California passes law mandating VC firms to release investments’ diversity information
Published 17 October 2023
In the first ever US law aiming at increasing diversity within the venture capital landscape, the Californian governor has signed SB 54 into law. The law, which will enter into effect on March 1, 2025, mandates all venture capital firms operating in California to annually disclose diversity metrics. This includes information on the gender, race, ethnicity, disability status, LGBTQ+ identity, etc. of the founders they invest in.
While founders’ participation in this disclosure is voluntary, VCs failing to comply (with what data they can gather) may face penalties enforced by the courts. The information gathered must be submitted to the California Civil Rights Department, which then aggregate and release the data to the public.
The law does not set diversity targets for VCs, but merely require information gathering and disclosure, opting for a naming and shaming strategy.