Lynching DEI: Entrepreneurship is next target

A US court ruling this week dealt a major blow to America’s equity-based entrepreneurship and innovation programs.

AAER (American Alliance for Equal Rights), a conservative anti-affirmative action group that is allegedly funded by dark money, has successfully sued Fearless Fund, an Atlanta-based foundation led by black women. The five-year-old foundation provides grants of up to $20,000, business support services, and mentorship exclusively to black women-owned businesses. The court ruled that the foundation’s programs discriminated against white and Asian women. Fearless Fund is now prohibited from making grants exclusively to black women.

To date, they have over 44 Black women in their investment portfolio. Backers of the fund include Bank of America, Invest Atlanta, and, surprisingly, PayPal.

Black women founders in the U.S. generate an average of $24,000 in revenue each, one-sixth of all women founders. Approximately 0.39% of venture capital (VC) funding goes to Black women founders. The numbers are similar in Canada. A recent WEKH survey found that Black women founders in Canada experience similar anti-anti-Black and sexist barriers in the entrepreneurial support space.

Despite some state-level efforts to curb it, it’s clear that diversity, equity, and inclusion (DEI) advocates in the United States are emerging en masse like a swarm of noisy cicadas that have been lurking underground for years. U.S. universities, major tech companies, and other organizations are cutting funding to DEI departments and initiatives. Tech billionaires and politicians from Silicon Valley are increasingly calling for the elimination of DEI.

However, this is the first time that an entrepreneurship support organization has been targeted.

This will not be the last. In February 2024, AAER filed a new lawsuit on behalf of a white male entrepreneur against Hidden Star, a Texas-based nonprofit entrepreneurial support grant program for women and minorities, for discrimination. The program provides up to $2,750 to eligible minority entrepreneurs. AAER claims the program amounts to unlawful discrimination under Section 1981 of the Civil Rights Act of 1866, a Civil War-era anti-discrimination law.

Should diverse Canadian entrepreneurs be worried the same thing will happen here?

“While some may challenge equity-based programs that seek to address historical disadvantages in business financing and investment in Canada, these types of programs are likely to be protected by the provisions of section 15(1) and (2) of the Charter of Rights and Freedoms, as well as exceptions in provincial human rights laws,” said Kofi Acheampong, a lawyer and government relations adviser at Acheampong Law Firm who works on equity and business law issues.

However, while legal challenges to DEI-based entrepreneurial support may be unlikely in Canada, anti-DEI rhetoric can still influence policy and funding.

The reactions of Black and diverse women entrepreneurship advocacy groups in Canada suggest that a DEI backslide is already happening here, but unlike the buzzing of American cicadas, it’s a bit harder to detect.

“I’m not surprised, but I am concerned. Throughout history, the justice system has been used to assert control over black communities. As Canadians, we watch what’s happening in the U.S. with distant disappointment, but we must acknowledge that similar stories are already here. Our approaches to sabotaging progress are more subtle than theirs. If we don’t scrutinize closely, they can easily go unnoticed.”

In 2020, Pitch Better founder Amoye Henry had the opportunity to collaborate with Fearless Fund founder Ariane Simone at a pitch event called InvestHer. Henry believes that equity-based programs aren’t just about eradicating discrimination.

“With facts and empirical evidence, we can make the case for policies and laws that protect DEI programs as tools for economic growth,” Henry said.

Nancy Wilson, CEO of the Canadian Women’s Chamber of Commerce, expressed broader concerns: “What’s next? Women’s programs? Indigenous? LGBTQ+? Can we make it happen in Canada? Yes, 100%. It’s happening in my living room and in the pub across the street. It’s changing the conversations I have with men (and I’m talking about men who are friends and who speak freely with me). There is widespread backlash simmering, manifesting as anti-Trudeau rhetoric and quickly shifting to anti-DEI, racist and sexist comments.”

Vicki Saunders, founder of Coralus, which has a $19 million fund and 7,000-member community to support diverse women entrepreneurs in Canada, the U.S. and abroad, added: “The court’s decision to halt Fearless Fund’s grants to Black women entrepreneurs as causing ‘irreparable harm’ is simply the most absurd abuse of power and a racist act.”

According to a 2021 Abacus Data Canada survey, only 2% of venture capital funding in Canada went to Black-owned businesses, and 76% of survey respondents indicated their race made it harder for them to succeed as a founder. Additionally, a 2021 survey commissioned by the African Canadian Senate Group found that only 19% of respondents said they trusted their banks to do what’s best for their community. The same survey found that three-quarters of respondents would struggle to raise $10,000 if they needed business support.

What can we do about it?

“We need to create a new system that allows all humanity to thrive. Operating within the existing system, we will always be oppressed and discriminated against because the rules are written to keep us out,” Sanders said.

Henry emphasizes the importance of research to provide incontrovertible data on the challenges diverse entrepreneurs face and the economic imperatives of inclusion: In 2021, a reported 1.5 million people in Canada (4.3% of the population) are Black.

Acheampong added that we should not be naive.

“What is very clear, and what should be clear to all of us, is that all courts, including Canadian courts, are very much influenced by the social whims of their times – in this case, a general backlash against many Black-centred, DEI-driven improvement initiatives to redress historical injustices. Of course, the US court’s decision does not fully resolve this issue and I am confident the issue will make it to the Supreme Court. But I don’t have much faith in that process either, given the recent string of conservative decisions,” Acheampong said.

There are currently more than a dozen programs and funds aimed at Black entrepreneurs in Canada.