PayPal is being sued by the founder of venture firm Andav Capital, Nisha Desai, who claims she was excluded from the payment giant’s diversity and equity program because she is Asian, according to a suit filed this week.
In 2020, PayPal made a $530 million commitment to support more Black and minority-led businesses in the wake of Black Lives Matter. In the newly filed lawsuit, Desai claims that she applied to be considered for the financial commitment but was overlooked because she is Asian, as the program sought to exclusively focus on Black and Hispanic-led enterprises.
Desai launched Andav Capital in 2018, according to PitchBook, to invest in early-stage companies. The venture firm has made at least 13 investments, including in fintech startup Acorns, the startup funding marketplace IFundWomen, and the environmental tech firm Kubik.
“Funds majority-owned by individuals of other races, including Asian Americans, are not given equal consideration,” Desai alleges in the suit, filed in a New York federal court. “Worse, PayPal and its senior management have repeatedly trumpeted the program’s focus on race, bragging in statements and press releases that PayPal’s program is for some races and ethnicities and not others.”
When reached by TechCrunch, PayPal spokesperson Taylor Watson declined to comment on the case citing pending litigation.
In her suit, Desai claims she met numerous times with executives at PayPal and its venture arm, PayPal Ventures, about her qualifications for receiving a financial grant, where Desai alleges that PayPal’s head of public policy and research explicitly told her in a July 2020 meeting that the program preferences Black and Hispanic-led firms “over other races and ethnicities, including Asian Americans.”
When PayPal announced its first investments from the $530 million commitment, the company invested in firms with at least one Black or Latino general partner, “an unmistakable racial pattern that reflected PayPal’s stated race-based purpose,” the suit reads.
“Even today, PayPal continues to make the same race-based claims,” the suit adds. “In total, PayPal invested $100 million in 19 venture capital firms led by ‘Black and Latinx managers’ but announced not $1 of funding to Asian-American woman-led funds — despite their demonstrated interest and fit. … To PayPal and its executives, Asian Americans might be minorities, but they’re the wrong kind of minority. PayPal has not announced an end to the program.”
Desai claims that her rejection from PayPal’s investment commitment cost her firm “vital capital worth millions of dollars.” The suit also alleges that those who received PayPal checks were “able to leverage those awards into additional investments, greater brand equity, resources, access, and success.”
Meanwhile, funds like Desai’s that were rejected “suffered from the adverse and inaccurate perception that PayPal had made a decision based on the merits of their business, rather than the race of the fund’s ownership,” the suit claims.
Desai alleges that PayPal violated the Civil Rights Act 1981 and that PayPal’s “racially exclusionary investment program” is illegal under the New York state and city laws that prohibit racial discrimination.
Desai is represented by Consovoy McCarthy, a conservative legal firm with a history of taking on cases related to race-based programs. The law firm notably sued Pfizer for its diversity program, which targeted Black, Latino, and Native Americans, alleging the program discriminated against white and Asian American applicants, though the suit was later dismissed. Consovoy McCarthy also sued Harvard University and the University of North Carolina in 2022 for race-based admissions that subsequently helped to overturn 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 based on her race. This discrimination is antithetical to our laws and to the very spirit of the alleged purpose of PayPal’s program. PayPal was a leader in the market and others followed suit, despite Ms. Desai’s pleas for them to treat her fairly. We look forward to proving her case and achieving justice in court.”
Desai joins other individuals and organizations that are suing diversity schemes for only targeting Black and Hispanic communities. Most notably, Edward Blum, the man who helped overturn affirmative action in education alongside Consovoy McCarthy, launched the American Alliance for Equal Rights (AAER), which went on to sue the venture firm Fearless Fund, alleging one of its grants discriminated against white and Asian Americans because it was awarded only to Black women.
That court case was settled, but many more suits have followed since.
Sean O’Kane contributed reporting.
Updated with comment from Consovoy McCarthy.
