The Big Story: Legal setback threatens resources for underrepresented founders
This week, the 11th Circuit Court of Appeals blocked the Fearless Fund—a venture capital firm with a mission of supporting women founders of color—from awarding grants open exclusively to Black women entrepreneurs. Black women receive less than 1 percent of venture capital dollars, a dismally low figure that impedes their ability to participate in the startup ecosystem. The ruling presents a significant blow to efforts to ensure diverse founders have equitable access to capital and is unfortunately a part of a larger trend of cases curtailing resources designed for underrepresented individuals.
The court’s decision comes on the heels of multiple similar efforts by activists to block programs geared at helping underserved business owners, including at the Minority Business Development Agency and the Small Business Administration’s 8(a) program. Underrepresented founders, including founders of color and women founders, face significant barriers in the startup ecosystem. From restricted access to capital across all funding streams to challenges accessing affordable childcare so that entrepreneurship is a career pathway, these founders must consistently do more with significantly less. The court’s decision in the Fearless Fund case is yet another development that only serves to undermine the goal of an equitable startup ecosystem.
Programs dedicated to helping diverse founders thrive do not detract from efforts to support startup founders broadly, instead, they inch the ecosystem towards equity, strengthening it and benefiting us all. Policymakers must work to ensure that underrepresented founders are supported by protecting programs that enable them to access the resources they need.
Policy Roundup:
Internet providers look to block implementation of net neutrality rules. Last Friday, several telecom industry associations filed legal challenges against the Biden administration's move to reinstate net neutrality rules. The rules are set to be effective on July 22 following an April Federal Communications Commission vote and bar Internet service providers from blocking or slowing down traffic to certain websites and prohibits paid prioritization of lawful content. For startups, the rules will ensure that the Internet remains a level playing field.
Court overturns securities rule set to add burdens to startup investors. This week, a federal circuit court vacated the Securities and Exchange Commission’s Private Fund Adviser Rule that would have reshaped the industry through new regulatory requirements and compliance costs. The now-overturned rules would have disproportionately impacted small and emerging managers that invest in startups. Those fund managers often have limited resources, meaning the rule stood to limit the diversity of the investor pool, a crucial aspect for fostering equity in the startup ecosystem.
New York State Senate passes algorithm, age verification bill. On Thursday, the New York State Senate passed a bill to regulate the use of algorithms to present content on Internet services considered social media. The bill passed on the last scheduled session day in the legislature, and did not pass the State Assembly before it adjourned. The effort was supported by Governor Kathy Hochul (D) and Attorney General Letitia James (D), and would have required age verification, but left the specifics of those requirements to future rulemaking. The bill is part of a national trend that has seen several states considering measures requiring age verification—explicitly or in practice—which are unworkable for startups and undermine privacy for all Internet users.
Biden administration announces executive order to address border crisis. On Tuesday, President Joe Biden announced an executive order to limit the ability of migrants to seek asylum if they’ve crossed the border unlawfully. The order is a shift in immigration policy for the administration and comes after Congress failed to pass a bipartisan immigration bill this year. Congress has also failed to implement efforts to strengthen the U.S. STEM talent pool, including by expanding high-skilled immigration and providing a permanent solution for Dreamers that are already here contributing to the innovation ecosystem.
Bicameral hearing underscores value of AI innovation. On Tuesday, the Joint Economic Committee held a hearing exploring the potential for artificial intelligence to boost economic growth and improve governance. Witnesses and lawmakers alike highlighted the value of AI innovation in sectors across the economy and underlined the importance of getting any potential regulatory actions right so that startups and innovation can flourish.
