California’s New Venture Capital Diversity Reporting Law: Key Deadline Approaching

California’s New Venture Capital Diversity Reporting Law: Key Deadline Approaching

California’s new Fair Investment Practices by Venture Capital Companies Law (FIPVCC) took effect on March 1, 2026, introducing registration and diversity reporting requirements for certain venture capital companies with ties to California. The FIPVCC is intended to promote transparency and diversity in venture capital investments.

This article provides high-level guidance from Reicker Pfau LLP on the applicability of the FIPVCC, key compliance deadlines, potential penalties for non-compliance, and practical next steps for venture capital companies.

Which Companies Must Register?

The FIPVCC requires any company that qualifies as a “Covered Entity” to register with the California Department of Financial Protection & Innovation (DFPI). The FIPVCC defines “Covered Entity” broadly and may apply to companies that do not maintain a physical presence in California.

A company is considered a “Covered Entity” if it meets each of the three following criteria:

1. The company satisfies one of the following definitions of a “venture capital company”:
   a. During the annual period beginning on a company’s date of initial capitalization, and during each annual period thereafter, 50% or more of the company’s assets (other than short-term investments pending long-term commitment or distribution to investors), valued at cost, are venture capital investments or derivative investments; or
   b. The company is a “venture capital fund” under the Investment Advisers Act of 1940; or
   c. The company is a “venture capital operating company” under ERISA.
2. The company primarily engages in the business of investing in, or providing financing to, startup, early-stage, or emerging growth companies.
3. The company has a nexus to California under the FIPVCC by satisfying one of the following requirements:
   • The company is headquartered in California; or
   • The company maintains a significant presence or office in California; or
   • The company invests in companies located in or with significant operations in California; or
   • The company solicits or receives investments from a California resident.

Required Reporting Information

Covered Entities must provide a standardized demographic data survey to each founding team member of every business in which the Covered Entity has invested, requesting that such members voluntarily disclose certain demographic information such as gender, race, ethnicity, disability status, LGBTQ+ status, veteran status, disability status, and California residency. A founding team member is a person that either:

1. Has been designated as the chief executive officer or president of a company, or
2. 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, and
   c. the person was not a passive investor in the business.

Covered Entities must then submit a demographic report to the DFPI summarizing aggregated and anonymized demographic information received in surveys completed by founding team members of businesses that received funding from the Covered Entity during the prior calendar year.

In addition to demographic information, Covered Entities must report investment statistics, including venture capital investment amounts made in businesses with diverse founding team members.

The DFPI will publish each Covered Entity’s demographic report on the DFPI website.

Non-Compliance Penalties

If a Covered Entity fails to comply with the FIPVCC, the DFPI must provide notice of such failure and a cure period of 60 calendar days. If non-compliance continues after this period, the Covered Entity may face penalties of up to $5,000 per day, with higher penalties applicable for reckless and knowing violations.

Key Dates

The FIPVCC’s first compliance cycle occurs in 2026:

March 1, 2026: Covered Entities must register with the DFPI through its Venture Capital Company Reporting Portal.
April 1, 2026: Covered Entities must submit their first demographic report, covering venture capital investments made in 2025.

Next Steps

Companies that may be subject to the FIPVCC should consider taking the following steps now:

1. Determine whether the company qualifies as a Covered Entity.
2. Set up a user account with DFPI through the Portal.
3. Identify companies that received venture capital investments from the Covered Entity.
4. Implement procedures to (i) distribute and collect the required founding team member surveys and (ii) aggregate survey responses in a demographic report.
5. Submit the first demographic report to the DFPI through the Portal by April 1, 2026.

Please contact the authors if you have any questions regarding the applicability of the FIPVCC to your company.