Indian American VC firm founder, Nisha Desai, sues PayPal

Nisha Desai, Indian American founder of venture firm Andav Capital, has sued PayPal for alleged racial discrimination claiming she was excluded from the payment giant’s diversity and equity program because she is Asian.

In 2020, PayPal made a $530 million commitment to support more Black and minority-led businesses in the wake of Black Lives Matter. In a lawsuit filed Jan. 2, 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, TechCrunch reported.

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As someone born and raised in “the deep south,” Desai said that she thought she was “a good fit for PayPal’s investment program. She “spent 1.5 months seeking funding before PayPal stopped communicating, even as the company invested $100m in 19 venture capital firms led by Black and Hispanic people,” the lawsuit says.

“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.”

According to her, PayPal has told multiple other businesswomen they were ineligible for funding because of their Asian descent. “To PayPal and its executives, Asian Americans might be minorities, but they’re the wrong kind of minority,” read the complaint.

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.

PayPal spokesperson Taylor Watson declined TechCrunch’s request 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.

READ: Rakesh Agrawal leaves PayPal, launches Twitter rant against former colleagues (May 5, 2014)

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.

Desai did not respond to TechCrunch’s request for comment. 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.”