When the party was created, Justin Smith, better known by his D.J. name, Just Blaze, had spent more than a decade as one of hip-hop’s top producers, collaborating frequently with Jay-Z and working at top nightclubs in New York.

In 2012, Mr. Smith said, bottle service had taken over the city’s night life. High-rolling clubgoers — often young and privileged — held court in the city’s top clubs and bars, paying for preferential V.I.P. treatment by buying bottles of liquor at prices that typically started at around $5,000 apiece.

“It was the go-to format” Mr. Smith said. “And while these clubs opened themselves up to a new revenue stream, they got cut off to the cool people making the waves in culture, the influencers.”

That style of socializing was fundamentally at odds with hip-hop culture, which had historically taken its cues from often financially strapped provocateurs.

“That’s what Palooza represents in a nutshell, really,” Mr. Smith said. “A bunch of cool people getting together and saying ‘Let’s do our own thing.’ At a certain point the underground is going to subvert the mainstream.”

Mr. Ivey, 37, said that the rise of bottle service and V.I.P. sections had begun to make going out feel rote and monotonous for many young black people.

“We made it O.K. for people to come together and not look at each other weird because you don’t have a bottle,” he said, adding “or you don’t have a section at all.”