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The Story: Fearless Fund, an Atlanta-based venture capital firm, is back in the spotlight this week as the lawsuit it faces alleging the fund is guilty of racial discrimination may not be going away.

Fearless has a $20,000 grant program available only to Black female founders called the Fearless Strivers Grant Contest. In August, the firm was sued over said program by the American Alliance for Equal Rights, a conservative nonprofit group, on grounds of racial discrimination.

A judge ruled in Fearless’s favor in September, but now this week, the American Alliance for Equal Rights has filed a court brief asking an Atlanta appeals court to overturn the recent ruling.

The Alliance argues that a grant competition made specifically for only Black women small business owners is an equivalent discriminatory practice to what white business owners were doing to Black Americans after the Civil War.

Fearless Fund was absolved of this claim as the judge ruled in September that the $20,000 grant is actually a charitable donation, not a contract, which makes it protected under the First Amendment.

Not long after, however, a three-judge panel from the 11th Circuit Court of Appeals in Atlanta decided to place a temporary injunction on the case during the appeals process. Two of the three judges actually agreed with the Alliance’s argument, saying, “the plaintiffs have established an irreparable injury.” The two judges said the grant was “racially exclusionary.”

Because of this, the Alliance is confident its appeal will lead to a “preliminary injunction because of the earlier split decision by the motions panel.”

Fearless Fund has until December 6th to respond to the Alliance’s latest brief.

Expert Take: Ben Stokes, founding partner of Chasing Rainbows, defends Fearless Fund’s grant program, believing it is crucial for promoting equity for underrepresented founders: “The gap in funders deploying capital, but also the gap in where funding has been deployed—just looking at those numbers, if we’re talking here about equality and ensuring that nobody is advantaged or disadvantaged, then the only way forward is through equity.”

Stokes notes the disparity that minority and female founders experience in venture: “I think realistically, in venture capital and the venture ecosystem, it is blatantly obvious that less than 2% of all venture funding goes to people who are outside of the standard white cis-gendered men. And so just thinking about that more and more, and thinking, ‘well, how do we create more diversity in opportunity for not only fund managers, but also founders?’ And the only way to agree to do that is by ensuring that there are opportunities like this grant.”

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