Fearless Fund, a venture capitalist firm that invests in female entrepreneurs of color, has settled a discrimination lawsuit over a grant program specifically for Black women.
The lawsuit from the American Alliance for Equal Rights (AAER) claimed that the fund's Fearless Strivers Grant Contest, which was open "only to Black females," was discriminatory.
The grant program was at its end when the court case began in 2023, according to an online post by Fearless Fund founder Arian Simone, and the fund said it was motivated to avoid a court ruling so as not to lead to a Supreme Court decision that could end minority-based funding nationwide.
The Fearless Fund said it will continue to focus on "helping under-resourced entrepreneurs who have been ill served by traditional capital markets for far too long." In a statement on the settlement, it announced a new $200 million debt fund with the goal of lending to more than 3,000 under-resourced founders.
Representatives of Fearless Fund partners Simone and Ayana Parson told reporters in August 2023 that the fund was established to address the wide gap in venture capital funding for businesses led by women of color "who confront barrier after barrier to obtain support and investments for their businesses."
The Fearless Strivers Grant Contest was created specifically for Black women because Black women-owned businesses receive less than 1% of venture capital funding, according to the organization.
AAER called the grant program "divisive and illegal" and claimed that it "encouraged the Fearless Fund to open its grant contest to Hispanic, Asian, Native American and white women but Fearless has decided instead to end it entirely."
MORE: Mixed results in college admissions diversity post-SCOTUS affirmative action decisionWhite women-founded companies take home 64% of "Diversity Investments" by deal count, meanwhile women of color-owned businesses only take home 10%, according to an analysis of Crunchbase data by venture capital firm BBG Ventures.
Fearless Fund partners have long defended their work, citing the poor representation of women of color among venture capital recipients and evidence of racial bias in the investment decisions of asset allocators.
"From the moment the lawsuit was filed, I pledged to stand firm in helping and empowering women of color entrepreneurs in need. I stand by that pledge today and in fact my commitment remains stronger than ever," read a statement from the organization's co-founder Arian Simone. "Our overarching mission remains focused on helping and empowering entrepreneurs who have been historically overlooked in the venture capital marketplace."
AAER's founder Edward Blum also leads the Students for Fair Admissions, the group that initiated the anti-affirmative action case that reached the Supreme Court and won the case, setting new limits on the use of race-based policies in college admissions.
The conservative group claimed that affirmative action, which was implemented to address racial inequities in access to higher education, violated the equal protection clause of the 14th Amendment.
ABC News' Abby Cruz and Sabina Ghebremedhin contributed to this report.