Elizabeth Gore, Co-founder and President, Hello Alice , Arian Simone, Founding Partner and CEO, Fearless Fund Moderator: Emma Hinchliffe, Fortune
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00:00Elizabeth and Arian, thank you so much for being here and closing out the summit with us.
00:04Pleasure. Howdy everybody.
00:06Hi. Yeah. Yeah, claps. We'll take it.
00:10So as we just heard, you both didn't know each other that well until you had one big thing in common.
00:16So tell us about what that was. Elizabeth, maybe start with what happened with you.
00:20It was the type of alcohol we drank, right?
00:24No, we both got hit basically at the same time with federal lawsuits for our programs benefiting black-owned businesses.
00:34And it was a heck of a time.
00:36Actually, I was first. You were first. Yeah, you win.
00:40And who sued you?
00:42I was sued by Hello, Alice. So we're a financial technology.
00:46We fund 1.5 million small businesses with credit and loans in all 50 states.
00:51Oh, that deserves a clap.
00:53Well, okay. Thank you.
00:57And so that's our financial tech.
01:00And then we have a philanthropic program and we do about $50 million in grants.
01:04And Stephen Miller and America First Legal sued us for one of our programs, a great program with Progressive Auto,
01:13where we fund small business owners who have commercial vehicle companies who are African-American.
01:18And so America First Legal and then Jonathan Mitchell, who overturned Roe v. Wade.
01:24A lot of good, just awesome guys here.
01:28So they were the two that sued us.
01:31And Ariane, what about you? What happened with your lawsuit, if you could walk us through?
01:35Yes. On August 2nd, it was a regular day in Atlanta, Georgia.
01:38And I found out on the news that we were being sued for alleged discrimination.
01:43And I didn't even believe it was real at first.
01:45But in our case, the plaintiffs filed three things against us.
01:48They filed a temporary restraining order, meaning they were trying to have us out of business and shut down by August 17th.
01:54I thought TROs were for like stalkers.
01:57And then the other thing they filed was a preliminary injunction on one of our grant programs.
02:01And then the case itself alleging discrimination against four of our companies.
02:06Wow. And where do things stand now? I believe you recently settled.
02:09Oh, I'm permanently case dismissed.
02:12Now that deserves a clap, too.
02:15But yes, I run the nation's largest and first ever venture capital fund that's built by women of color for women of color.
02:22But one thing I would like to. Oh, thank you.
02:27One thing I would like to point out prior to these lawsuits, the work that we do is difficult.
02:33Right now, women of color receive only 0.39 percent of venture capital funds.
02:39That means that there is opposition way before these lawsuits took place.
02:42For those numbers to exist, women of color are the most founded entrepreneur demographic, just the least funded.
02:49So for anything like a litigation to take place should let you know there was opposition way before we even got sued.
02:55And honestly, there's opposition even afterwards.
02:58We're facing it now, people trying to make us close our fundraise early.
03:02It's ridiculous, honestly.
03:04Yeah. And just to finish with the case, why did you decide to settle?
03:08Oh, it was very simple. I learned as a very young child, you never let a nickel hold up a dollar.
03:13And that's that's why we chose to settle.
03:16The preliminary injunction was only on one grant that was left out of a program that had already been deployed for twenty thousand dollars.
03:24And I just pretty much asked the plaintiffs. I let the time run out on the SCOTUS appeal.
03:29I was like, you know what? We're not going to the Supreme Court with this.
03:32That would be very damaging. So after I let the time go out, the plaintiffs saw we weren't headed to the Supreme Court.
03:37And we know that what they wanted was to establish case law.
03:40I can assume that's what they wanted based upon what we've seen in recent rulings.
03:44And I said, hey, what is it you all want? Just negotiate it.
03:49And I just said, hey, I've got to keep going with the work that I do because it's important.
03:53Yeah. So you did not want to set a precedent that would have hurt other people.
03:57Oh, it would have been disastrous with today's current climate in twenty twenty four.
04:01Yeah. What would the impact have been?
