Conservative Legal Challenges: Potential Obstacles to Progress for Black Entrepreneurs and Business Leaders

Having been a news anchor in New York, Cathleen Trigg-Jones personally witnessed the prejudice that women of color encounter in the male-dominated entertainment industry. This prompted her to make a significant change in 2019, when she transitioned her career and established iWoman TV, a media company driven by women and dedicated to showcasing shows with female protagonists.

Trigg-Jones encountered a hurdle in the form of insufficient funds to sustain her business. Despite applying for funding from various sources like grant groups, venture capital funds, and investors, she faced numerous rejections. These rejections were based on the reasons that her company's revenue wasn't substantial enough and it was still in its early stages.

Fortunately, the Fearless Fund, a venture capitalist firm owned by Black women that focuses on investing in women of color, decided to take a risk on Trigg-Jones and her company. In 2022, they granted iWoman TV a significant sum of $20,000, as Trigg-Jones revealed.

The grant enabled her to expand operations and enhance funding for female content creators to initiate or complete film projects.

"Even the smallest contribution is valuable when you're a Black woman attempting to establish a business from the ground up in a world that isn't conducive to your success," Trigg-Jones expressed. "The obstacles are extensive."

The Fearless Funds grant program for women-owned businesses of color is currently facing a legal challenge from the American Alliance for Equal Rights (AAER), a conservative group. The AAER claims that the grants provided by venture capitalist firms amount to racial discrimination under the Civil Rights Act of 1866. Recently, a federal appeals court granted the Alliance's motion to temporarily block the Fearless Fund from awarding grants exclusively to Black women entrepreneurs.

CNN has reached out to the Fearless Fund for comment on the ongoing lawsuit.

Attorney Ben Crump, along with co-partners Arian Simone and Ayana Parsons from the Fearless Fund, lead counsel Mylan Denerstein, and co-counsel Alphonso David, pose for a photo at the conclusion of a press conference in New York City on August 10th.

Eduardo Munoz/Reuters

Federal appeals court approves injunction to block grant for Black women entrepreneurs

Conservative legal strategist Edward Blum, who successfully challenged affirmative action in college admissions before the Supreme Court, leads The Alliance. Last August, Blum filed lawsuits against two international law firms for their diversity fellowships. However, one of the lawsuits was dropped after the firm chose to make their fellowship program available to all associates. Blum, in an email to CNN, stated that he sees his legal campaign against affirmative action and grant programs, such as those provided by the Fearless Fund, as a matter of fairness.

Blum stated in the email that our nation's civil rights laws prohibit racial distinctions, regardless of the overrepresentation or under-representation of certain racial groups in different fields. This has led civil rights activists and Black business leaders to anticipate the conservative group's upcoming lawsuit. There is a concern whether Blum will continue to focus on programs that solely benefit individuals of color.

The lawsuits have the potential to reverse years of progress in promoting equality for Black and brown individuals in the workplace and small business sector, according to Black business leaders interviewed by CNN. Trigg-Jones expressed concern, stating that it would undoubtedly lead to unforeseen consequences, and emphasized the need for collective worry.

Trigg-Jones contended that initiatives like the Fearless Fund would be rendered redundant if Black business owners were afforded equitable funding opportunities. As per a 2019 study by American Express, Black women emerge as the most rapidly expanding segment of entrepreneurs in the nation.

However, the combination of being both Black and a woman creates additional barriers for securing financial support for these businesses. In fact, a 2020 analysis conducted by Goldman Sachs revealed that Black business owners face a loan rejection rate three times higher than their White counterparts.

And in 2020, female-led US businesses accounted for just 2% of venture capital funding, as reported by PitchBook, an organization that analyzes data and conducts research on global capital markets.

The US Supreme Court Building on October 03, 2022 in Washington, DC.

Anna Moneymaker/Getty Images

Last month, Arian Simone, co-founder and CEO of Fearless Fund, stated in an interview with CNN that women of color face the greatest financial challenges despite being highly qualified.

Acknowledging the existence of disparities, Blum stated to CNN that venture capital funding gaps between racial groups cannot be used as a legal or moral reason to exclude certain individuals based on their race or ethnicity from public programs. According to him, AAER believes in the legality of offering benefits to under-resourced businesses and individuals, but emphasizes that such benefits should be accessible to individuals of all races and ethnicities.

However, certain Black entrepreneurs argue that they require specialized funding support in order to level the playing field with their White counterparts. Rashae Barnes, the founder of Evals Equity, affirmed that she established an investment fund for women of color-owned businesses in response to the obstacles she encountered during her own entrepreneurial journey.

Barnes, the owner of a public relations firm and a spice company, expressed her difficulty in obtaining capital due to the exorbitant interest rates associated with business loans.

Thanks to Evals Equity, Barnes has successfully raised over $100,000 and has played a significant role in funding more than 40 women of color entrepreneurs. These entrepreneurs are involved in a diverse range of businesses, including hair salons, tech companies, and tutoring programs.

In addition, Barnes established National Black Funding Day, observed on September 30th, as a means to generate awareness about the financial challenges encountered by Black entrepreneurs.

"Our aim is simply to level the playing field," Barnes expressed. "Had we been included from the start in the allocation of funds... we wouldn't need to develop initiatives or funds to support individuals who share our background."

A pin in the progress

Moving forward, Kaycea Campbell, chair of the economics department at Pierce College Los Angeles, anticipates a rise in legal challenges to diversity initiatives.

The political and legal landscape of the nation is undergoing a shift, with an increasing number of Republican lawmakers criticizing diversity, equity, and inclusion programs. Additionally, the conservative majority on the Supreme Court is dismantling affirmative action. According to Campbell, these developments have significant implications for diversity, equity, and inclusion initiatives. Companies are now apprehensive about potential lawsuits or investing in programs that may be overturned in the future. Consequently, this has impeded progress in this area.

The Federal Reserve's latest Survey of Consumer Finances revealed that in 2022, the average net worth of Black households was $44,900, indicating an increase of over 61% compared to the previous survey conducted by the Federal Reserve in 2019.

Despite these improvements, the net worth of Black households still pales in comparison to that of White households. According to the Feds survey, the median wealth of White households was $285,000 last year, a 31% increase from 2019. Lenwood Long, the president and CEO of the African American Alliance of Community Development Financial Institution CEOs, a national coalition comprising venture capital funds, credit unions, and loan funds, highlighted the ongoing struggle for economic equality and justice faced by Black Americans due to centuries of discrimination and systemic racism.

Black entrepreneurs frequently do not possess the inherited wealth necessary to initiate businesses without relying on loans. Additionally, they often lack the collateral required to secure loans from prominent financial institutions. However, organizations such as the Fearless Fund aid in granting Black individuals the opportunity to acquire capital, thus facilitating the construction of wealth.

Long said the conservative challenges feel like a setback for Black Americans.

"Its sad and disgraceful and shameful," he said.

They argue that it is impossible to deliberately allocate funds to groups that have historically faced barriers in accessing capital and education, which are two key factors in addressing the racial wealth disparity. CNN reporters Jaide Timm-Garcia, Isabel Rosales, and Tami Luhby contributed to this report.