California’s Venture Capital Diversity Registration and Reporting Deadlines Approach: Survey and Reporting Forms Now Available; Registration Portal Pending

The initial registration and reporting deadlines under California’s Fair Investment Practices by Venture Capital Companies (FIPVCC) Law are fast approaching. “Covered entities” under the FIPVCC Law – a broad category that can even capture funds managed by sponsors who do not consider themselves California venture capital investors – should be preparing now to satisfy their registration and reporting obligations. Though enacted in its earliest form in 2023 (as SB 54) and amended in 2024 (by SB 164), until now managers have been hamstrung in preparing to meet reporting obligations under the law because the California Department of Financial Protection and Innovation (the “DFPI”) had not issued the forms necessary to comply with those obligations. The DFPI has now published the official survey and reporting forms, and we recommend that in-scope managers act promptly to ensure timely compliance. As of the date of this alert, the DFPI has not yet made the registration portal available. 

Key Dates

• Registration: Commencing March 1, 2026, covered entities must register on the DFPI’s portal (as of the date of this alert, the DFPI has not yet made the registration portal available).
• Reporting: By April 1, 2026, and each year thereafter, covered entities are required to use the reporting form provided by the DFPI to submit aggregated and anonymized demographic information voluntarily provided by the “founding team members” of businesses in which the “covered entity” made a “venture capital investment” (each discussed below) in the prior calendar year.

Next Steps

Managers should:

• Identify which of their investment vehicles, if any, are covered entities under the law¹;
• Review the investments of those covered entities in calendar year 2025 to determine which are “venture capital investments” under the law;
• Distribute DFPI’s standardized survey to founding team members of applicable venture capital investments (either directly, or via such portfolio companies);
• Register with the DFPI once the registration portal is available and no later than March 1, 2026;
• Determine whether reporting will be done at the fund level (i.e., by filing a separate report for each fund), or at the manager level, by providing a report prepared by a business that controls each covered entity (i.e., fund) at any time during the prior calendar year;
• Input the aggregated and anonymized survey responses, as well as the other required investment-level data, into the DFPI reporting form, and submit the completed DFPI reporting form to the DFPI by April 1, 2026. Filed reports will be publicly accessible on the DFPI’s website. Back-up data for reports must be preserved for at least five years after the report is delivered; and
• 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. Surveys should not be provided to founding team members until after the covered entity has executed an investment agreement with the business and made the first transfer of funds.

Additional guidance and resources are available on the DFPI’s VCC Reporting Program webpage.

Essential Background for Compliance with the FIPVCC Law

Venture Capital Companies and Venture Capital Investments

The FIPVCC Law imposes reporting obligations on certain “venture capital companies.” Confusingly, the FIPVCC Law defines “venture capital companies” (“VCCs”) to capture a wide variety of investment vehicles (not operating companies). Specifically, the FIPVCC Law defines VCC to mean one or more of:

1. an entity that has, on at least one occasion during the annual period commencing with the date of its initial capitalization, and on at least one occasion during each annual period thereafter, at least 50% of its assets comprising “venture capital investments;”
2. a “venture capital fund” as defined under the Investment Advisers Act of 1940; or
3. a “venture capital operating company” as defined under the Employee Retirement Income Security Act of 1974.

A “venture capital investment” for purposes of the FIPVCC Law means an acquisition of securities in an operating company in which the investment adviser or its affiliates obtain “management rights,” or the right, obtained contractually or through ownership of securities, to substantially participate in, to substantially influence the conduct of, or to provide (or to offer to provide) significant guidance and counsel concerning, the management, operations or business objectives of the operating company in which the venture capital investment is made. Consequently, if a fund obtains management rights in the majority of its investments, it would be a VCC under the FIPVCC Law, regardless of the stated investment strategy of the fund. This is in contrast to the Advisers Act definition of “venture capital fund,” which requires (among other conditions) that the fund represents to investors or prospective investors that it pursues a “venture capital strategy.”

Covered Entities

The reporting requirements under the FIPVCC Law apply to a subset of VCCs meeting two criteria:

1. the VCC “primarily” engages in the business of investing in, or providing financing to, startup, early-stage, or emerging growth companies; and
2. the VCC has a California nexus.

“Startup,” “early-stage” and “emerging growth” are not defined terms under the law, and therefore there is not one way to test whether a particular fund is a covered entity under the first prong. We recommend managers consider (i) how they have categorized their funds’ investment strategies and holdings for offering and investor reporting purposes in determining whether the first criterion under the definition of “covered entities” has been satisfied with respect to any fund and (ii) whether a fund has in fact “primarily” engaged in the business of investing in, or providing financing to, startup, early-stage, or emerging growth companies.

A California nexus means the VCC satisfies any one of the following criteria:

1. the VCC is headquartered in California;
2. the VCC has a significant presence or operational office in California;
3. the VCC makes venture capital investments in businesses that are located in, or have significant operations in, California; or
4. the VCC solicits or receives investments from a person who is a resident of California.

Under the last prong, VCCs located in other states or countries could have the required California nexus if they solicit one California resident, even if the solicitation occurs outside of California.

