California's SB 54 (as amended by SB 164) establishes mandatory demographic reporting requirements for certain venture capital firms with a California nexus. The law seeks to increase transparency around the diversity of founding teams receiving venture capital funding and requires firms to submit aggregated demographic data to the California Department of Financial Protection and Innovation (DFPI) beginning in 2026.
Who is covered?
These new reporting obligations apply to a range of entities (as described below), but most notably to investment funds that pursue a venture capital strategy and either are headquartered in California, invest in portfolio companies based in or primarily operating in California, or solicit or receive capital from California residents or entities.
SB 54 applies to “covered entities” that meet three criteria.
First, a covered entity must be a “venture capital company” under Section 260.204.9 of the California Code of Regulations. In short, this definition includes (i) any “venture capital company” (i.e. an entity that invests at least 50% of its assets in “VC investments”), (ii) any “venture capital fund” under the U.S. Investment Advisers Act of 1940 or (iii) any “venture capital operating company” under the Employee Retirement Income Security Act of 1974.
Second, a covered entity must also be primarily engaged in the business of investing in, or providing financing to, startup, early-stage or emerging growth companies.
Finally, a covered entity will include any venture capital company that:
- is headquartered in California;
- has a significant presence or operational office in California;
- invests in portfolio companies based in or primarily operating in California; or
- solicits or receive capital from California residents or entities.
Note that SB 54 does not define “significant presence,” and therefore, additional clarity or guidance from DFPI may be necessary.
Reporting obligations
Commencing March 1, 2026, covered entities are required to register with DFPI by submitting certain identification information (such as name of the firm, and contact details of designated point of contact) to DFPI.
Commencing April 1, 2026, covered entities must collect and submit the following information on an annual basis (with the initial 2026 reporting based on 2025 data):
- aggregated demographic information on the gender identity, race, ethnicity, sexual orientation, disability status, veteran status, and California residency (each, an “Identified Group”) for each founding team member of each of the covered entity’s portfolio companies;
- the investment amounts and percentage allocated to companies founded by individuals from each Identified Group, broken down by each respective category;
- the aggregate amount of capital that the covered entity invested in each portfolio company and the principal place of business in which it invested; and
- the number of founders who declined to provide demographic information.
Data collection requirements
Venture firms must administer a standardized survey, through a form that will be provided by DFPI, to founding teams after signing definitive investment documents and transferring capital. Founders must be informed that participation is voluntary and that survey responses will be anonymized and reported only in the aggregate.
Recordkeeping
Firms must retain original, individual-level survey responses for five years and make them available to the DFPI upon request.
Enforcement and penalties
DFPI will notify non-compliant firms and allow a 60-day cure period. Notified firms that fail to register and submit the information within the 60-day period may face significant monetary penalties.
Next steps
Covered entities should begin preparing internal compliance frameworks to administer founder surveys, track data, and prepare for annual filings with the DFPI. Firms should also monitor forthcoming guidance from the DFPI regarding survey templates and filing procedures.
We continue to monitor ongoing developments with respect to DFPI and SB 54, and we will provide updates as additional guidance emerges and as the March 1, 2026 deadline approaches.
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