California Suspends Venture Capital Demographic Disclosure Rule Ahead of First Deadline
A new California regulation that would have required in-state venture capital (VC) firms to submit demographic data on the founders of their portfolio companies—including details on founders’ gender and racial identity—has been paused by state regulators just before the first mandatory disclosure deadline this Wednesday. The suspension came in response to widespread public criticism from a slate of prominent tech industry leaders.
“The California Department of Financial Protection and Innovation (DFPI) has announced that it plans to initiate rulemaking in response to comments by various stakeholders relating to the Fair Investment Practices by Venture Capital Companies Law,” the state agency shared in a mid-March post on its website. “Implementation and enforcement of the [law] will be suspended pending completion of the rulemaking and until final regulations are in place.”
California lawmakers first passed the measure in 2023, and Governor Gavin Newsom signed it into law shortly after legislative approval. For decades, women and people of color have secured only a small fraction of total U.S. startup funding, a sharp mismatch relative to their share of the overall national population. Lawmakers designed the rule to bring greater public scrutiny to VC investment decisions, with the goal of fostering more industry equity for underrepresented groups, including disabled founders, veteran founders, and LGBTQ+ founders.
The original law required VC firms and certain other investment groups to file annual reports starting March 1 of last year, detailing the demographic makeup of invested founding teams and how much capital firms allocated to diverse founders. Firms were instructed to collect demographic data via a voluntary, anonymized survey, and California regulators planned to publish all aggregated filings publicly online. Lawmakers amended the law in 2024 to push the first reporting deadline back to April 1, 2026, and added authorization for the state to issue daily fines for noncompliance.
DFPI did not immediately respond to requests for comment on the legal authority the agency used to pause the legislatively set deadline, and Newsom’s office also declined to immediately comment on the suspension.
Investors focused on backing entrepreneurs from underrepresented backgrounds broadly supported the law, but the National Venture Capital Association (NVCA)—the tech investment industry’s leading trade group—opposed the measure. The group argued that voluntary data collection would inflate diversity statistics, and publishing inaccurate data could lead to unfair backlash against investors already working sincerely to address industry diversity gaps. The pause also comes amid a broader national pushback against diversity, equity, and inclusion (DEI) initiatives: over the past year, the Trump administration has cut funding for and attacked DEI programs across both the public and private sectors, leading many businesses and organizations to scale back their own DEI work.
In February, NVCA sent a letter to Newsom calling for another delay to the reporting deadline, arguing that the state had mismanaged the rule’s rollout. According to the association, California regulators did not release the standardized survey for founders to complete until early 2025, and as of February, the state still had not launched the required registration system for firms to sign up with regulators as the law mandates. “This administrative timeline creates an environment ripe for error and threatens to produce the misleading and counterproductive data we previously warned against,” NVCA president and CEO Bobby Franklin wrote.
Last month, as the first reporting deadline approached, dozens of entrepreneurs and investors took to social media to criticize the survey requirement. “The latest California malarky is a requirement for venture investors to collect/report racial and gender statistics,” wrote Blake Scholl, founder and CEO of venture-backed aviation startup Boom Supersonic. “I want to live in a world where merit matters—not skin color or what you have between your legs.” Scholl added that “Boom will not be supporting any of these requests,” and declined to offer further comment to WIRED.
Joe Lonsdale, a Palantir co-founder and prominent investor at VC firm 8VC, posted: “In CA this month, we’re literally required as a venture firm to ask each of our CEO’s in a survey if they are gay. Meanwhile today in Texas the voting machine is like, Y or N, ‘Ban gender nonsense in K-12?’ ‘Ban sharia law?’”
The California agency leading the regulation wrote in its recent notice that it will first collect input from investors, industry groups, and founders before launching a new rulemaking process later this year that could take up to 12 months to complete. The process’ stated goal is “promoting clarity, collaboration, and transparency” around the law.
After the state suspended enforcement, Lonsdale returned to X to write that “CA regulators waited until the most curious VC's sent out the survey ahead of time, then told the rest of us that we don't actually need to do it. 🤷♂️” He went on, “Was reliably informed by founders that @8VC data WOULD have, for some reason, shown lots of queer natives.” 8VC did not immediately respond to WIRED’s request to elaborate on what Lonsdale meant by the comment.
