California's Venture Capital Diversity Reporting Requirements Take Effect

California’s Venture Capital Diversity Reporting Requirements Take Effect | Wilson Sonsini California’s Venture Capital Diversity Reporting Requirements Take Effect Alerts March 3, 2026 California’s statute on Fair Investment Practices by Venture Capital Companies (FIPVCC) 1 requires that venture capital companies file annual reports to report demographic data related to founders of their portfolio companies in which they have invested in the prior year. Venture capital companies must register beginning March 1, 2026, and submit annual reports by April 1, 2026. On March 1, 2026, California’s Department of Financial Protection and Innovation (DFPI) opened its Venture Capital Company Reporting Portal (VCC Portal) for registration and report filing under FIPVCC. Overview The FIPVCC creates a new venture capital demographic survey and reporting regime administered by DFPI. Under the FIPVCC, certain entities which invest in startup, early-stage or emerging growth companies and have a California nexus (Covered Entities) are required to register with DFPI, circulate a prescribed demographic survey to collect demographic data from founders of portfolio companies in which they invested in the prior year, and submit an annual report of anonymized data collected . The demographic information collected under the FIPVCC includes gender identity, race, ethnicity, disability status, LGBTQ+ status, California residency, and veteran status. The demographic data will be reported to the California Civil Rights Department, and each report will also be made publicly available on the DFPI’s website. We anticipate that thousands of venture-backed start-ups will receive form surveys (VCC Surveys) requesting demographic information from their investors this month. Founders should be aware that completion of VCC Surveys is strictly voluntary and there is no legal requirement to provide the requested information or respond in any way. Covered Entities are required by the law to provide the demographic survey to their portfolio company founders, but are prohibited from encouraging, incentivizing, or attempting to influence the decision of a founding team member to participate. See below for more on the FIPVCC registration and reporting requirements including information about deadlines, penalties, affected entities, and answers to commonly asked questions regarding the law. Registration and Reporting Deadlines Starting March 1, 2026: Covered Entities must register and submit required identifying and contact information to DFPI via the VCC Portal. DFPI has published a VCC Portal External User Guide to aid Covered Entities in the registration process. Covered Entities should begin using the DFPI-developed, VCC Survey form to collect anonymized demographic information from the founding team members 2 of businesses that the Covered Entity invested in during the 2025 calendar year. Covered Entities Are Required to Use DFPI’s VCC Survey Form By April 1, 2026 (and annually thereafter): Covered Entities must file a standardized Venture Capital Demographic Data Report (VCC Report) encompassing investments made in the 2025 calendar year by April 1, 2026 (and annually thereafter by April 1). Each VCC Report contains aggregated and anonymized demographic data and investment information for investments made by the Covered Entity in the prior calendar year. Penalties for Non-Compliance Penalties for failure to file a required VCC Report (after notice and 60 days to cure) include fines of up to $5,000 (or more for knowing or reckless violations) for each day during which the violation continues, orders requiring the entity to desist and refrain from the violation and payment of DPFI’s attorney’s fees and investigative expenses. 3 VCC Report Data Collection Process When collecting demographic information from founding team members of businesses the Covered Entity invested in during the prior calendar year, Covered Entities are required to use the DFPI-developed VCC Survey form. The VCC Survey form must be accompanied by a written disclosure to each founding team member that states all the following: The founding team member’s decision to disclose their demographic information is voluntary. No adverse action will be taken against the founding team member if they decline to participate in the survey. The aggregate data collected for each demographic category will be reported to DFPI. 4 Covered Entities may not send the VCC Surveys to founding team members until after the Covered Entity has executed an investment agreement with the business and made the first transfer of funds. Once data has been collected via VCC Surveys, Covered Entities prepare and file annual VCC reports containing all of the following information for the founding teams of every business in which the Covered Entity made a venture capital investment in the prior calendar year to the extent the information was provided by the founding team: The gender identity of each member of the founding team, including nonbinary and gender-fluid identities. The race of each member of the founding team. The ethnicity of each member of the founding team. The disability status of each member of the founding team. Whether any member of the founding team identifies as LGBTQ+. Whether any member of the founding team is a veteran or a disabled veteran. Whether any member of the founding team is a resident of California. Whether any member of the founding team declined to provide any of the information described above. 