Venture capital firm Fearless Fund has reached a settlement agreement with the American Alliance for Equal Rights (AAER), resulting in the closure of its Strivers Grant program. The program, which aimed to support small businesses owned by Black women with a $20,000 grant, came under fire when AAER accused Fearless Fund of discriminating against non-Black founders and violating the Civil Rights Act of 1866.

In June of this year, a court ruled that Fearless Fund's contract for the Strivers Grant likely violated the Civil Rights Act and imposed a preliminary injunction on the program. The AAER, led by conservative activist Edward Blum, contended that the program's exclusivity based on race was divisive and illegal.

Blum stated, "The American Alliance for Equal Rights encouraged the Fearless Fund to open its grant contest to Hispanic, Asian, Native American, and white women, but [the firm] has decided instead to end it entirely. Opening grant programs to all applicants, regardless of race, is enshrined in our nation's civil rights law and supported by significant majorities of all Americans."

Fearless Fund's CEO, Arian Simone, expressed satisfaction with the settlement, stating, "The Fearless Fund and the Fearless Foundation are pleased to end the case and continue to focus on helping under-resourced entrepreneurs who have been ill served by traditional capital markets for far too long." Simone reaffirmed her commitment to supporting women of color entrepreneurs, highlighting the firm's dedication to empowering this marginalized group.

Fearless Fund plans to announce a $200 million debt fund to provide financial assistance to those in need. This initiative is expected to aid entrepreneurs who have been underserved by traditional capital markets.

The lawsuit brought against Fearless Fund by AAER has garnered attention within the venture capital industry, with some investors and founders expressing surprise at the use of a civil rights act designed to support the formerly enslaved being used against the very population it was meant to uplift.

Unfortunately, despite efforts to address funding disparities, the landscape remains challenging for Black founders. Figures from Crunchbase reveal that Black founders raise less than 1% of total invested venture funding each year, and in the first half of this year, they only secured 0.32% of all venture investments.

The discontinuation of the Strivers Grant program marks another setback for the diversity, equity, and inclusion movement this year. Several DEI tech foundations have closed down, and companies are redirecting initiatives previously benefiting minority groups towards alternative areas.

Edward Blum and other conservative activists have achieved success in their efforts to challenge race-based programs. Blum was instrumental in ending the use of race in college admissions, and currently, AAER is suing other similar programs, such as the Smithsonian Institute's Latino Museum Studies Program, over its focus on hiring Latino interns.

Furthermore, Fearless Fund has reportedly lost the majority of its partnerships following the lawsuit. While the firm previously offered other grants for businesses owned by women of color, information about those grants is no longer available on its website.

As Fearless Fund settles the lawsuit and terminates the Strivers Grant program, questions surrounding equitable access to capital for underrepresented entrepreneurs persist. The outcome of this case signifies both the challenges faced by Black founders in securing funding and the ongoing debate regarding race-based programs in achieving equality.