California suspends VC diversity data law before deadline
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- California's DFPI suspended enforcement of the Fair Investment Practices by Venture Capital Companies Law just before the Wednesday deadline for VC firms' first demographic disclosures about portfolio company founding teams.
- The National Venture Capital Association opposed the law, arguing that voluntary data collection would inflate diversity statistics and that publishing inaccurate data could lead to unfair attacks on investors genuinely trying to tackle diversity issues.
- NVCA president Bobby Franklin wrote to Governor Newsom in February seeking another delay, citing the state's late publication of the standardized survey and its failure to create a system for firms to register with regulators.
- DFPI announced it will begin a new rulemaking process that could last up to 12 months, seeking input from investors, industry groups, and founders before establishing final regulations.
- Blake Scholl (Boom Supersonic CEO) and Joe Lonsdale (8VC co-founder and Palantir co-founder) publicly criticized the survey effort on social media in the weeks before the deadline; Lonsdale suggested 8VC's data would have shown disproportionate diversity.
- The law, passed in 2023 and signed by Governor Newsom, was amended in 2024 to delay reporting until April 1, 2026, and to authorize daily fines for noncompliance.
Why it matters: California's suspension removes a key transparency mechanism designed to track whether women and minority founders receive equitable startup funding, pausing a law scheduled to take effect April 1, 2026 with daily fines for noncompliance. The 12-month rulemaking window gives the VC industry another year of voluntary compliance while federal DEI rollbacks create a more favorable climate for industry pushback.
