Fearless Fund and Hello Alice fight for inclusive financing

Two organizations dedicated to empowering marginalized entrepreneurs, Fearless Fund and Hello Alice, have been sued by activists over their funding programs. The Fearless Fund invests in underfunded entrepreneurs, including companies led by women of color, seeking early-stage venture capital. Hello Alice provides equal access to capital and offers grants, loans and credit products.

Arian Simone and Elizabeth Gore, co-founders of Fearless Fund and Hello Alice, shared their lawsuit experiences together for the first time at the Women's Venture Summit in San Diego on February 28, 2024. In an interview with me, they discussed the business challenges, personal stresses, and the importance of resilience and community support in overcoming adversity to move forward.

Lawsuits demand grants to bridge capital gaps for black entrepreneurs

These lawsuits were filed by the American Alliance for Equal Rights (AAER) – a group led by activist Edward Blum – and America First Legal (AFL, an activist group led by Stephen Miller, who served as a senior adviser during Trump's presidency). . The lawsuits sought to dismantle initiatives aimed at leveling the playing field for underrepresented entrepreneurs.

The Fearless Fund, co-founded by Simone, is a venture capital fund created to invest in and support women entrepreneurs of color. “Dark-skinned women, black and brown, only get 0.39%,” Simone said. Recognizing the stark racial disparity in venture capital funding, Fearless Fund offers grants, loans, equity investments and educational programs to prepare companies for venture capital through its nonprofit organization.

Co-founded by Gore, Hello Alice is focused on providing equal access to capital for all small and medium-sized businesses, with a particular focus on those often overlooked by traditional funding sources. Their platform offers a range of resources including grants, loans and credit products tailored to the needs of women, people of color, veterans and people with disabilities.

The lawsuits against both organizations stemmed from allegations of discrimination, alleging that one of their programs that prioritized Black entrepreneurs was discriminatory. Hello Alice also provides grants for white male veterans. Providing tailored programs tailored to the needs of specific groups is extremely effective, it says Wells Fargo 2024 Impact of Women-Owned Business*.

Financially, the lawsuits strained resources and forced both organizations to contend with mounting legal fees and frozen assets. Hello Alice was forced to lay off some employees and postpone an important Series C funding round.

The Fearless Fund has suffered setbacks in its fundraising efforts. Litigation brings bumps and bruises. “We had an amount of over $150 million at that point. That was about 20 million here, 60 million there,” Simone said. “Fundraising is a big deal because our fundraising generates an administration fee that we use for our operations. So we also had to reduce the size of our teams.”

At an operational level, the lawsuits have diverted valuable time and energy from the core mission of supporting entrepreneurs. The founders and their teams had to deal with the complexities of legal procedures, which caused enormous stress and emotional distress.

Critics argue that all of these programs unfairly prioritize businesses based on race and potentially violate constitutional equality rights. “All racial discrimination is wrong and must end,” AFL vice-president Gene Hamilton emailed Fast company.

The reality is that not everyone has the same opportunities. Because of systemic barriers, black women earn only 70 cents for every dollar that white men earn, and white men have greater access to debt financing.

Resilience and persistence in the face of legal challenges

Gore and Simone demonstrated resilience and perseverance when faced with lawsuits that sought to undermine their efforts to support Black entrepreneurs. Their journeys through these legal battles provide valuable lessons in dealing with adversity and protecting one's business.

The two took proactive measures to protect their organizations:

• Legal advisor: They assembled teams of experienced lawyers to defend their companies.
• War rooms: They set up “war rooms” with trusted advisors, board members and legal experts to strategize and coordinate their response.
• External advice: They sought advice from other entrepreneurs who had experienced legal challenges and gained valuable insight and perspective.
• Cybersecurity: Recognizing the potential for online attacks, Hello Alice invested in cybersecurity measures to protect the company's data and reputation.
• Directors and Officers Insurance: Gore used its D&O insurance to cover legal costs, highlighting the importance of this coverage for business leaders. However, she had to fight with insurance to cover the costs.

The enormous burden of the lawsuits took its toll on both founders. “Cocktails, advice and prayers,” Gore joked. On a more serious note, she emphasized the importance of community support by leaning on her family, friends and mentors and speaking to people who faced similar challenges. On the other hand, Simone found comfort in surrendering to the situation and taking some time off to focus on her well-being.

As of September 2024, the Fearless Fund case has been resolved, allowing the organization to continue its operations without restrictions. Hello Alice won the case in Ohio court, allowing the company to continue operating, but potential legal challenges remain.

Fighting for the American dream of all Americans

Although six in ten Americans support DEI, the attacks continue. Founders First Community Development Corporation, a nonprofit founded by Kim Folsom and led by Shaylon Scott, was sued for providing a $50,000 grant and agreeing to abandon its minority-focused focus.

The federal government is also facing lawsuits:

• The U.S. Small Business Administration's 8(a) program provides federal contracting opportunities to disadvantaged small businesses
• The SBA Restaurant Revitalization Fund (RRF) is designed to support restaurants impacted by the COVID-19 pandemic
• The Minority Business Development Agency supports businesses owned by people of color

“Emerging markets is a term I’m hearing right now,” Gore explained. Because Black women entrepreneurs are a rapidly growing market, some companies like ADP have moved these programs to their profit and loss statements. Other companies like Google Grow, JPMorgan Chase and Wells Fargo are using Hello Alice's AI to help them diversify their customer base into emerging markets. They understand that these small business owners are growing and gaining access to mainstream capital.

Stacey Abrams, founder of American Pride Rises and former member of the Georgia House of Representatives, and Margaret Huang, president and CEO of the Southern Poverty Law Center, wrote an op-ed: “Opponents of DEI want to stifle America’s progress.” We can’t let that happen. The American Dream is worth defending.”

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