04:03Oh, it would have eliminated race based programs nationwide.
04:07It would eliminated funding for women nationwide and people of color nationwide.
04:13And that was too much at stake. Yeah. Let's talk a little bit.
04:21So let's talk a little bit about the personal impact while all this was happening.
04:24Elizabeth, you mentioned drinking wine. How did this all impact your health, your relationships, your lives outside of this legal action?
04:32Well, we found each other, which was pretty special through this.
04:36I mean, you form very tight relationships in crises.
04:39I think they do that a romcom. So we have our own romcom.
04:43But, you know, it was it was detrimental.
04:47I mean, we ours was a class action suit. So any white male could sign on to the suit.
04:54And so we were we were in the middle of a series C fundraise for our company.
04:59And it blocked that fundraise. So we had to lay off two thirds of our employees.
05:05And there we also had a significant amount of cyber attacks.
05:09People following we assume following AFL. And so we had to have security teams.
05:16It was it was tough. And I mean, I ended up having some heart failure and some crazy stuff.
05:22And I really resonate with Ariana yesterday saying, you know, all this is connected in mind, body and spirit.
05:28But, you know, my number one objective is for my family, my employees and most of all, our million have business owners.
05:34So like any company that goes through a black swan event, it was, you know, you know, hold your head up high and give them hell.
05:41Wow. So what lessons did you draw from that for other business leaders who are faced with some sort of crisis?
05:47I don't know if it's a lesson I drew from that, but just something that I've always honed in on is I do prioritize myself.
05:54Even in the midst of this, I took a sabbatical from like March to half of April.
05:59And I was like, I'm off the grid. I'm at Miraval, at wellness resorts. I'm zenned out.
06:05And the moment I shifted myself, everything around me shifted.
06:09I had clarity on how we could resolve the case and just how we could move forward as a company.
06:14And I encourage that in general. But one thing that people don't talk about, she was telling me about even just the state of mental health, our physical safety.
06:23I was in the oh, I can't say where I was, but it was here.
06:28But what I can say is there was a CEO and she was talking about her personal safety at her house.
06:34I said, nobody talks about that. The first three weeks of this, it wasn't even safe for me to even be at home.
06:39You know, especially in a state like Georgia. That's a very conservative state.
06:43So nobody talks about the fact that where our safety can can lie in the midst of all of this.
06:50We had a we had a sheriff's vehicle out in front of our house and I have little children.
06:54And it was, you know, it's something that, you know, this is a philanthropic program that we care deeply in.
07:00But, you know, come on, let's go. Yeah. No, that's really scary.
07:03And very glad you're healthy today. Thank you. Thank you.
07:06And we'll come to everyone for questions in a moment.
07:08But just to return to that idea of lessons for business leaders on how to get through a crisis.
07:13What would you tell people in this room? You know, obviously, there's amazing executives in this room.
07:18And I will say that the basic fundamentals of running a solid company really got us through there.
07:24I think if there had been anything else, we were too much debt or we were overspending or we didn't have a good leadership team.
07:31We didn't have a good board of directors. I don't know that we could have made it through.
07:34And by the way, we did grow and become profitable during all this.
07:37So so for, you know, a venture backed company during a tough economic year, that was exciting for us.
07:45But I will say just the basic fundamentals, both personally, professionally and then of the company.
07:50You just never know who's going to run a red light and sideswipe your car.
07:55And so driving safely in your company, in your life, no matter what's going to hit you,
08:00whether it's, you know, an alt right lawsuit or whatever that may be.
08:04So, yeah. You know, we have an election coming up. I heard. Yeah.
08:08What what do you expect to see in either scenario?
08:11Do you expect to see more legal action like this targeting other people trying to achieve that precedent that they didn't achieve with your case?
08:17And what would you like to see from a Harris administration? Elections have consequences.
08:22I'm so glad you just said a Harris administration. OK, go ahead. No, seriously.
08:26Elections have consequences. I was in a federal lawsuit that had multiple federal rulings.
