Gov. Newsom signs a bill that will require venture firms to collect diversity information about their founders

Gov. Gavin Newsom has signed into law a bill that would require venture capital firms to report to the state the race, gender, sexual orientation and other demographic information of the founders they back.

Signed by Newsom on Sunday, Senate Bill 54 applies to all venture firms that have a connection to the state, whether because they are based in California, have an office in the state, invest in companies here or solicit investments from state residents. The new law, which was passed by the state Senate and Assembly in early September, would require such firms to collect demographic information from the founders they invest in and then report that data annually to the state Civil Rights Department. The legislation also directs that department to make those reports available to the public via its website.

"This bill resonates deeply with my commitment to advance equity and provide for greater economic empowerment of historically underrepresented communities," Newsom said in a letter explaining why he signed SB 54.

Starting March 1, 2025, the legislation will require venture firms to collect demographic information from their founders via a state-issued survey. The founders' participation in the survey will be voluntary. The survey will ask for information on each founder's race; ethnicity; disability, if any; sexual orientation; military service background; and whether they are state residents.

The law will require venture firms to aggregate that data and provide it to the state. It will also require firms to break out the number and amount of their investments that go to founders in each of those categories and to all non-white, non-heterosexual male founders as a percentage of their total investments.

Backers of the bill see the measure as a way to help increase funding for founders from traditionally underrepresented groups. Last year, startups with female-only founding teams received just 2.1% of all the venture capital money invested across the country, according to a report by PitchBook Data. Startups founded by Latinx and Black people received 2.1% and less than 2%, respectively, of all venture funding, according to Crunchbase.

SB 54 is the first piece of legislation in the country aimed at increasing diversity within the venture landscape, according to Sen. Nancy Skinner (D-Berkeley), the measure's sponsor.

"With Governor Newsom's signing of SB 54, California is extending its nation-leading efforts to expand equity by bringing transparency to venture capital investment decisions," Skinner said in a press release.

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