Just a couple weeks ago, the four-year-old firm, whose first fund was $25.8 million, was still somewhat under the radar, writing small checks up to $2.5 million, and in the process of raising fresh capital amid the rocky venture environment (the firm raised $16 million so far for its second fund, according to a May SEC filing). Now, the early-stage Fearless Fund has been thrust into the national spotlight as one of the faces defending diversity-focused investing, backed by a team of big time lawyers. And they’re at the center of what I and others view as a major story in the venture world right now—one that could have ramifications for the industry at large.  

Courtesy of Anne Sraders

To recap, last week the American Alliance for Equal Rights (AAER), a group founded by the conservative activist behind the recent rejection of affirmative action in college admissions, filed a lawsuit against the small fund. The lawsuit alleges that Fearless Fund’s grant program, which awards Black women small business owners $20,000 four times a year in partnership with Mastercard, is discriminatory against nonblack individuals, violating Section 1981 of the Civil Rights Act. Remember: Black founders received only 1% of VC dollars in 2022; so far in the first half of 2023, the figures are even more paltry, at around 0.75%, TechCrunch reported. (Simone said Fearless Fund has deployed over $26.5 million so far.)  

Fearless Fund has heavy-hitting lawyers in their corner: Ben Crump, an attorney known for representing the families of George Floyd and Breonna Taylor, and Janai Nelson from the NAACP Legal Defense and Education Fund, are among those representing the firm. 

As Fearless Fund is highlighting in its response—the fund addressed the lawsuit for the first time yesterday—the recent ruling rejecting affirmative action in higher education “has become a catalyst for more legal groups to attack critical investments in marginalized communities,” the firm wrote in a release prior to the press conference. 

But some insiders also worry about what the lawsuit might do to limited partners investing in these types of funds. “If this lawsuit successfully deters LPs from supporting funds with racial mandates, especially in a further deteriorated fundraising environment, it will be hard for these funds to grow beyond Fund I or Fund II, which replenish sources of capital for entrepreneurs,” Yasmin Cruz Ferrine, cofounder and general partner at Visible Hands, a VC firm that has accelerators for underrepresented founders, wrote in a blog post this week. And she later told me over the phone that, considering many of these minority-focused VCs are still relatively young, they haven’t had sufficient time to prove their returns to LPs for preseed and seed companies. “I worry that just giving an out of justifiable legal liability [for LPs] will reverberate,” she told me (Visible Hands shares some portfolio companies with Fearless Fund, she said). 

So far, the big corporate backers of Fearless Fund, including Bank of America and JPMorgan Chase, are rallying around the firm, cofounder Simone said on CBS Mornings earlier on Thursday, adding that “They stand by their DEI programs.” 

It’s too soon to tell how this will play out, or how the fund’s lawyers will go about their defense (Fearless Fund’s legal counsel would not answer questions about their strategy during the press conference). But this will be a precedent-setting case that VCs should be paying attention to.

Fashion consolidation…Tapestry, the American fashion company that owns brands including Coach, agreed to acquire Capri Holdings, the parent of iconic fashion brands Versace and Michael Kors, for a whopping $8.5 billion in cash. It’s another big consolidation in the fashion space, and beefs up Tapestry against the likes of European titan LVMH, which still dominates the luxury goods space and counts brands like Louis Vuitton among its holdings. 

Have a great weekend,

Anne Sraders
Twitter: @AnneSraders
Email: anne.sraders@fortune.com
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Jackson Fordyce curated the deals section of today’s newsletter.

VENTURE DEALS

- Verdagy, a Moss Landing, Calif.-based water electrolysis technology company for the production of green hydrogen, raised $73 million in Series B funding. Temasek and Shell Ventures co-led the round and were joined by Bidra Innovation Ventures, BlueScope, Galp, Samsung Venture Investment, Toppan Ventures, Tupras Ventures, Yara Growth Ventures, and Zeon Ventures.

