Nisha Desai, the founder of venture firm Andav Capital, is suing PayPal, accusing the company of excluding her from their diversity and equity initiative due to her Asian ethnicity, as per a lawsuit filed this week. 

In response to Black Lives Matter, PayPal pledged $530 million in 2020 to back more Black and minority-operated businesses. The recent lawsuit asserts that Desai applied for this financial support but was ignored because she is Asian, while the program focus was intended solely toward Black and Hispanic-led ventures. 

Desai initiated Andav Capital in 2018, to focus on early-stage investments, based on PitchBook. The firm has participated in at least 13 investments, such as fintech entity Acorns, the startup investment marketplace IFundWomen, and the green tech company Kubik. 

“Funds predominantly owned by individuals of other ethnicities, including Asian Americans, are not given equal treatment,” Desai asserts in the lawsuit filed in a New York federal court. “Even worse, PayPal and its upper management have consistently highlighted the program’s racial focus, boasting in statements and press releases that PayPal’s initiative is for some ethnicities and not others.” 

Upon contact by TechCrunch, PayPal representative Taylor Watson refused to comment on the legal matter citing ongoing litigation. 

In her legal filing, Desai alleges she engaged in multiple discussions with PayPal executives and PayPal Ventures about her eligibility for a financial award, claiming that PayPal’s head of public policy and research directly informed her in a July 2020 meeting of the preference for Black and Hispanic-led companies “over other races and ethnicities, including Asian Americans.”

When PayPal disclosed its initial allocations from the $530 million commitment, it directed investments toward firms with at least one Black or Latino general partner, “a clear racial trend that mirrored PayPal’s declared race-based objective,” as per the lawsuit. 

“Even now, PayPal persists in making these race-based declarations,” the lawsuit continues. “In its entirety, PayPal allocated $100 million to 19 venture capital entities headed by ‘Black and Latinx managers’ but did not announce a single dollar of funding to Asian-American women-led funds — regardless of their interest and suitability. … To PayPal and its leadership, Asian Americans may be minorities, but they are not the right kind of minority. PayPal has not announced a conclusion to the program.” 

Desai suggests that her exclusion from PayPal’s investment pledge resulted in a “loss of crucial capital worth millions of dollars” for her firm. The lawsuit further claims that recipients of PayPal’s support were “able to turn those awards into additional capital, increased brand equity, resources, access, and success.” 

Conversely, funds like Desai’s, which were rejected, “suffered from the adverse and misleading perception that PayPal had made a decision based on the merits of their business, instead of the race of the fund’s proprietors,” the lawsuit states. 

Desai accuses PayPal of contravening the Civil Rights Act 1981 and contends that PayPal’s “racially exclusive investment scheme” is unlawful under New York state and city anti-racial discrimination laws.

Desai is represented by Consovoy McCarthy, a conservative law practice with a track record of tackling cases concerning race-based initiatives. Notably, the firm took legal action against Pfizer over its diversity strategy targeting Black, Latino, and Native Americans, citing that the program discriminated against white and Asian American applicants, though the case was eventually dismissed. Consovoy McCarthy also brought lawsuits against Harvard University and the University of North Carolina in 2022 regarding race-based admissions, which contributed to overturning affirmative action in the educational sector. 

Desai did not provide a response to TechCrunch’s inquiry on Friday. However, in a brief statement given to TechCrunch, Consovoy McCarthy partner Patrick Strawbridge stated: “PayPal discriminated against Ms. Desai on the basis of her race. Such discrimination is contrary to our legal framework and the fundamental spirit of the alleged aim of PayPal’s program. PayPal led in this approach, and others followed, despite Ms. Desai’s appeals for equitable treatment. We look forward to substantiating her case and achieving justice in court.”

Desai aligns with other entities and individuals challenging diversity initiatives that solely target Black and Hispanic populations. Most prominently, Edward Blum, a key figure in overturning affirmative action in education alongside Consovoy McCarthy, established the American Alliance for Equal Rights (AAER), which subsequently pursued legal action against the venture firm Fearless Fund, claiming that one of its grants discriminated against white and Asian Americans as it was awarded exclusively to Black women. 

While that legal dispute was resolved, numerous other lawsuits have since emerged.

Sean O’Kane contributed reporting. 

Updated with feedback from Consovoy McCarthy.