Press Release

Skinner’s Bill to Boost Investment in Women- and Minority-Owned Startups Wins Approval from CA Legislature

The state Legislature has approved Senator Skinner’s legislation, SB 54, which would bring transparency to venture capital investments in California and is designed to help more women- and minority-owned startups access vital VC funding. If signed into law, SB 54 would be the first such transparency measure in the nation.

“California has landmark laws that shine a light on pay inequities and the lack of diversity in both the workplace and the boardroom. SB 54 extends that transparency to venture capital investing to help more women- and minority-owned startups access the VC lifeline that nearly all entrepreneurs depend on,” said Sen. Skinner, D-Berkeley.

SB 54, Investing in Equity, won approval in the state Assembly on a 60-15 vote, and the state Senate voted 32-8 in favor of it. SB 54 is now on its way to Gov. Gavin Newsom’s desk.

“SB 54 is simply about gaining clarity on what we know to be a perpetuating issue in venture capital — a biased distribution of funding that leaves out women and people of color. The situation is so dire that it risks excluding those groups from entrepreneurship altogether, possibly even adversely effecting future generations. Moreover, many of these venture funds manage money from large pension funds like CalPERS and CalSTRS — I doubt their members, many of whom are women and people if color, would be OK with this type of discrimination. This is an emergency,” said Marquesa Finch, founding partner of The F5 Collective, which is sponsoring SB 54 and is a fund established to close the gender-funding gap and support female founders. “With this bill, we hope we can accelerate the institutional change that needs to happen in order for venture-backed financing to be fair.”

Venture capital investment is one of the key ways that entrepreneurs are able to launch and expand new businesses. Interestingly, the founders of innovative startups come from every demographic. In 2021, for example, 49% of startups were formed by women. Yet data compiled in a 2019 “Diversity in U.S. Startups” report revealed that VC investments are disproportionately allocated to companies launched by white men. 

According to a report by PitchBook, female-founded startups received only 2.1% of all venture capital invested in the U.S. in 2022. Startups founded by Black and Latinx individuals received only 2.6% and 0.6% of venture capital funding, respectively.

There’s also evidence that the lack of diversity in VC investment not only blocks the ability of women and minorities to build wealth, it also harms California’s innovation economy. Studies, for example, reveal that increasing the diversity of investment recipients can generate higher overall economic returns.

SB 54 is aimed at improving diversity in venture capital investments by:

  • requiring venture capital firms to report on diversity efforts annually starting March 1, 2025;
  • outlining reporting requirements and procedures, including data collection through a standardized survey while protecting individual privacy; and
  • ensuring that the receiving agency (Civil Rights Department) makes the reports received readily accessible, easily searchable, and easily downloadable on its website.

“Venture capital firms might not be aware that their rate of investment is so low,” Sen. Skinner added. “Hopefully, the transparency required by SB 54 will inspire these investors to do better.”

 

Sen. Nancy Skinner represents the 9th Senate District and is chair of the Senate Budget Committee and the California Legislative Women’s Caucus.