Key Points

• Broad jurisdictional reach: The Fair Investment Practices by Venture Capital Companies Law captures any venture capital firm with a California "nexus," including those headquartered elsewhere or even outside the U.S., if they invest in California companies or have even a single California-based limited partner.
• Imminent compliance deadlines: Covered entities must register with the DFPI by March 1, 2026 and submit their first demographic report by April 1, 2026, covering all 2025 investments.
• Voluntary founder participation: While firms must survey all portfolio company founders worldwide, founder participation is entirely voluntary, and firms are prohibited from pressuring founders to respond.

The state of California recently implemented the Fair Investment Practices by Venture Capital Companies Law (FIPVCC), which establishes a mandatory transparency regime requiring venture capital firms to report aggregated demographic data on portfolio company founders. For our international partners, it is critical to recognize that the jurisdictional reach is broad and often captures firms operating entirely outside of the United States. The same applies to U.S.-based funds organized in other states — a fund headquartered in New York or any other jurisdiction may be covered if it has any California nexus as described below.

Key Compliance Deadlines

The first reporting cycle is imminent and covers all venture capital investments made during the 2025 calendar year. Covered entities must survey the founding teams of their portfolio companies and submit aggregated demographic data by the deadlines below.

• March 1, 2026: Registration. Covered entities must register via the California Department of Financial Protection and Innovation (DFPI) portal.
• April 1, 2026: Annual Reporting. Covered entities must submit their first aggregated demographic report to the DFPI.

What Must Be Reported to the DFPI

Covered entities must report the following aggregated demographic data regarding the founding teams of their portfolio companies to the DFPI:

• Gender
• Race/Ethnicity
• LGBTQ+
• Disability
• Veteran status
• California residency

The DFPI will compile filings and publish an annual public report summarizing industry-wide demographic trends in venture capital funding. Individual firm data will also be made publicly available on the DFPI's website; however, no individual founder names will be disclosed.

Applicability: The Nexus Test

A venture capital firm is a “covered entity” if it primarily focuses on early-stage or emerging growth companies and meets any one of the following criteria:

• California Presence: Headquartered or maintains a local office in California.
• California Portfolios: Invests in companies located in, or with "significant operations" in, California. (Note: "Significant operations" includes any material business activity in the state; further regulatory guidance from DFPI is anticipated.)
• California Capital: Solicits or receives capital from a California resident (including individuals, entities or pension funds).

Note: If a fund has even a single limited partner (LP) residing in California, the fund is likely a covered entity.

Voluntary Nature and Surveying

The law is strictly a “disclosure” mandate. It is not a “participation” mandate for founders.

• Founder Autonomy: Participation by founders is entirely voluntary. Firms are legally prohibited from forcing, incentivizing or influencing founders to complete the survey.
• Mandatory Disclosures: When sending any survey, firms must provide a written notice stating that the decision to disclose is voluntary and that no adverse action will be taken against the founder for declining.
• Global Scope: If a firm is a covered entity, it must survey all 2025 portfolio companies, regardless of where that startup is based (Europe, Asia, etc.).
• Anonymity: Founder demographic data must be reported in the aggregate and cannot be associated with any individual founder.

Investment Data Disclosures

In addition to aggregated founder demographic data, covered entities must report investment-level information for each portfolio company that received funding during the prior calendar year. Additional information that covered entities must report includes certain calculated metrics, such as the number and dollar amount of investments in businesses "primarily founded by diverse founding team members" as a percentage of the covered entity's total investments, both in the aggregate and broken down by demographic category. Unlike founder demographic data — which is reported only in aggregated, anonymized form — the investment amounts and portfolio company names and locations will be publicly available on the DFPI website on a company-by-company basis.

Enforcement and Penalties

The DFPI will oversee enforcement. Noncompliant firms receive a notice and shall have a 60-day cure period. Failure to remedy a filing within that window can result in penalties of up to $5,000 per day.

For a step-by-step guide to determining whether your fund is a covered entity and identifying founding team members for survey purposes, see the Appendix: Nexus and Founder Determination Worksheet.

Appendix: Nexus and Founder Determination Worksheet

Step 1: Entity Classification

Does the entity primarily invest in startup or early-stage companies?

[ ] YES [ ] NO

Does the entity manage assets on behalf of third-party investors?

[ ] YES [ ] NO

(If NO to both, the fund is likely exempt. If YES to either, proceed to Step 2. Note: Corporate venture capital arms and family offices that do not manage third-party assets may still be Covered Entities if they answer YES to the first question.)

Step 2: The California Nexus Test

Check all that apply to the fund:

[ ] Headquartered or has an office in California.

[ ] Invested in a business located in or with “significant operations” in California.

[ ] Has at least one Limited Partner (LP) who is a resident of California.

[ ] Has solicited investments from California residents.

(If any box is checked, the fund is a Covered Entity regardless of where the fund is organized).

Step 3: Identifying “Founding Team Members”

Identify individuals who meet either Criterion A or B:

• Criterion A: Owned initial shares, contributed to the concept/research before shares were issued, and was not a passive investor. (Note: All three conditions must be satisfied to meet Criterion A.)
• Criterion B: Is currently the CEO or President.

Step 4: Compliance Safeguards

• [ ] Use the official DFPI-mandated survey form.
• [ ] Include the mandatory “Voluntary Participation” disclosure notice.
• [ ] Ensure no incentives or pressure are applied to founders.

For more information, please contact Matthew R. Kittay at mkittay@foxrothschild.com, Teresa Paikeday at tpaikedayleduc@foxrothschild, Michael A. Sweet at msweet@foxrothschild.com, or another member of our Emerging Companies & Venture Capital Practice Group.

This information is intended to inform firm clients and friends about legal developments, including the decisions of courts and administrative bodies. Nothing in this alert should be construed as legal advice or a legal opinion. Readers should not act upon the information contained in this alert without seeking the advice of legal counsel. Views expressed are those of the author(s) and not necessarily this law firm or its clients. Prior results do not guarantee a similar outcome.