- Persefoni, a Mesa, Ariz.-based climate management and accounting platform, raised $50 million in Series C1 funding. TPG Rise led the round and was joined by Clearvision Ventures, NGP, Prelude Ventures, Parkway Ventures, The Rice Investment Group, Bain and Co., EDF, Alumni Ventures, and ENEOS Innovation Partners.

- Virtualitics, a Pasadena, Calif.-based artificial intelligence and data exploration company, raised $37 million in Series C funding. Smith Point Capital led the round and was joined by Citi, advisory clients of The Hillman Company, and others. 

- Trove, a Brisbane, Calif.-based branded fashion and apparel resale and trade-in company, raised $30 million in Series E funding. Wellington Management and ArcTern Ventures co-led the round and were joined by CVC Fund, G2 Venture Partners, Prelude Ventures, and others. 

- Boston Micro Fabrication, a Maynard, Mass.-based manufacturing solutions provider, raised $24 million in Series D funding led by Guotai Junan Securities.

- Symmetry Systems, a San Mateo, Calif.-based data security management company, raised $17.7 million in funding. ForgePoint Capital, Prefix Capital, W11 Capital Management, and TSG invested in the round.

- Rightfoot, a San Francisco-based consumer permissioned financial data and payments platform, raised $15 million in Series A funding. Blue Lion Global and Renegade Partners co-led the round and were joined by Bain Capital Ventures, Box Group, and Kraken Ventures.

- Veza, a Palo Alto-based identity management platform, raised $15 million in funding co-led by Capital One Ventures and ServiceNow. 

- Rootly, a San Francisco-based incident management platform, raised $12 million in Series A funding. Renegade Partners led the round and was joined by Google Gradient Ventures, and XYZ Ventures. 

- BioFlyte, an Albuquerque, N.M.-based biothreat detection firm, raised $5.4 million in Series B funding. Scout Ventures and Cottonwood Technology Fund co-led the round and were joined by New Mexico Vintage Fund.  

- Nature Coatings, a Las Vegas-based biochemicals company, raised $2.45 million in seed funding. Regeneration.VC and The 22 Fund co-led the round and were joined by Leonardo DiCaprio, Safer Made, and Portfolia.

PRIVATE EQUITY

- An affiliate of STG agreed to acquire Avid, a Burlington, Mass.-based technology provider for the media and entertainment industry, for approximately $1.4 billion. 

- AccuQuilt, a subsidiary of TekBrands and WILsquare portfolio company, acquired the brand, product line, and other key assets of June Tailor, an Omaha, Neb.-based designer and marketer of quilting, sewing, and crafting products. Financial terms were not disclosed.

EXITS

- IBM acquired Apptio, a Bellevue, Wash.-based financial and operational IT management and optimization software company, from Vista Equity Partners for $4.6 billion.

OTHER

- Novo Nordisk agreed to acquire Inversago Pharma, a Montreal-based obesity and diabetes treatments company, for as much as $1.08 billion.

- Check Point Software Technologies agreed to acquire Perimeter 81, a Tel Aviv-based cloud-based security solutions provider, for $490 million. 

- Wrap Technologies acquired Intrensic, an Austin-based digital evidence management and body worn cameras company. Financial terms were not disclosed.

FUNDS + FUNDS OF FUNDS

- Blackstone, a New York-based private equity firm, raised $7.1 billion for a fund focused on financing solar companies, electric car parts manufacturers, and carbon emissions cutting companies.

PEOPLE

- Ares Management, a Los Angeles- and New York-based-based alternative investment manager, hired Joe Indvik as a climate lead on Ares’ global ESG team. Formerly, he was with RE Tech Advisors.

- Macquarie Capital, the Sydney, Australia-based corporate advisory, capital markets, and investing arm of Macquarie Group, hired Christopher Hieb as managing director, customer interaction management. Formerly, he was with DC Advisory.

Correction, Aug. 14, 2023: Several details supplied to Fortune on the Symmetry Systems deal by a representative for the company were incorrect. The corrected information is as follows: $17.7 million in funding raised; there was no lead investor; Adit Capital weren’t in the round, and W11 Capital Management was in the round; OVN Capital is now Prefix Capital.