Venture fund founder sues PayPal for racial discrimination

PayPal is being sued by the founder of venture capital firm Andav Capital, who claims the payments giant was excluded from its diversity and equity program because he is Asian. according to a lawsuit filed this week.

In 2020, PayPal committed $530 million to support more black and minority-led businesses. After Black Lives Matter. Andav Capital founder Nisha Desai claims in a newly filed lawsuit that she applied for a financial commitment review but was overlooked because she was Asian because the program sought to focus only on Black and Hispanic-led businesses.

Desai launched Andav Capital in 2018 to invest in early-stage companies, according to Pitchbook. The venture firm has made at least 13 investments, including fintech startup Acorns, startup search marketplace IFundWomen and environmental tech firm Kubik.

“Most funds owned by people of other races, including Asian Americans, are not treated equally,” Desai said in the lawsuit filed in New York federal court. “Worse, PayPal and its senior management have repeatedly touted the program’s focus on race, boasting in statements and press releases that PayPal’s program is for some races and ethnicities and not for others.”

When contacted by TechCrunch, PayPal spokesperson Taylor Watson declined to comment on the case, citing pending litigation.

In his suit, Desai alleges that he met repeatedly with executives at PayPal and its venture arm, PayPal Ventures, regarding his requests for grant funding, where Desai alleges that PayPal’s head of public policy and research in July 2020 told him openly. the program allows firms led by blacks and Hispanics “of other races and ethnicities, including Asian Americans.”

When PayPal announced its first investments from a $530 million commitment, the company invested in firms with at least one Black or Latino general partner, “an unmistakable racial pattern that reflects PayPal’s race-based purpose.”

“Even today, PayPal continues to make the same race-based claims,” ​​the suit adds. “In total, PayPal has invested $100 million in 19 venture capital firms led by ‘Black and Latino executives,’ but has not announced $1 in funding to funds led by Asian-American women, despite their demonstrated interest and compliance. (…) For PayPal and its executives, Asian Americans may be minorities, but they are the wrong kind of minority. PayPal has not announced that the program has ended.”

Desai claims that his reneging on PayPal’s investment commitment cost his firm “millions of dollars worth of vital capital.” The suit also claims that those who received PayPal vouchers “were able to convert these rewards into additional investments, greater brand equity, resources, access and success.”

At the same time, funds like Desai’s that were rejected “suffered from a negative and inaccurate perception that PayPal was making decisions based on the merits of its business rather than the fund’s ownership race,” the suit says.

Desai alleges that PayPal violated the Civil Rights Act of 1981 and that PayPal’s “racially exclusionary investment program” is illegal under New York state and city laws that prohibit racial discrimination.

Desai is represented by Consovoy McCarthy, is a conservative law firm with a history of acceptance of cases involving race-based programs. The law firm specifically sued Pfizer over its diversity program, which targeted black, Latino and Native Americans. the program discriminated against white and Asian American applicantsalthough the claim was later dismissed. Consovoy McCarthy also sued Harvard University and the University of North Carolina in 2022 over racially biased admissions. helped undo affirmative action in education.

Desai did not respond to TechCrunch’s request for comment on Friday. In a brief statement shared with TechCrunch, Consovoy McCarthy partner Patrick Strawbridge said, “PayPal discriminated against Ms. Desai on the basis of her race. This discrimination is against our laws and the spirit of the PayPal program’s purported purpose. PayPal was the market leader and others followed suit, despite Ms. Desai’s pleas to treat her fairly. We look forward to proving his case and to justice in court.”

Desai joins other individuals and organizations suing diversity schemes to target exclusively Black and Hispanic communities. Most notably, Edward Bloom started the American Alliance for Equal Rights (AAER), which helped to overturn affirmative action in education, along with John McCarthy. sued the venture firm Fearless Fundclaimed that one of its grants discriminated against white and Asian Americans because it was awarded only to black women.

That lawsuit was settled, but many more lawsuits have continued since then.

Sean O’Kane contributed reporting.

Updated with comment from Consovoy McCarthy.