California Venture Capital Diversity Reporting Requirements — 2026 Deadlines Approach

Key Takeaways:

• California's Fair Investment Practices by Venture Capital Companies Law (the “FIPVCC Law”) imposes registration and reporting requirements on certain venture capital companies with a California nexus.
• Covered venture firms will be required to collect and publicly report aggregated demographic information regarding the founding teams of portfolio companies in which they invested during the preceding calendar year.
• Covered firms have an initial registration deadline of March 1, 2026 and the first annual reporting deadline of April 1, 2026.
• The California Department of Financial Protection and Innovation (the “DFPI”) has published the official survey and reporting forms, though as of the date of this alert the DFPI has not yet made the registration portal available.

SCOPE OF COVERAGE

Venture Capital Companies

The FIPVCC Law imposes reporting obligations on certain “venture capital companies” (“VCCs”). Under California Code of Regulations Section 260.204.9, a VCC includes any entity that (i) has at least 50% of its assets in venture capital investments during each annual period from initial capitalization; (ii) qualifies as a “venture capital fund” under the Investment Advisers Act of 1940; or (iii) qualifies as a “venture capital operating company” under ERISA.

A “venture capital investment” means an acquisition of securities in an operating company where the adviser or its affiliates obtain “management rights”—i.e., the contractual or ownership-based right to substantially participate in or influence the company's management, operations, or business objectives. Funds obtaining management rights (such as board or observer seats) in most investments would qualify as VCCs regardless of stated strategy.

Covered Entities

The reporting requirements under the FIPVCC Law apply to a subset of VCCs, referred to as “covered entities,” that meet two criteria: (i) the VCC primarily engages in the business of investing in, or providing financing to, startup, early-stage, or emerging growth companies; and (ii) the VCC has a California nexus.

The terms “startup,” “early-stage,” and “emerging growth” are undefined, so managers should consider how they have characterized their funds' strategies for offering and investor reporting purposes.

A California nexus is broadly defined and exists where the VCC (i) is headquartered in California; (ii) has a significant presence or operational office in California; (iii) invests in California-based businesses; or (iv) solicits or receives investments from California residents.

Covered entities are determined at the individual vehicle level, not at the adviser level, so a manager will need to analyze which vehicles it advises are covered entities under the law.

ANNUAL REPORTING REQUIREMENTS

Demographic Data from Prescribed Survey

Covered entities must submit aggregated demographic data for each “founding team member” of all businesses in which the covered entity made a venture capital investment in the prior year. The required information includes: (i) gender identity, including nonbinary and gender-fluid identities; (ii) race; (iii) ethnicity; (iv) disability status; (v) LGBTQ+ identification; (vi) veteran or disabled veteran status; (vii) California residency; and (viii) whether any founding team member declined to provide any of the preceding information.

A “founding team member” is (a) a non-passive owner who held initial shares and contributed to the business's concept, research, or development before shares were issued, or (b) the CEO or president.

Diverse Founder Investment Metrics

The annual report must also include the total number and dollar amount of investments in businesses “primarily founded by diverse founding team members,” broken down by demographic category and expressed as a percentage of total venture capital investments made in the prior calendar year. A business is “primarily founded by diverse founding team members” if more than half of founding team members responded to the survey and at least half of respondents self-identify as belonging to one or more diverse categories (women, nonbinary individuals, racial or ethnic minorities, disabled individuals, veterans, or LGBTQ+ individuals).

Investment-Level Data

Covered entities must also report (i) the dollar amount invested in each portfolio company during the prior year and (ii) each company's principal place of business. This reporting obligation applies even if all founding team members decline to respond to the survey.

Consolidated Reporting Option

A “business that controls” a covered entity may submit a consolidated report on behalf of multiple covered entities. Although “control” is not defined, fund managers should generally be able to file a single report covering all of their in-scope funds, or alternatively file separately for each fund.

Survey Process and Privacy Considerations

Covered entities must offer each founding team member the opportunity to complete the DFPI's standardized survey form. The law prohibits covered entities from encouraging or influencing survey participation, requires anonymized data collection and reporting, and bars survey distribution until after the investment agreement is executed and funds are transferred in order to avoid undue coercion to respond. The survey form itself states that participation is voluntary, no adverse action will result from declining, and only aggregated data will be reported.

Covered entities should also consider implications under the CCPA and other applicable privacy laws. Entities should maintain a privacy policy addressing data use, protection, and retention and should provide this to founders along with survey requests. In addition, appropriate controls should be maintained on survey responses received, including restricting access to such records over the required retention period (see below) and appropriate disposal procedures once retention is no longer required.

Public Availability of Reports

The DFPI must make filed reports publicly accessible, searchable, and downloadable on its website, and may publish aggregate data.

Fees and Penalties

Each report submission to the DFPI is subject to a minimum fee of $175, which may be adjusted to reflect the DFPI's administrative costs.

If a covered entity fails to file an annual report by April 1, the DFPI is required to provide notice to the covered entity and allow a 60-day period to submit the report without penalty. Similar notice-and-cure mechanics apply to failures to timely update entity-level information. Continued noncompliance after the cure period may result in enforcement actions, including cease and desist orders, recovery of costs and attorney's fees, injunctive relief, and daily monetary penalties of up to $5,000 per day, with higher amounts possible for reckless or knowing violations as determined by the Commissioner of Financial Protection and Innovation.

Record Retention

Covered entities must maintain records related to their reporting obligations and preserve records related to a delivered report for at least five years after the report is delivered. The DFPI has the authority to examine records to assess compliance and can require production of documents and written reports or answers.

RECOMMENDED NEXT STEPS

Managers should take the following steps to ensure timely compliance:

Confirm Coverage: Evaluate whether each fund or vehicle (and/or its manager) meets the “venture capital company” definition and the “covered entity” criteria, including the California nexus test. This requires an entity-by-entity analysis.

Identify Reporting Structure: Assess whether reporting will be done at the fund level or via a controlling entity report covering multiple covered entities, and map which investments will be captured.

Build Investment-Tracking Workflow: Because the first report will cover 2025 investments, ensure internal compliance systems capture the amounts invested per portfolio company and each portfolio company's principal place of business. Also review investments of covered entities in calendar year 2025 to determine which are “venture capital investments” under the law.

Distribute Surveys: Distribute the DFPI's standardized survey to founding team members of applicable venture capital investments, either directly or via such portfolio companies.

Register with the DFPI: Register once the registration portal is available and no later than March 1, 2026.

Update Deal Processes: Consider ongoing deal processes and compliance functions to capture required information on future investments in an orderly manner, including correct handling of personal information with appropriate privacy controls. Prepare to integrate the DFPI survey and the required founder disclosures into post-closing workflows.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.