08:34And every Trump appointed judge said that what we were doing was in violation to the law.
08:40And not even just in violation to the law, a civil rights law at that, a law that was actually put in place to ensure that black people had the right to enter contracts.
08:49So elections have consequences. Every Obama appointed judge and every Clinton appointed judge ruled that what we were doing was not in violation of the law.
08:58Now, this is not a Democratic or a Republican discussion, because I do believe that Republicans are very heavy in capitalism, very, very heavy in business.
09:08I do believe if I had some Bush appointed judges, we would have been just fine.
09:12So this is not a matter of that. But it was to just show that there is clearly an agenda that is going on against women and it needs to stop.
09:25One of the things that, you know, Erin's right in the sense of your federal local circuit.
09:32I know more about judges now than I ever wanted to know. But the other thing is just supply chain and funding.
09:37For the corporations in the room, the other thing that was sued the exact same time as our two organizations is the 8-8 program.
09:45So supplier diversity contracting, federal contracting, the four categories of women, people of color, veterans, and disabled veterans were also sued and blocked, as was the restaurant revitalization program.
09:57So there are federal government programs that are the tune of almost a billion dollars that are also being impacted by politics instead of policy.
10:07So supply chain for Fortune 500, we spent $4 billion a year at Dell on supplier diversity when I was there contracting.
10:15And so this also absolutely affects corporate, the P&L of corporate, and our supply chain as well.
10:21Got it. Any questions for Elizabeth and Erin?
10:25Oh, sure. We have a Q&A.
10:27Yeah, we've got a little bit.
10:28Go ahead, Diane.
10:29From the boss.
10:30Hi, everybody. You know, I'm curious. We've seen people like Robbie Starbuck prompt companies to back away from, for example, supporting pride rights, right?
10:41What impact does that have when you're seeing companies really retract for good reason because they're facing these campaigns?
10:50What impact do you think that has on the situations you found yourselves in?
10:54I was actually about to speak on that before you even asked because I wanted to share prior to our lawsuit, our investors received threatening letters to stop their DEI funding.
11:07I run an SEC regulated financial institution.
11:11We are backed by JPMorgan Chase, MasterCard, PayPal Ventures, Bank of America, and plenty of Fortune 100 companies.
11:18And when you see movements like that, it's very concerning because everybody wants to make diversity conditional based upon current climates.
11:29So it's very, very concerning.
11:32When we were in litigation right when the case started, I had just closed on $23 million.
11:38We had about $150 million in diligence that just was like poof.
11:45I was like, what?
11:46They're like, we need you all out of litigation before anybody can move forward.
11:50And I'm like, well, wait a minute.
11:51What's happening here?
11:53So when you see movements like that, it's very concerning.
11:56But we know that we are at Fortune.
11:59Yes.
12:01And we know that there are powerful women in this place.
12:05Isn't that correct?
12:06Most powerful women.
12:08So we need everybody in this room to stand by the principles that you all believe at your companies.
12:15We don't need anybody being concerned with the threats.
12:17If everybody just stands strong, we will be okay.
12:21But we need everybody just to stand strong.
12:26And Diane, the thing that I'm really focused on is, I mean, we are capitalists through and through.
12:32And one of the things that concerns me is these significant gaps.
12:35So we provide credit and loans to small business owners.
12:38There's a $40 billion gap in the BIPOC community for small business owners who have applied and then declined credit.
12:44Generally not because they have bad credit, but because they don't have credit history.
12:47So a lot of these programs actually are highly beneficial to the banks.
12:52So if you look at secured credit, for example, which we provide a lot of, I want these to be our customers.
12:58I want individuals to be able to apply and get the loans and credits so they can be job creators and so on.
13:04So this is good economics.
13:05So I do think those who stick with these programs are going to win out in the end, and they're going to be highly profitable for it.
13:12Because this is a whole new, we call them the new majority of small business owners that are coming in and applying and growing.
13:18Yeah.
13:19Have you learned anything?
