Democratic California Governor Gavin Newsom signed a law on Sunday that would force venture capital (VC) companies to disclose diversity data, according to an office press release.
California’s Senate Bill 54 would mandate VC companies operating in the state to provide public yearly diversity reports and would take effect on March 1, 2025, according to its text. The VC companies would be required to disclose data such as the race, disability status and sexual orientation of the individuals on the founding teams of the companies they back. (RELATED: California University Ranked Job Applicants Based On Their Commitment To Diversity, Docs Show)
“This bill resonates deeply with my commitment to advance equity and provide for greater economic empowerment of historically underrepresented communities,” Newsom wrote in a letter to the California state Senate.
It is the first ever American legislative effort to boost diversity in the VC industry, according to TechCrunch.
A “diverse founding team member” is “a founding team member who self-identifies as a woman, nonbinary, Black, African American, Hispanic, Latino-Latina, Asian, Pacific Islander, Native American, Native Hawaiian, Alaskan Native, disabled, veteran or disabled veteran, lesbian, gay, bisexual, transgender, or queer,” according to the text of the bill.
NEW: @GavinNewsom signed my #caleg #SB54, which brings transparency to venture capital investments in CA and is designed to help more women- and minority-owned startups access vital VC funding. SB 54 is the first such transparency measure in the nation.https://t.co/9CuBiyGlaB
— Nancy Skinner (@NancySkinnerCA) October 9, 2023
SB 54 could lead to “misleading and counterproductive data that would hurt the cause of diversity, equity, and inclusion efforts while creating unnecessary costs and risk for California venture capitalists,” the National Venture Capital Association (NVCA) wrote in a letter to Democratic California state Senator Nancy Skinner, who introduced the bill, according to TechCrunch.
California has faced several First Amendment challenges in response to multiple laws Newsom signed in late 2022, which would require compliance from social media platforms and medical doctors regarding certain speech guidelines.
NVCA did not immediately respond to the Daily Caller News Foundation’s request for comment.
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