California’s New Venture Capital Company Reporting Law: What Fund Managers Should Know

February 28, 2026 22:54:41

1. Overview

California has recently implemented the Fair Investment Practices by Venture Capital Companies Law (FIPVCC) n. FIPVCC introduces mandatory diversity data reporting obligations for certain venture capital companies (covered entities) with a nexus to California and is intended to increase transparency around demographic representation among founders receiving venture capital funding. The FIPVCC is broad in its reach. Having a single investor from or investment in California could bring a private fund within the scope of the law. 

2. Who Is Required to Comply?

You may be subject to reporting if your firm:

· Operates as a “venture capital company”;

· Invests primarily in startup, early-stage or emerging growth companies; and

· Has a connection to California, including:

- Being headquartered in California;

- Having a significant presence or operational office in California;

- Making venture capital investments in businesses that are located, or have significant operations, in California; or

- Soliciting or receiving investments from persons who are California residents.

The term “venture capital company” is defined as being an entity that satisfies one or more of the conditions below:

· 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 fifty percent (50%) of its assets (other than short-term investments pending long-term commitment or distribution to investors), valued at cost, are “venture capital investments,” or “derivative investments.”

· The entity is a “venture capital fund” within Rule 203(l)-1 adopted by the Securities and Exchange Commission under the Investment Advisers Act of 1940, as amended.

· The entity is a “venture capital operating company” as defined in Rule 2510.3-101(d) adopted by the U.S. Department of Labor under the Employee Retirement Income Security Act of 1974.

3. What You Must Do

Beginning March 1, 2026, covered venture capital firms must register with the California Department of Financial Protection and Innovation (DFPI) and provide basic organizational and contact information, including a designated point of contact. By April 1, 2026, and annually thereafter, each covered entity must submit a report covering the prior calendar year’s investments.

The annual report must include aggregated demographic information for founding teams of funded portfolio companies, including gender identity, race and ethnicity, disability status, LGBTQ+ identification, veteran status, California residency, and the number of founders who declined to respond. In addition, funds must disclose the percentage and total amount of investments made in companies primarily founded by diverse founders, the total amount invested in each portfolio company, and each company’s principal place of business. A covered entity must preserve records related to its obligations for at least five years after it delivers each report.

4. Enforcement & Penalties

Failure to submit required information may result in:

• A 60-day cure period following notice; and

• Daily fines of up to $5,000 thereafter.

Penalties for reckless or knowing violations may exceed statutory daily limits. The Commissioner has examination and enforcement authority, including audits and civil actions.

5. Conclusions and Next Steps

FIPVCC represents a meaningful compliance development for funds which invest in startup, early-stage or emerging growth companies. Because the new law sweeps broadly, investment advisers to such funds should carefully examine each fund to ascertain whether FIPVCC applies. If FIPVCC applies, advisers should promptly collect information necessary for the filing. As threshold for the requisite California nexus is set very low, it is important to understand that even funds headquartered outside California or otherwise with limited activities or exposure in California may still be subject to the new reporting obligations under FIPVCC.