A fund created by Black women to invest in and bridge the venture capital funding gap for women of color-led businesses has been responding to allegations of discrimination in a lawsuit filed against the organization. The case has put a spotlight on diversity-driven initiatives and has concerning implications for the broader startup landscape.
Amidst the ever-evolving landscape of entrepreneurship, we should celebrate any effort or commitment to shifting the imbalance of capital flows to founders from diverse and underrepresented founders. However, since the beginning of this month, Fearless Fund – a fund created by Black women to invest in and bridge the venture capital funding gap for women of color-led businesses – has been responding to allegations of discrimination in a lawsuit filed against the organization. The case has put a spotlight on diversity-driven initiatives and has concerning implications for the broader startup landscape.
“Women of color are the most founded entrepreneurial demographic; they are just the least funded. Beyond racism and sexism, there is something called proximity. [92% of] the investors in the venture capital field are white-male. I’m a strong believer that if we can diversify the investors, we can diversify the investments,” shared Arian Simone, President and CEO at Fearless Fund, in an interview with CBS Mornings.
Arian Simone’s words pierce straight to the core of the implicit bias against Black and Brown founders. This bias has cast a long shadow over innovation and opportunity within the US. Diversifying the investor landscape – and investors’ decisions – is a call to action to break down the barriers that have held back an inherently entrepreneurial community from bringing new innovations to market. In response, a wave of ecosystem builders and funds, though still insufficient in number, are taking up this mission.
As an organization that is focused on supporting impact-driven companies with an emphasis on founders who have lived experience and have been historically and systematically excluded, we find this lawsuit – and the potential implications for fund managers, ecosystem builders, and founders who are diligently forming new pathways to mentor, train, guide, and invest in underrepresented founders – downright disturbing. Its risks set us back decades (if not more) and have serious consequences for innovation by reinforcing a system that continues to limit which ideas and solutions can access funding to succeed.
The claims of racial discrimination against Fearless Fund overlook (or worse, willfully ignore) the context and the very real challenges that prompted its creation, alongside many other funds and initiatives with similar missions. An abundance of data illustrates that existing power structures in our society – including within the venture capital landscape – favor certain groups of people. Between 2009 and 2017, only 0.0006% of VC funding went to businesses started by Black women, according to nonprofit advocacy group Digitalundivided.
The racial gap in early stage funding not only holds back the US innovation economy (as our friend Joey Womack at Goodie Nation explains), but also for our work at Village Capital, it holds back the opportunity for promising founders with the lived experience to address significant social, economic, and environmental challenges to get access to the critical resources they need to grow their businesses. The role of organizations directing support and capital to specific communities, including Black and Brown women, is critical in addressing these challenges.
Ecosystem builders like Fearless Fund are often the first line of support for Black and Brown women founders. We’ve witnessed the impactful work of locally-led and Black and Brown-led organizations that concentrate their resources on addressing critical disparities, including in the Resource initiative we’ve co-led with the Black Innovation Alliance. We’ve had the opportunity to learn from entrepreneur support organizations from coast to coast – whose leaders have built entire infrastructures for entrepreneurs who don’t have the same social capital or wealth that their white counterparts often do. They’re building inclusive ecosystems by empowering Black and other underestimated founders with spaces to work, mentors, training, funding, and communities of peers to cheer them through what can feel like an impossible system.
What’s more, these organizations’ aspirations and impact extend beyond the entrepreneurs they directly support. Black and Brown-led startups’ success means thousands of new jobs created, reinvestment in their local communities, and working to close the gap in generational wealth for non-white communities.
Our mission is firmly rooted in the pursuit of reinventing the system that backs the entrepreneurs of the future. Over the last ten years, we have seen progress (although frustratingly slow) in recognizing and building new pathways to right systemic injustice. Our pursuit to reinvent the system includes speaking out against threats to the progress that has been made. We continue to work tirelessly to foster a fairer and more inclusive framework for decision-making, especially within the early stage investment venture capital landscape.
As outlined above, the far-reaching implications of this case threaten the broader startup landscape – including equitable access to capital and economic opportunity for Black and Brown communities in our broader society and this New Majority of entrepreneurs. This moment is not a time to stay on the sidelines, so we invite you to take action with us. To lend your immediate support, Fearless Freedom has created a letter that awaits your signature here, along with an opportunity to contribute to this cause directly through donations here.
The path ahead is abundant with meaningful work, irrespective of your role as a fund manager, ecosystem builder, investor, or mentor. If you’re seeking to be part of the solution, explore our comprehensive report, delving into the pivotal role of accelerators in addressing the gender financing gap; discover actionable insights for reducing disparities and improving accuracy in evaluations by downloading the report and implementation guides; read Black Innovation Alliance’s Black Innovation CensUs about Black Innovator Support Organizations in the US; and consult 1863 Ventures report: What would it take to support BIPOC businesses to thrive well beyond the 8.5 year mark, so they can build generational wealth?
You can also make a significant impact by volunteering your time as a mentor and facilitator. In the realm of venture funding, personal connections often carry as much weight as expertise (if not more). For deeper insights into the potential of mentorship and how ecosystem builders frequently emerge as the primary support for women founders and founders of color, explore more on this topic here.
Empowered by knowledge and united in purpose, let us collectively catalyze change and reshape the startup landscape for the better.