Woke companies PANIC, fire EMPLOYEES and lose INVESTORS (over MASSIVE racism LAWSUITS)!

‘It All Fell Apart’: Fearless Fund Founder on Impact of DEI Lawsuits. As conservative groups continue to go after DEI-based grant programs, the firms that provide them–including Fearless Fund and Hello Alice–are struggling.

It’s been roughly six months since conservative groups began suing companies and investment firms that offer grant programs exclusively to historically disadvantaged groups–calling the funding discriminatory and, therefore, unlawful. Fearless Fund CEO Arian Simone revealed in an interview with Inc. that the conservatives’ strategy is essentially working and that her organization is on the ropes.

The firm, which launched in 2019 and grew to a team of 19, has since scaled back to six. “It all fell apart due to litigation,” says Simone. “You’re talking millions of dollars we’ve lost, and it’s truly impacting our operations.”

Back in August, the American Alliance for Equal Rights, a nonprofit membership organization led by conservative litigator Edward Blum, sued Simone’s Fearless Fund, an Atlanta-based venture firm. The suit claimed the Fearless Fund’s grant program–geared toward funding Black women entrepreneurs–violated a section of the Civil Rights Act of 1866. The law, which was initially put in place to protect the right of anyone to win contracts, regardless of race, is now being used to dismantle a private-money effort designed to correct the imbalance of funding to historically disadvantaged groups.

The lawsuit came two months after the firm received multimillion-dollar investments from Bank of America, Costco, and Mastercard, in June 2023, to “financially support and provide resources for women of color,” according to a press release. For context, Black and Latino women entrepreneurs received 0.1 percent of VC funds, according to a 2023 study from McKinsey and Company.

Following the suit, a judicial panel officially blocked the Fearless Fund from awarding $10,000 to $20,000 and business-development services to early-stage Black-woman-owned businesses as part of the firm’s Fearless Strivers Grant program. The grant program is now on hold.

DEI funding dries up
Over the past four years, the Fearless Fund has partnered with corporations to supply diverse business owners $3.7 million in grants. Now, according to Simone, all but two of the firm’s partners have backed out.

“I didn’t plan for this,” she says. “I’m definitely equipped for it, but I didn’t prepare for the mental and emotional toll this has taken on me and my team.”

Simone adds that the venture side of the firm is also struggling. Since she started the fund in 2019 with co-founder and COO Ayana Parsons, it has invested nearly $27 million in roughly 40 women-owned businesses, including fast-growing startups Slutty Vegan and Partake Foods (No. 151 on the 2023 Inc. 5000). Before the lawsuit, the pair expected to raise another eight-figure round of funding to continue their investments. Since the lawsuit began, however, they haven’t raised a single dollar.

The Fearless Fund isn’t the only capital provider facing financial hardship following lawsuits. After right-leaning nonprofit America First Legal (AFL) sued Hello Alice, an online platform for business owners, claiming its grant program for Black-owned small trucking companies was discriminatory, co-founder Elizabeth Gore says the company recently had to lay off 69 percent of its workforce.

“It still breaks my heart, actually,” says Gore, who launched the company in 2017. “It happened right before the holidays in December, and we had to lay off people who have been with us for years.”

“Onslaught” of litigation expected
Gore says the lawsuit has also greatly impacted her ability to raise capital. When Hello Alice was first sued in August 2023, she and co-founder Carolyn Rodz were in the middle of closing a Series C funding round. Within two days of notifying investors about the suit, says Gore, the entrepreneurs lost two-thirds of the entire round.

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