Enacted in its earliest form in 2023 (as SB 54) and amended in 2024 (by SB 164), California’s Fair Investment Practices by Venture Capital Companies (FIPVCC) Law is intended to increase transparency around the demographics of founders receiving venture funding and to broaden equitable access to capital, with the DFPI overseeing implementation and enforcement. Under the law, asset managers with a California nexus will be required to collect, aggregate, and publicly report standardized demographic information about founders for certain qualifying investments made during the prior calendar year.
Who must comply?
The FIPVCC Law reporting requirements apply to a “covered entity,” defined as a “venture capital company” that primarily focuses on investing in or providing financing to start-up, early-stage, or emerging growth companies and has a sufficient connection to California.
For purposes of the FIPVCC law, a “venture capital company” includes an entity that meets any one of three tests: at least once each year, 50% or more of its assets (valued at cost, excluding short‑term holdings) are invested in (1) “venture capital investments” or “derivative investments,” as defined in the California rule; (2) a “venture capital fund,” under the Investment Advisers Act of 1940; or (3) a “venture capital operating company,” under ERISA.
A sufficient connection to California exists if the entity is headquartered in California, has a significant presence or operational office in California, makes venture investments in businesses located in or with significant operations in California, or solicits or receives investments from a California resident. Although DFPI has not yet defined “significant presence,” “operational office,” “significant operations,” “startup,” “early-stage,” or “emerging growth,” the law appears to reach a broad range of funds, including those managed by firms located outside California. Managers should therefore take the practical steps outlined below, while continuing to monitor for further guidance as the rules are clarified.
Key deadlines and required filings
- Beginning March 1, 2026, a venture capital company primarily engaged in investing in or financing start-up, early-stage, or emerging growth companies and with a California nexus must register with the DFPI by submitting specified entity and contact information through the agency’s online portal, which is not yet available, and must keep that information current.
- By April 1, 2026, and annually thereafter, each covered entity must provide the DFPI’s standardized demographic survey to founding team members of portfolio companies that received qualifying investments during the prior calendar year, aggregate the voluntary anonymized responses, and submit the required report and related investment-level information to the DFPI, which will make the reports publicly available.
What must be reported?
Covered entities must submit an annual report (Venture Capital Demographic Data Report) that includes aggregated, anonymized demographic data from the standardized surveys (Venture Capital Demographic Data Survey), along with metrics showing the number and percentage of investments in companies primarily founded by diverse teams. The report must also disclose the total amount invested in each portfolio company during the prior calendar year and each company’s principal place of business. Surveys may only be sent after an investment has closed and funded, participation is voluntary, and managers may not guess or infer demographic information.
The required demographic data covers each founding team member’s gender identity, race, ethnicity, disability status, and certain additional categories, as well as whether a founder declines to respond. A “founding team member” includes early owners who contributed to the business, as well as the company’s chief executive officer or president.
A controlling entity may submit a single consolidated report for multiple-covered funds, as long as the submission contains all required information for each fund within scope, allowing managers to centralize reporting rather than file separate fund-level reports.
Fees, penalties, and recordkeeping
Covered entities should anticipate a DFPI filing fee of at least $175 per report, subject to additional administrative costs.
If an annual report is not submitted by the April 1 deadline, the DFPI must first provide notice and a 60-day timeframe to correct the issue before penalties apply, with similar timeframes for failures to update entity-level information. If deficiencies are not resolved within the applicable timeframes, the DFPI may pursue injunctive relief, and civil penalties may reach up to $5,000 per day, with higher amounts for reckless or knowing violations.
Covered entities are also required to maintain records supporting their reporting obligations and materials related to each report for at least five years, subject to DFPI review.
Practical steps to prepare now
- Managers should evaluate whether any of their funds qualify as covered entities under the FIPVCC and begin establishing internal data collection and reporting processes.
- Establish ongoing processes to capture the required data for each qualifying investment, coordinate the distribution and collection of compliant post-closing surveys, provide appropriate founder notices, and implement secure anonymization procedures for aggregation and reporting.
- Implement appropriate record-retention controls, assign responsibility for the March 1 registration filings, and prepare for potential public scrutiny given the public availability of the reports.
Nixon Peabody’s Investment Funds team is tracking the FIPVCC law and other regulatory developments shaping the innovation economy. Our team is available to help you prepare for the 2026 deadlines and implement practical, efficient compliance strategies for your portfolio and operations.