Note that “covered entities” are at the individual vehicle level, not adviser level, so a manager will need to analyze which vehicles it advises are covered entities under the law. Because “covered entities” under the FIPVCC Law will typically be passive investment vehicles, not operating companies, it is unclear how to interpret references in the definition of “California nexus” to a covered entity being “headquartered” or having “significant presence” or an “operational office” in California. However, the third and fourth prongs of the definition of “California nexus” appear likely to capture a large number of funds managed by firms that are not themselves located in California.

Reporting Requirements

Demographic Data from Prescribed Survey

Under the FIPVCC Law, 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. Specifically, the required information includes such person’s (i) gender identity; (ii) race; (iii) ethnicity and (iv) disability status. In addition, the report must indicate whether any founding team member (w) identifies as LGBTQ+, (x) is a veteran or a disabled veteran, (y) is a resident of California or (z) declined to provide any of the preceding information.

The law further obligates covered entities to report the total number and dollar amount (each, as a percentage of total venture capital investments made) of venture capital investments to businesses primarily founded by diverse founding team members, aggregated and broken down by each of the above categories, during the prior calendar year. For these purposes, “primarily founded by diverse founding team members” means more than half of the responding founding team members responded to the annual survey, and at least half of the founding team members responding to the survey self-identify 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. A “founding team member” covers anyone who (i) owned initial ownership interests in the business, contributed (conceptually/developmentally) to the business before such initial shares were issued and was not a passive investor in the business, or (ii) is the chief executive officer or president of the business.

Investment-Level Data

Covered entities must also report the total amount of money in venture capital investments and the principal place of business for each company in which the covered entity made a venture capital investment during the prior calendar year.

Consolidated Report by Control Persons Permitted

To fulfill these requirements, a covered entity may submit a consolidated 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 required information. While there is not a clear definition of “controlling” a covered entity, we believe it should generally be reasonable for a fund manager to file a report on behalf of all funds it manages that are in scope. Alternatively, firms may elect to make separate filings for each individual fund within scope.

Enforcement and Fees

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 a report, the DFPI will issue a notice granting a 60-day window to comply without penalty. Continued noncompliance after this period may result in enforcement actions, including cease and desist orders, recovery of costs and attorney’s fees, and daily monetary penalties. Penalties may reach 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 (the “Commissioner”). The Commissioner is empowered to investigate compliance, require the production of documents, request written responses, and conduct both public and private inquiries. The Commissioner may also promulgate or amend rules, forms, and orders as necessary to administer the FIPVCC Law.

Privacy Considerations

As discussed in our prior alerts, covered entities should consider how the FIPVCC Law implicates “comprehensive” privacy laws like the California Consumer Privacy Act (CCPA) in California and similar laws in Colorado, Connecticut, and Virginia, as well as privacy laws to which covered entities outside the U.S. may be subject – including those in countries where the collection of demographic data may be less culturally appropriate. Many of these laws contain restrictions around the use of so-called “sensitive” personal information, which includes race and ethnicity data relating to an identifiable individual. Covered entities that are impacted by the comprehensive state and ex-U.S. privacy laws are required to make disclosures about their collection and use of “sensitive” personal information and can rely on these disclosures (normally accomplished through a privacy policy / notice) as implied consent; some states, however, require more affirmative consent prior to its collection and use. However, state privacy laws also have express or implied exemptions for cases where the obligations would restrict the covered entity’s ability to comply with federal and other state laws. Accordingly, covered entities can collect, aggregate, and report the required information regardless of whether consent is obtained under the state privacy laws. Nevertheless, the further use of the data by the covered entity strongly suggests that covered entities should post and provide a link to a privacy policy that covers such information and makes clear what, if any, future use will be made of the data, how it will be shielded from inappropriate uses, and that it will be retained as required by law. We also recommend that covered entities communicate to the founding team members (directly or indirectly) that providing the data will be construed as consenting to the linked privacy policy.

Covered entities that are subject to ex-U.S. privacy laws – particularly those in jurisdictions where demographic data is not routinely collected in the employment context – should make especially clear to relevant individuals that the provision of their personal information is voluntary. This is consistent with the language of the standardized survey.

Other Resources from Ropes & Gray

For our previous alerts and podcasts on this topic, please visit:

• California’s New Law to Increase Transparency of Founder Diversity in Investments by Venture Capital Companies (October 9, 2023 Alert)
• Overview of New California Law Requiring Disclosure on Diversity in VC Investments by “Venture Capital Companies” (December 4, 2023 Podcast)
• Covered Funds in Limbo in Face of California’s Recent Diversity Reporting Law (February 27, 2024 Alert)
• California Amendments to Venture Capital Diversity Reporting Law Provide Some Respite on Scope of Impacted Funds and Reporting Deadline; Keep Substance of Reporting Intact (July 29, 2024 Alert)

We are developing model materials to be used in connection with obtaining information from founding members of covered portfolio companies, which we are happy to provide upon request. Please contact Colleen Meyer, Catherine Skulan, or your usual Ropes & Gray adviser with any questions about those materials, the FIPVCC Law, and the application of the reporting requirements thereunder to your firm.