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Hi, fintech fam! 💜

This week started off on a high note after watching the Grammys on Sunday night. In case you missed it, female artists won in every major category, and there were a few highlights.

After more than 15 years in the music industry, Miley Cyrus and Victoria Monét finally received their first Grammys, which was great to see.

I love seeing women succeed, whether it's in fintech or pop culture. When one of us wins, we all win. It really feels like we're celebrating these victories together.

That leads us to our story for today's column. To see more women succeed in fintech, we need to support each other from all sides of the ecosystem.

Today, we'll discuss venture capital- the lifeblood of fintech and the startup ecosystem - and the current disconnect impacting our industry’s success.

Let’s get into it.

WHY UPGRADE?

There’s a big difference in how the mainstream media covers fintech and how I do. Every week, I will provide you with the latest fintech news (minus the BS), profiles of inspiring women in fintech, and insightful analysis to help you stay ahead of the competition.

For our premium members, I send out updates 3x a week through our new column, "On Performance.” These columns will provide tactical advice to improve your entrepreneur and business leader performance.

Plus, premium members support female-led journalism and keep this work going. Because of your support, Fintech Is Femme is more than just a newsletter; it's a media empire and community for women to connect, learn, and support one another.

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INCLUSION

Lawsuit Against Fearless Fund, Venture Capital Diversity and Fintech Innovation

The disparity between the rising number of Black female entrepreneurs, who are establishing businesses at an impressive rate, and the minimal portion of venture capital (VC) investment they receive is a major problem for our fintech ecosystem. 

This week, I'd like to draw attention to an insightful piece penned by Janell Ross, TIME's senior correspondent covering race and identities.

Ross delves into a lawsuit targeting Fearless Fund, a VC firm led by women of color that focuses on investing in tech and consumer-goods businesses owned by women of color.

On August 2nd, the American Alliance for Equal Rights, led by Edward Blum (yeah, the guy behind those Supreme Court affirmative-action cases), filed a federal civil rights suit against Fearless Fund, alleging racial discrimination through its Fearless Strivers Grant program, which supports early-stage Black-woman-owned businesses with a $10,000 to $20,000 grant. 

While the amount of money at issue is relatively small, the case has potentially massive implications, especially if it goes to the Supreme Court. 

The ripple effects are already visible in our fintech world. 

Co-founders Elizabeth Gore, Carolyn Rodz, and Kelsey Ruger of Hello Alice, a fintech startup that serves small business owners, also became the subject of a lawsuit in August by America First Legal (AFL), a right-of-center nonprofit organization formed by former senior Trump White House adviser Stephen Miller. 

The suit claims that the company's grant program (in conjunction with insurance company Progressive), which offers $25,000 grants to Black small-business owners to use toward purchasing a commercial vehicle, is unconstitutional. 

Since its founding in 2015, Hello Alice has distributed over $38 million in grants to small business owners (more on this story in another newsletter). 

Why It Matters

1. These lawsuits confront female-founded businesses in VC and fintech, diverting resources into legal battles and potentially stifling innovation. (Fortunately, women of color exhibit remarkable resilience, enabling these businesses to thrive despite legal challenges).

2. Women who build businesses to support other marginalized communities are often criticized, even though diverse entrepreneurs create businesses with double-bottom lines — more profitable and sustainable businesses.

But at the heart of this issue is the primary source of business funding in the U.S. – venture capital, which has historically favored white male founders. 

Despite historical efforts to portray VC as an equalizer to invest in the startups that will define our society, statistics reveal a stark lack of investment in companies led by women, especially Black women. 

The lawsuit against Fearless Fund represents more than a legal dispute; it symbolizes resistance to efforts to foster inclusivity and economic empowerment. 

Impact on Fintech Innovation

The fintech sector, which relies heavily on VC funding, is particularly vulnerable to the ramifications of such lawsuits. 

Startups, already grappling with limited resources and high risks, depend on diverse funding sources to thrive. 

Legal challenges like this could hinder innovation and restrict access to capital, stifling the industry's growth and potential for positive change.

To tackle the issue, we must first comprehend the scope of the problem.

Knowing what's ahead of us makes it much easier to overcome obstacles.

One of the more significant issues is the VC landscape's homogeneity. 

The venture capital industry is dominated by white men who tend to make funding decisions based on their personal networks, which can result in a lack of diversity in the companies that receive investment. 

Ross outlined a few key data points in her reporting: 

• Only 2.4% of the VC industry's funding over the past 30 years went to companies founded by women of any race or ethnicity. 

• In 2020, less than 0.35% of available funds were invested in companies founded by Black women. 