5 Determining If an Investment Vehicle Is a Covered Entity Under the FIPVCC, venture capital companies that primarily engage in the business of investing in, or providing financing to, start-up, early-stage, or emerging growth companies, and have a California nexus are defined as Covered Entities that are subject to the law’s registration and reporting requirements. To determine if an entity is a Covered Entity under the FIPVCC, a multi-step analysis is required: Step 1: Does entity meet the definition of “venture capital company” in the FIPVCC? “Venture capital company” means an entity that satisfies one or more following conditions: 6 at least fifty percent (50%) of its assets (other than short-term investments pending long-term commitment or distribution to investors), valued at cost, are venture capital investments; 7 or the entity is a “venture capital fund” as defined in rules adopted by the Securities and Exchange Commission; 8 or the entity is a “venture capital operating company” as defined in rules adopted by the U.S. Department of Labor. 9 If the entity does not meet (A), (B) or (C) above, then the entity is not a Covered Entity and VCC registration and reporting is not required. If the entity meets one or more of (A), (B) or (C) above, then proceed to Step 2. Step 2: If the entity meets the definition of “venture capital company,” does the venture capital company meet BOTH of the following criteria? Step 2a: Does the venture capital company primarily engage in the business of investing in, or providing financing to, startup, early-stage, or emerging growth companies? 10 If the answer to this question is yes, then proceed to Step 2b. If the answer to this question is no, then the venture capital company is not a Covered Entity, and registration, demographic information collection, and VCC Report filing is not required. Step 2b: Does the venture capital company have a nexus to California? A California nexus exists if the venture capital company meets any of the following criteria: the venture capital company is headquartered in California; the venture capital company has a significant presence or operational office in California; the venture capital company makes venture capital investments in businesses that are located in, or have significant operations in, California; or the venture capital company solicits or receives investments from a person who is a resident of California. 11 If the venture capital company does not meet any of (A) through (D) above, then the venture capital company is not a Covered Entity and registration is not required. If the venture capital company engage in the business of investing in, or providing financing to, start-up, early-stage, or emerging growth companies and meets at least one of the criteria in (A) through (D) above, then the venture capital company meets the definition of Covered Entity and must register and file VCC Reports. Examples of Entities that are not Covered Entities under the FIPVCC: Individuals, private equity funds, hedge funds, and other investment vehicles that do not meet the definition of a “venture capital company” under the FIPVCC. Venture capital companies that do not primarily engage in the business of investing in, or providing financing to, startup, early-stage, or emerging growth companies. Venture capital companies that neither maintain a California office nor invest in California-based businesses or accept funds from California residents. Portfolio companies themselves (the reporting requirement is for the investment entity, not the business which received the venture capital investment). Commonly Asked Questions If an investor or investment vehicle does not receive management rights in connection with its investments, does it qualify as a venture capital company under the first prong of the venture capital company definition? Usually no, not under the first prong. A “venture capital investment” requires an investment in an operating company in which the investor has or obtains “management rights.” If those rights are absent, the investment typically will not count as a venture capital investment for the first-prong test. 12 However, “management rights” may be construed to be broader than board seats, board observer rights, or veto rights. The current California rule defines management rights to include the right to substantially participate in management, substantially influence conduct, or provide (or offer to provide) significant guidance and counsel. 13 Commentary on the definition of “venture capital company” supports a broad reading of management rights and specifically notes that historical venture capital management rights have included inspection or information rights, in addition to veto or approval rights and board membership or observer rights. This commentary also clarifies that management rights may be held by one person alone and that an offer to provide significant guidance and counsel is included. 14 Information and/or inspection rights alone may be enough to qualify as “management rights” in appropriate circumstances, but there is no bright-line test for when an information-rights package alone is sufficient. The strongest cases are where deal documents support a meaningful guidance-and-counsel role, not merely passive reporting. Note, however, that even if an entity does not qualify as a “venture capital company” under the first prong of the venture capital company definition due to a lack of management rights, the entity may still qualify under the alternative prongs if it is a “venture capital fund” or “venture capital operating company” under the other two prongs. 