ATLANTA — Brianna Wise-Riley was working an administrative job with the Fulton County Superior Court when her manager gave her a brilliant 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-old purchased an old school bus on Facebook Marketplace, painted it white, removed the floor and seats, and added manicure stations. She found success booking weddings and parties, and now she’s looking to expand. She recently discovered a grant program for Black, female entrepreneurs run by Fearless Fund, an Atlanta-based venture capital firm.
The firm had planned to announce the latest round of grant winners before Labor Day. However, Fearless Fund has agreed to postpone the awards as it finds itself entangled in the nation’s rapidly growing legal dispute over affirmative action.
Edward Blum, whose lawsuit prompted the U.S. Supreme Court to invalidate 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 series 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 realm 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 terminated.
“Laws must be applied 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 extend the reasoning and rationale of the affirmative action cases into new contexts.”
The legal battle is causing concern among those who argue that efforts such as the Fearless Fund’s are crucial for expanding economic opportunities for people of color and others. Wise-Riley, for instance, said she has struggled to secure 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 have the same opportunities. Why can’t we be included?”
Fearless Fund is one of many firms focused on addressing the well-documented racial disparity in U.S. venture capital: Last year, only 1.1 percent of the $214 billion in venture capital funding went to companies with Black founders, according to data from Crunchbase. In 2019, research from Stanford University found that founders of color face more bias from professional investors the more successful they become.
Ayana Parsons and Arian Simone, the two Black women who founded Fearless Fund, said they became accustomed 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 extensive business experience, they estimate they had 300 meetings with potential investors before securing their first $5 million in funding.
Now Fearless Fund is supported by Mastercard and Bank of America, and has invested in over 40 businesses in the last four years, including well-known brands like the Slutty Vegan restaurant chain and the Lip Bar makeup company. The firm has provided more than $26 million in investments and $3 million in grants.
“We are aware that women like us have been disregarded. We have been marginalized. We have been underfunded and unsupported,” Parsons said during a press conference on August 10 regarding the lawsuit. She pointed out that Black women are starting businesses at a higher rate than any other group, "yet they lack access to capital, resources, strategic networks, and the education necessary to grow their businesses."
Fearless Fund has assembled a strong 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 lawsuits against the police for their deaths.
Crump told The Post that the lawsuit against Fearless Fund "is an attack by those who oppose equality, aimed at saying 'You will never be equal.'"
Blum, who has taken eight cases to the Supreme Court, describes himself as a connector who brings together plaintiffs, lawyers, and funders to argue that any consideration of race or ethnicity is unconstitutional. He stated that he did not actively seek out the Fearless Fund case but was contacted by a woman-owned business that described the fund to him. The lawsuit includes three female business owners, one from New York and two from Virginia, who claimed that they could have benefited from Fearless Fund grants but were ineligible because they are not Black. The women are not named in the lawsuit, and Blum declined to identify them.
Blum argued that the fund's grant program fails what he calls the "shoe-on-the-other-foot test." In other words, if a fund aimed solely at benefiting businesses owned 51 percent by White males would not be considered fair and legal, then a venture fund aimed at businesses primarily owned by Black women should not be either, according to Blum. He believes that using race to exclude a business from receiving funds from the Fearless Fund is a "compelling reason to closely examine that specific policy." A legal team agreed that the case had merit and could have broader implications for public policy.
As Blum targets race-based programs beyond the realm of education, he is starting with two Black female founders in Atlanta, a city that has played a crucial role in the civil rights movement and has the highest concentration of Black-owned businesses in he country.
"It feels as if he is intimidating them," expressed Fatima Goss Graves, the president and CEO of the National Women's Law Center, which is providing legal advice to Fearless Fund. She also believes that this lawsuit is just the beginning of a larger plan to dismantle organizations' efforts in promoting equal opportunities in the country.
The lawsuit argues that the venture capital firm's practice of granting $20,000, providing business support services, and mentorship exclusively to Black women-owned businesses violates a section of the Civil Rights Act of 1866 that guarantees impartiality in contracts. This legislation, enacted after the Civil War to safeguard the rights of formerly enslaved individuals, is now being used in conjunction with the Civil Rights Act of 1964 in similar lawsuits that claim companies' attempts to eliminate racial inequality amount to discrimination.
Kenneth Davis, a law and ethics professor at Fordham University, stated that federal laws initially designed to ensure equal opportunities and rights for people of color are now being weaponized against them. He finds this situation ironic.
On August 17, the Fearless Fund organized a town hall meeting attended by its portfolio companies, local representatives, legal advisors, and other supporters to discuss the lawsuit. Approximately 400 individuals gathered at the Gathering Spot, a private club and co-working space in Atlanta catering to professionals from underrepresented backgrounds. The attendees, mostly Black investors and business owners, were dressed in cocktail attire and engaged in celebratory defiance.
Ryan Wilson, co-founder of the Gathering Spot, addressed the crowd, emphasizing that they were collectively under attack. Wilson acknowledged that they were facing well-organized opponents with substantial resources. Parsons, one of the founders of Fearless Fund, echoed these sentiments and asserted that the lawsuit aimed to hinder the progress of Black economic advancement, which already faces numerous obstacles.
Parsons argued that while tools like the stock market and homeownership are valuable, entrepreneurship has the potential to unlock generational wealth in a way that other avenues cannot. When asked how many in the audience were born with trust funds, the question was met with laughter, and only one hand was raised.
According to data from the Pew Research Center, Black-owned businesses accounted for just 3 percent of all U.S. businesses in 2020, while White-owned businesses made up 86 percent. Research from the Congressional Black Caucus Foundation revealed that Black business owners are 12 times wealthier than Black individuals who do not own businesses.
Following George Floyd's murder in 2020, companies made pledges to improve racial equity within their organizations, committing $340 billion to the cause between May 2020 and October 2022, as reported by the McKinsey Institute for Black Economic Mobility. The start-up world also experienced increased investment, with a record $5.1 billion allocated to Black-founded start-ups in 2021, according to Crunchbase. However, this interest and commitment quickly waned, with funding for Black-founded start-ups plummeting by 50 percent in 2022, as reported by Crunchbase, due to corporate diversity efforts becoming politicized and employers backtracking.
Simone emphasized the need for policy work during the Gathering Spot event, stating that one Fearless Fund is not enough and that they require more Fearless Funds to address the issue. The audience at the event displayed unwavering support for Fearless Fund's mission. Instead of asking questions during the Q&A session, attendees offered rallying cries. Arlan Hamilton, the founder of Backstage Capital who built her VC fund while homeless, expressed that the lawsuit against Fearless Fund deeply affected her and felt like a threat to her work and the work of others.
Wise-Riley departed the town hall feeling a mix of emotions. She expressed feeling "motivated" and invigorated by the success stories shared by Black entrepreneurs, particularly women whose businesses had experienced significant growth due to investments from Fearless Fund. However, she also experienced feelings of "disheartenment" regarding the lawsuit and other factors that are attempting to impede efforts to create a level playing field for Black professionals.
Wise-Riley believes that Fearless Fund is addressing a gap that should never have existed in the first place. The final decision on whether Fearless Fund's approach to closing this gap is acceptable or unconstitutional lies with the U.S. District Court for the Northern District of Georgia. Judge Thomas W. Thrash Jr., who was appointed by President Bill Clinton in 1997, is expected to make a ruling in the coming months. This ruling will determine whether Fearless Fund can continue to provide grants during the ongoing lawsuit.