VC Firms Face New California Reporting Mandate

The amendments in SB 164 narrow certain definitions, expand reporting fields, impose additional governance and record-retention obligations, and clarify timing and compliance expectations for 2026 and beyond.

DFPI Oversight and Timeline
SB 54 originally tasked the California Civil Rights Department with collecting and publishing demographic information about startup founders. Under the 2024 amendments, this responsibility shifted to the DFPI, which will now administer and enforce the program. DFPI representatives have indicated that they are drafting a standardized survey form that fund managers must distribute to portfolio-company founding teams after investments close.

The following are the key dates for compliance:

• March 1, 2026: Fund managers must register with the DFPI, identifying themselves as covered entities.
• April 1, 2026: Fund managers must file their first annual diversity-reporting form, covering investments made in 2025.

The registration filing must also include covered-entity-level information, including the legal name of the fund, physical address, website, and the name, title and email address of a designated compliance contact, per SB 164. The DFPI intends to allow a post-deadline grace period (approximately 60 days from notice of non-compliance) during which covered entities may cure a late or missing filing before penalties of up to $5,000 per day of non-compliance are assessed. As of the date of this alert, DFPI has not yet released the standardized survey form or reporting template, and covered entities should continue to monitor DFPI guidance for further updates.

Who Is Covered
The law applies to “covered entities,” defined broadly to include venture capital firms and similar investment vehicles that:

• Qualify as a “venture capital company” under California Corporations Code § 27500 and related regulations;
• Are primarily engaged in investing in or financing startup, early-stage or emerging-growth companies; and
• Maintain a California nexus, including:

- Being headquartered or having a significant presence or operating in California,

- Investing in California-based portfolio companies, or

- Soliciting or receiving investments from California residents or entities.

Because the “California nexus” standard is broad, even firms without a physical presence in the state may fall within scope if they raise capital from even a single California investor.

What Fund Managers Must Do
The DFPI survey, expected to be released in early 2026, will require fund managers to collect demographic information from founders after signing definitive investment documents and funding such investments. Founders must be informed that:

• Participation is voluntary,
• Responses will be anonymized and reported only in the aggregate, and
• No identifying information will be disclosed.

The amended law specifies the full set of demographic fields that must be made available to founders, including gender identity (with nonbinary and gender fluid options), race, ethnicity, disability status, LGBTQ+ status, veteran or disabled-veteran status, and California residency, as well as a “decline-to-provide” option.

SB 164 also narrowed and clarified the definition of “founding team member.” A reportable founding team member is someone who (1) owned initial shares or similar ownership interests in the business, contributed to the company’s concept or development before the issuance of initial shares, and is not a passive investor in the business, or (2) is designated as chief executive officer or president.

Covered managers must aggregate the information received and report it annually to the DFPI. If no founders respond, the manager must affirmatively indicate that no information was available.

In addition to the demographic data, the fund manager must report investment-level details, including the total amount of money invested into each business during the prior year, the principal place of business of each company and the percentage of venture capital investment made by the covered entity.

Practical Implications
Nearly all venture-focused funds with at least one California investor are likely to be covered. Because survey participation by founders is voluntary, some reports may contain limited or no demographic data, but fund managers are still expected to register and file.

Firms covered should consult with their counsel and:

• Assess coverage under § 27500 and related DFPI guidance.
• Design internal processes for tracking California investments and founder-team outreach.
• Prepare to register with DFPI by March 1, 2026.
• Monitor DFPI updates and the release of the official survey form.
• Update internal privacy and data-governance systems, as SB 164 requires covered entities to retain all records related to each report for at least five years and involves sensitive personal information.
• Be aware of ongoing uncertainty, as SB 164 does not define several key terms (e.g., “emerging growth company,” “significant presence,” “diverse founded”), and further DFPI guidance will be needed.

Conclusion
California’s SB 54 represents a new stage in venture capital transparency regulation aimed at increasing disclosure with respect to diversity of founding teams. With DFPI now leading implementation and the first filings due at the beginning of Q2 of 2026, fund managers should begin compliance planning well before the survey form is released.

Pillsbury’s Investment Funds team is actively tracking DFPI updates and can assist in assessing coverage and preparing filings once the reporting framework is finalized.