• Investment in companies owned by Black men and women combined decreased from 1.5% of available VC funds in 2021 to 1.1% in 2022.

These statistics are alarming. It raises the question of how to shift our focus away from the zero-sum mentality that one group's success comes at the expense of another (clearly, that is not what’s happening today).

Ross also shared several surveys that have found substantial support for diversity, equity, and inclusion (DEI) initiatives in the workplace, with some differences along race, gender, and ideological lines. 

"In August, the BEA Foundation commissioned a Harris Poll, in which 78% of respondents told researchers they support businesses taking active steps to ensure companies reflect the diversity of the American population. This included 75% white, 78% Hispanic, and 88% Black respondents," she wrote. 

"The poll also surfaced deep delusion about how diverse the nation's corporate leadership ranks are. Specifically, 37% of respondents estimated that 20% or more of Fortune 500 CEOs are Black. In reality, that share is closer to 2%. Exactly two Black women are among them."

Ultimately, these cases show us that this is about wealth creation.

This is so much bigger than us. We need thousands of Fearless Funds and Hello Alices, but most importantly, Black women founders need access to capital.

The ultimate bipartisan issue is making money, lifting people out of poverty, and the power of entrepreneurship to do all of that.

Instead, we are forced to focus our attention and time on lawsuits that do nothing to advance us as a society.

One of the most infuriating quotes from Ross' article is from Blum in a statement: 

"A useful way of determining the fairness, and, ultimately, the legality, of a policy is to apply the 'shoe on the other foot' test."

This reasoning is simplistic and elementary. Using the "shoe on the other foot" test is inappropriate when we are not discussing a situation that allows for an equitable comparison. 

Plus, it is essential to acknowledge the context and history of systemic oppression that is deeply rooted in every sector of our society, especially venture capital and financial services. 

To add fuel to the fire, many diversity initiatives in VC have done more to support white women than Black Americans. 

What We Can Do

The outcome of this lawsuit could negatively impact venture capital firms and fintech entrepreneurs, leading them to refrain from catering to niche markets or underrepresented groups.

This may result in reduced investment opportunities for fintech startups founded by women and people of color that cater to marginalized communities.

It's critical for us not to fall into this trap. 

Remember, when we build for the margins, we get the center for free.

Luckily, the fintech industry and the humans that run it have increasingly recognized the importance of diversity in driving innovation and capturing untapped markets. 

To ensure a thriving and innovative fintech sector, investors and startups must navigate challenges like these discrimination lawsuits with a keen awareness of the implications for the industry's future growth, profitability, and capacity for positive change.

We must unite as a community, voice our opinions, support each other intentionally, observe what's happening, and deliberately innovate against the status quo.

Read Janell Ross' full deep dive into this issue here. 

_{WTF ELSE?}

• Mastercard will invest up to $200M in MTN's fintech business

• Stripe's popping off in the secondary markets right now

• Enterprise fintech sector to become a $20B industry by 2030

• Bloomberg Surveillance: Sallie Krawcheck on Financial Guidance to Women

• 'Substitution' of gold for Bitcoin is now underway, says Cathie Wood

• Singapore AI fintech investment surges in H2 despite global funding winter

• 6 venture investors spotlight the fintechs that could soar in 2024 amid another tough year for startups

_{I WANT IT, I GOT IT}

• 📚 Today’s Read: A friend introduced me to journalist Josie Cox's upcoming book Women, Money, Power: The Rise and Fall of Economic Equality. It's time to pre-order!

• 👀 Today’s Watch: Jay Z’s Grammys Speech is a must-watch for everyone, especially my fellow entrepreneurs. It’s the motivational speech we can keep for the rest of 2024. In HOV’s words: “Keep showing up. Keep showing up until they give you those accolades you deserve. You feel me?”

• 🍣 Today’s Eats: If you ever find yourself looking to eat at a fabulous French bistro in Brooklyn, I highly recommend Mominette. I had a celebratory dinner with my NYC family over the weekend after Fintech Is Femme closed its first big brand partnership deal of the year! Never forget to celebrate your wins. Big or small.

_FINTUNES

🎵 Miley Cyrus - Flowers (Backyard Sessions)

I must admit, this is the third time this particular song has been featured in this section.

I have been a long-time Miley fan since 2006 (I used to watch Hannah Montana religiously as a teen). I cannot help but dance around my apartment whenever this song plays, especially after she finally won a Grammy for it. Plus, her live performance at the Grammys was absolutely iconic.

So, go ahead, press play, and dance around while loving yourself; I promise you’ll be a better business leader for it.

That’s all for now! Stay safe, everyone. Hug your loved ones. See you Thursday!

Love,

Nicole

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