Good morning, Broadsheet readers! The first pill to fight postpartum depression was approved by the FDA, pregnant workers will soon see expanded accommodations, and a lawsuit against a small VC fund has big implications. Have a thoughtful Tuesday.
- Delay and distract. Last week, a conservative activist group behind the Supreme Court case that limited affirmative action in higher education sued early-stage venture capital fund Fearless Fund for racial discrimination. Atlanta-based Fearless Fund, led by general partners Arian Simone and Ayana Parsons, backs women of color entrepreneurs.
When the Supreme Court issued its affirmative action decision in June, diversity and inclusion experts warned that the corporate world could soon see similar challenges come its way. "Everyone's been waiting for the other shoe to drop," says Susan Lyne, managing partner at BBG Ventures, another early-stage fund that invests in diverse founders. Now, it has.
Fearless Fund is somewhat of an underdog target—perhaps an intentional strategy. Its largest checks are around $2.5 million. The grant program specifically targeted by this lawsuit awards $20,000 to Black women entrepreneurs—a small effort to mitigate the reality that Black women founders receive less than 1% of U.S. VC funding. In its suit, the American Alliance for Equal Rights, founded by anti-affirmative action activist Edward Blum, alleges that Fearless violates the Civil Rights Act prohibiting racial bias in private contracts by only awarding grants to Black women. The fund has so far declined to comment on the suit.
The outcome of this case could have implications far beyond one small Atlanta-based fund, from larger VC firms that explicitly invest in diverse founders to diversity and inclusion efforts among the behemoths of corporate America.
"I anticipated this and knew this would happen," says Brittany Hale, an attorney currently serving as the interim CEO of digitalundivided, the organization that supports and tracks data about Black and Latinx women founders and entrepreneurs. "Attempts like this lawsuit only work to distract and delay from the important progress that needs to be made."
While Fearless is relatively small, larger organizations are likely to come to the fund's aid. Hale expects "strange bedfellows" to file amicus briefs in this case given the potential implications of the outcome. Mastercard has partnered with the fund on its grant program, for example, and other investors in the fund include Bank of America and Costco.
Lyne of BBG Ventures isn't too worried about the potential fallout at her own fund. BBG Ventures' investment thesis is to back teams with at least one diverse founder. "I could defend very strongly that this is based on our best assessment of the investment opportunity," she says. "But I do think there will be suits brought against funds that are focused on diverse founders or female founders."
Hale understands why founders who often receive this kind of funding might be nervous. But she reminds them: "They are innovators, they are powerful, they are successful. And they have succeeded in climates worse than this and will continue to succeed and prevail in climates better than this."
Emma Hinchliffe
emma.hinchliffe@fortune.com
@_emmahinchliffe
The Broadsheet is Fortune's newsletter for and about the world's most powerful women. Today's edition was curated by Joseph Abrams. Subscribe here.
