https://news.vcu.edu/image/f9fff63f-37ce-4962-91f8-4ebddf7a59ab

By Tiffany Murray-Robertson
L. Douglas Wilder School of Government and Public Affairs

In June, the U.S. Court of Appeals for the 11th Circuit temporarily blocked the Fearless Fund, an Atlanta-based venture capital firm, from awarding grants reserved for Black women entrepreneurs. The decision, reversing a lower court ruling, marks a critical moment in the debate over race-conscious programs in the private sector.

The panel’s 2-1 ruling stated that issuing the $20,000 grants would likely violate federal statutes prohibiting racial discrimination in contracts. Closely watched for its implications on other race-conscious initiatives, the case has sparked widespread discussion about the future of diversity, equity and inclusion efforts.

Many companies have begun to quietly alter their DEI programs, anticipating further legal challenges. According to digitalundivided, the combined share of venture capital funding for businesses owned by Black and Latina women has dipped to less than 1% after briefly surpassing that threshold in 2021. As the legal battle continues, organizations and policymakers are grappling with how to support minority entrepreneurship amid new constraints.

Elsie Harper-Anderson, Ph.D., an expert in minority entrepreneurship at Virginia Commonwealth University’s L. Douglas Wilder School of Government and Public Affairs, offers insight into potential impacts of the Fearless Fund ruling, broader economic and social outcomes, and practical recommendations for advocates and policymakers.

From a policy perspective, what are the impacts of this ruling on grant programs for minority entrepreneurs?

The inequality in entrepreneurship for minority and underrepresented groups is well-established. Many programs focused on minority entrepreneurs were created during the pandemic, often funded by relief money. If this ruling is fully enforced, there will be a significant gap in funding and services available to minority businesses.

In the short term, programs will scramble to reinvent themselves to focus on whatever cause is being funded. Many incubators and accelerators are highly subsidized, and if the funding stops, they will chase new sources of money, or close down.

Minority businesses have been growing, especially among women, and this ruling will likely slow that growth and reduce the number of new businesses started. Long-term, we will see a loss of progress made in minority entrepreneurship, and this ruling may be the beginning of broader attacks on race-based and other targeted funding.

What policy measures could mitigate the effects on Black women business owners?

Firstly, voting is crucial. We need to elect leaders who understand structural racism and support diversity, equity and inclusion. Beyond voting, there needs to be better enforcement of anti-discrimination policies, especially in banking and corporate contracting.

For example, many cities have policies requiring a certain percentage of contractors from underprivileged backgrounds, but these are often not enforced. Enforcing these policies could help minority entrepreneurs gain better access to funding. Additionally, extending support programs such as subsidized child care could benefit minority women tremendously.

How should policymakers redesign existing programs to withstand similar judicial challenges?

Policymakers should focus on how to reach their target populations without violating the law. One approach could be place-based initiatives, focusing on areas where underrepresented minority entrepreneurs live and where their businesses are located. They could also fund institutions that mainly serve minorities but are not exclusive to them, like the Urban League.

What industries are minority women entrepreneurs most active in?

Minority women are often concentrated in social service-oriented industries like home health care, care facilities and nursing homes. Restaurants also tend to have a high concentration of minority owners. These industries are crucial for providing services and creating jobs within minority communities.

What are the broader economic and social outcomes of this ruling?

I foresee social unrest. For a society to be stable, people need to be able to make a living and feel that they can participate in and benefit from the economy. Taking opportunities away from a large segment of the population can lead to social instability. Economically, as the number of minority women-owned businesses decreases, there will be a negative impact on the economy, particularly on the GDP. The most immediate impact, however, will be on social stability.

How can advocates and policymakers work together to support black women entrepreneurs in light of this ruling?

Organizations should continue to provide support and services that meet the specific needs of underrepresented populations. Creating spaces that help strengthen social networks, which are essential for building businesses, can fill part of the void left by lost funding. Volunteers and intentional efforts can help maintain these support systems.

A version of this article was previously published on the Wilder School’s website.

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