what to do next, including the possibility of going to trial, its reps told us. The firm disagrees with the court ruling that the Strivers Grant violates the Civil Rights Act of 1866, the firm’s lawyer and president of the Global Black Economic Forum, Alphonso David, told TechCrunch in an emailed statement.

“As the dissenting judge pointed out, the discrimination in access to funding that Fearless Foundation seeks to address is long-standing and irrefutable,” David said. “This is the first court decision in the 150-plus year history of the post-Civil War civil rights law that has halted private charitable support for any racial or ethnic group.”

Arian Simone, the CEO of Fearless Fund, also released a statement, saying the foundation was determined to continue fighting the lawsuit.

“America is supposed to be a nation where one has the freedom to achieve, the freedom to earn, and the freedom to prosper. Yet, when we have attempted to level the playing field for underrepresented groups, our freedoms were stifled,” Simone continued. “We must keep up this fight for the next generation of girls who deserve to grow up in an America that lets them realize their dreams instead of outlawing them.”

Blum also sent TechCrunch a statement, saying, “The American Alliance for Equal Rights is grateful that the court has ruled that the Fearless Fund’s racially exclusive grant competition is illegal … Programs that exclude certain individuals because of their race such as the ones the Fearless Fund has designed and implemented are unjust and polarizing. Significant majorities of all Americans believe that an individual’s race should not be a factor in our nation’s public policies."

The news of Fearless Fund’s lawsuit caused upset among diversity advocates within the startup and venture ecosystem. Numerous founders and investors told TechCrunch about the irony of the Civil Rights Act of 1866, which was initially put into place to help the formerly enslaved, is now being used against the community it sought to help. Others worried about the repercussions this case would have, as corporations seek to change the language around their diversity programs to seem less targeted toward marginalized communities. Its impact on diversity-focused venture funds remains unknown.

Dar’shun Kendrick, a lawyer and Georgia state representative, told TechCrunch that Fearless Fund still has a case, even though today’s ruling was disappointing. That’s because today’s ruling only upheld the verdict that Fearless Fund could not give out grants; it was not a ruling on the actual merits of the case, meaning there is still time to argue that, Kendrick said.

Still, big names in the tech ecosystem have remained quiet about what is happening to Fearless Fund, signaling an end to the outspoken era of DEI support in the industry. Simone spoke to Inc. earlier this year saying the fund had lost nearly all its partnerships aside from two, JPMorgan and Costco. Even Mastercard, who sponsored the now-contested Strivers Grant, has publicly never commented on the lawsuit.

“There are those that see justice as equality and those that see justice as equity, getting everyone up to the place of equality,” Kendrick continued, agreeing that the fight isn’t over yet.

This story was updated to add Blum's statement.