Credit: Adrian Sheby
Credit: Adrian Sheby
A year ago, a conservative group sued Atlanta-based venture capital firm Fearless Fund and its foundation over a $20,000 grant contest designed to help black women founders, alleging the contest is discriminatory. A federal appeals court panel has put the contest on hold as the lawsuit winds its way through the courts.
Fearless Fund is the nation’s first equity firm run by women of color that invests exclusively in companies owned by women of color. As of 2024, 66% of the portfolio companies they serve are owned by black women.
“There are grant programs that give people $100,000, $200,000 and $500,000. They gave [$20,000] and they get attacked,” Jones-Brown said fearless. “Everything is calculated. All these things are strategic. … They know exactly what they are doing to dismantle all of this.”
Attacks on DEI funding
Jones-Brown started her own business, Freeing Returns, a business that helps retailers reduce losses, at the right time, she says – in 2020, during the height of the COVID-19 pandemic. Before that, it struggled to find investors.
“Forward [COVID-19]I tried to raise funds to build Freeing Returns and I couldn’t raise a dime,” Jones-Brown said. “People were laughing me out of the room.”
She initially used pandemic relief funds to launch her company. Then, after the killing of George Floyd, a wave of support for black-owned businesses began to build.
She raised $750,000 in 2021, mostly from Black-led funds, she says.
“A lot of Black-led funds were created that year,” Jones-Brown said. “So I was speaking to black women, black men, and they listened; they saw me”.
But now, amid a wave of lawsuits targeting affirmative action and other diversity efforts, many diversity, equity and inclusion commitments made by companies and nonprofits are beginning to wane.
In 2023, the United States Supreme Court declared the use of race-conscious practices in college admissions unconstitutional. The decision was followed by a series of lawsuits against organizations that use such practices to provide exclusive funding to minority entrepreneurs.
“In 2023, everything changed and it became so difficult to raise money again,” Jones-Brown said. “And now DEI is under attack. It’s just a nightmare.”
Earlier this year, a federal judge in Texas struck down a small federal agency’s ability to extend venture capital and government contracts to minority groups. The statute governing the Minority Business Development Agency stated that the term “socially disadvantaged” naturally applied to individuals who are black or African American, Hispanic or Latino, American Indian or Alaska Native, Asian, Native American, or other Pacific island. The court stated that this violated the equal protection clause.
MBDA was established in 1969 under the Department of Commerce as the first and still the only federal agency committed to promoting the growth of minority businesses. A similar lawsuit has been filed against the Small Business Administration. A US district court The judge ruled last year that the administration violated the US Constitution with an assistance program known as 8A, which included a presumption rule for minorities.
“I think the biggest discussion is that this is all a hindrance,” said Donna Ennis, director of community engagement for the Georgia Business Center MBDA. “You can’t always tell specifically about an incident. … I think [this] Everything continues to create more difficulties for us and for our communities.”
Barriers to black business
According to Ennis, minority business organizations are essential in addressing the financing problems facing black communities and women entrepreneurs.
“These organizations, funds and programs are designed to address the disparity that exists between the brown and black communities and women,” Ennis said. “Because when you also do research on women’s companies, no matter what color, they are also underfunded.”
In 2023, Crunchbase data shows that funding amounts for companies with at least one female founder accounted for 23% of US venture capital, while companies with only female founders received 3%.
Credit: Adrian
Credit: Adrian
In a 2021 MBDA study, black small business owners were more likely to have used personal funds in response to their firms’ financial challenges—13% more likely to do so than white business owners. small and 9% more than Hispanics and Asians. entrepreneurs.
For Jones-Brown, the challenges of getting funding only dovetail with other difficulties black women business leaders face, such as sexism.
“Going into a room and trying to sell my business or sell our software to people, I feel some hesitation,” Jones-Brown said. “But if I have one of my men talk and talk, I feel like (customers) listen more and they recoil from their words. Even if they know I’m the CEO, the guy starts talking and everyone is looking at him. They forget everything about me.”
Ennis says another barrier to getting funding as a black entrepreneur is a lack of experience in knowing how to run a successful business, structuring companies and acquiring venture capital.
“A lot of our companies are first-generation, so we’re just learning how to do business,” Ennis said.
Looking ahead
According to Jennifer Palsey, senior project manager for the MBDA Georgia Business Center, it’s important for black entrepreneurs to both know that despite the struggles, there are still lenders committed to supporting them.
“There’s a lot of opportunity for financial institutions to do a better job of making sure our companies get the proper funding they need,” Palsey said. “But there are a lot of community-based lenders out there that are processing applications on the pure nature of why they were created.”
Jones-Brown notes, however, that in addition to getting funding, the key to sustaining their companies is having the business to keep the doors open.
“We definitely need funding, but I feel like the biggest thing that black businesses need is an opportunity for customers and for sales,” Jones-Brown said. “We’ve raised almost $5 million today, but if we’re not able to sell this product, we’re still going to die.”
According to the Bureau of Labor Statistics, 50% of black start-ups close within five years, compared to 45% of start-ups overall. According to statistics from JPMorgan Chase, only 3% of black women-owned companies mature and survive more than five years.
“We need to really focus on getting a lot of our money through sales, not just investments and grants and non-dilutive funding,” Jones-Brown said. “This is great to start with, but we need business. We are in business to make money.”
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