15 Are start-up founders that receive VCC Surveys obligated to respond? No, completion of VCC Surveys by start-up founders is strictly voluntary and there is no legal requirement for founders to provide the requested information or respond in any way. Founders that elect not to participate do not need to take any action. Founders should also be aware that Covered Entities are prohibited from encouraging, incentivizing, or attempting to influence the decision of a founding team member to participate. When determining whether to complete a VCC Survey, founding team members should be aware that, while their responses will be anonymized and aggregated, each Covered Entities VCC Report will be made publicly available on DFPI’s website. In some circumstances, the combination of demographic information and specific investing fund information could make information about a portfolio company or its founders identifiable, including to employees at the portfolio company. Founding team members that elect to answer the survey should follow the instructions on the VCC Survey Form and return the completed form to the requesting investor. Founders should not send completed VCC Surveys to DFPI. 16 Can a venture firm submit single report for multiple funds? Yes. A Covered Entity may satisfy the requirements of the FIPVCC by providing a report prepared by a business that controls each Covered Entity at any time during the prior calendar year if the report contains all of the information required by the statute. 17 Do FIPVCC requirements apply to non-U.S. entities? Yes, depending on whether the fund/entity has a California nexus. The statutory trigger is not citizenship and depends on whether the entity is a “Covered Entity” and satisfies one of the California nexus tests, including soliciting or receiving investments from a person who is a resident of California. If a non-U.S. fund, adviser, or vehicle otherwise meets the “venture capital company” definition and the FIPVCC covered entity criteria, it can be in scope. 18 Does the FIPVCC apply to non-corporate entities such as single member LLCs? Potentially yes. The definition of “venture capital company” applies to any “entity” that satisfies one of the three requirements, and it does not exclude LLCs (including single-member LLCs) from that definition. The analysis is functional, not based solely on entity form. 19 Are there privacy concerns related to collection of data under the FIPVCC ? Yes, Covered Entities are being asked to solicit and handle information that is considered “sensitive” or “special category data” under certain privacy laws when capable of being associated with an individual, including the California Consumer Privacy Act (CCPA) and the General Data Protection Regulation (GDPR), assuming those laws apply to the Covered Entity. Moreover, the FIPVCC places an affirmative duty on all Covered Entities to collect such information only through a standardized survey form published by the DFPI and only in a manner that does not associate the survey response data with an individual founding team member. Cal. Corp. Code §§ 27501(c)(1), (d)(1). Covered Entities also have an affirmative duty under the FIPVCC to report the survey data in a manner that does not associate the survey response data with an individual founding team member. Covered Entities will thus have to take care in how they process survey responses to preserve founding team member anonymity from collection to reporting. Is there a de minimis amount of investment that needs to be received for FIPVCC registration and reporting requirements to apply? No, neither the statute nor DFPI guidance provide a de minimis threshold. The “covered entity” definition asks whether the venture capital company “solicits or receives investments from a person who is a resident of California” and does not include a dollar threshold, percentage threshold, or materiality qualifier. 20 We will continue to monitor developments around FIPVCC and provide updates to extent DFPI issues additional guidance. For more information, please contact Bradley Doline , Becki DeGraw , or any member of the Wilson Sonsini’s Corporate practice team. [1] Cal. Corp. Code § 27500 et seq. [2] “Founding team member” means either of the following: (1) A person who satisfies all of the following conditions: (A) The person owned initial shares or similar ownership interests of the business. (B) The person contributed to the concept of, research for, development of, or work performed by the business before initial shares were issued. (C) The person was not a passive investor in the business. (2) A person who has been designated as the chief executive officer or president. Cal. Corp. Code § 27500(e). [3] Cal. Corp. Code § 27504(a). [4] Cal. Corp. Code § 27501(c)(3). [5] Cal. Corp. Code § 27501(b)(1). [6] 10 CCR § 260.204.9(a)(4). [7] “Venture capital investment” means an acquisition of securities in an operating company as to which the investment adviser, the entity advised by the investment adviser, or an affiliated person of either has or obtains management rights as defined in 10 CCR § 260.204.9(a)(4). 10 CCR § 260.204.9(a)(5). [8] 17 C.F.R. § 275.203(l)-(1). [9] 29 C.F.R. § 2510.3-101(d)). [10] Cal. Corp. Code § 27500(b)(1). [11] Cal. Corp. Code § 27500(b)(2)). [12] 10 CCR Sec. 260.204.9(a)(5). [13] 10 CCR Sec. 260.204.9(a)(7). [14] Final Statement of Reasons , 10 CCR. Sec. 260.204.9 (OP 07/99), at 3, 8. [15] 10 CCR. Sec. 260.204.9(a)(4)(B)-(C). [16] Cal. Corp. Code § 27501(c). [17] Cal. Corp. Code § 27501(d)(3). [18] Cal. Corp. Code § 27500(b)(2)(D). [19] 10 CCR § 260.204.9(a)(4). [20] Cal. Corp. Code § 27501(b). Contributors Becki DeGraw Bradley H. Doline people insights about us careers Binder Alumni Mailing List Signup Client FTP Portal Privacy Policy Terms of Use Accessibility Twitter LinkedIn Facebook Instagram Youtube Copyright © 2026 Wilson Sonsini Goodrich & Rosati. All Rights Reserved.