13:20Is there a strategic way that companies, funds can do this kind of work without the same legal risk?
13:26Well, one of the things I've seen that I've been really excited about, everyone from ADP to Chase, others,
13:32they're actually putting these programs in their P&L.
13:35And so they're looking at it as, I've heard emerging markets.
13:40I've heard new customer base.
13:42So ironically, when you push this as marketing or going after a new customer segment versus DE&I philanthropy,
13:50I mean, it's bullshit that we all have to snake around.
13:54But, look, when it's in the P&L and it's making money for a company, it seems like you're not getting quite the eyebrows raised.
14:01And that's just good business, too, I think.
14:04Yeah.
14:05And is there regulation or anything you would like to see to prevent this from happening again to other people?
14:11Well, I've said it many times on many stages, even including yours as a fortune stage,
14:16that the lawmakers and the legislators, they do need to make sure that we have legislation that protects the right to fund marginalized communities
14:24so that everybody has a fair chance at achieving the American dream.
14:29Yeah.
14:31Our lawyer, Neil Katyal, talks a lot about these types of debates used to happen in Congress.
14:37So, 1981 was the law that both of our lawsuits were based on.
14:41It was a post-Civil War reconstruction law about contracting.
14:46If that law needs to be interpreted in a different way in a modern society, normally that would be negotiated in Congress,
14:52not litigated in the private sector.
14:54So, one thing I'd like to really see, and we've met with a lot of congressional leaders and senators on this,
14:59is if these debates need to happen, let's have them not sit and stop the private sector from creating jobs and making money.
15:07Let's have these debates in Congress.
15:10Yeah.
15:11Do we have any last questions?
15:13Well, you know I have something to say.
15:14Oh, you have something?
15:15Okay, please go.
15:16Yes.
15:17We discussed this backstage.
15:18And I told you I definitely want to even place an ask to the audience.
15:22This work we do, you guys, is not easy, but it is needed.
15:26The U.S. economy is made up of over, oh gosh, 99.9% of businesses are small businesses.
15:35Any disruption in access to capital is a disruption actually to the U.S. economy.
15:39And the work we do is so important.
15:42I'm talking about the most founded, least funded.
15:45Right now in our portfolio, the top quarter of our women we've invested in,
15:49and they've been on everybody's magazine covers, TV shows, et cetera, they have eight-figure revenue year-over-year growth.
15:55I was dealing this morning with a portfolio company at $50 million in revenue struggling to fundraise.
16:02Have you heard of that from a white male?
16:04Exactly.
16:05Struggling to fundraise.
16:07So if you all truly believe in this work, and it's a black founder, she has a co-founder that's a white gay male,
16:13and they are struggling right now in a fundraise.
16:16Makes no sense.
16:17I don't care what the current macroeconomic climate is.
16:20A business that successful, that makes no sense.
16:22And we have some others.
16:23I've seen one at $20 million, $30 million.
16:25But if you all truly believe in this work, and I do not do this from a stage,
16:29but I'm asking you guys to invest in the Fearless Fund and let us know.
16:33And if you do not have it in your personal capacity, then please feel free to make any introductions.
16:39The work that we're doing is phenomenal.
16:41The impact we're doing is phenomenal.
16:43The job creation, the reducing the wealth gap.
16:45But this is difficult.
16:47It was difficult before we got sued, and it's still difficult, unfortunately, afterwards.
16:52Erin, you made your ask to the room.
16:58Elizabeth, is there one thing you'd want everyone in this room to do?
17:01I really think it's important that we get policymakers to start negotiating all this and discussing it.
17:09And I really appreciated the undersecretary earlier talking through, have you written letters,
17:13have you talked to your congressmen and women, have you talked to your legislators?
17:18This should not be in the private sector, and it should not be hitting nonprofits either.
17:23So I really encourage all of you to push your legislators to think about these issues.
17:28No matter what side you sit on, it's time for them to pull it back into Congress and do their jobs.
17:34Thank you both so much.
17:36Thank you all.