Ca is set To pass the country’s first legislation aimed at increasing diversity in venture capital.
SB 54 It passed the state Senate by a vote of 32 to 8; After that, it will be transferred to Gov. Gavin Newsom’s office. The bill would require venture capital firms operating in California to report a diversity breakdown of the founders they fund to the state; This includes reporting the gender, ethnic and racial background of the founders, as well as the dollar amount given to them.
Sen. Nancy Skinner, the bill’s sponsor, told TechCrunch+ that she is very optimistic that Newsom will sign the bill.
“Venture capital firms may not be aware that their investment rate is very low,” she told TechCrunch+. “So, hopefully this disclosure and this transparency will push them to do better.”
Supporters of the bill see it as a huge step toward increasing transparency in the venture capital industry, where less than 3% of total capital is allocated to women and Black founders. SB 54 would also require companies to collect their diversity data and release it to the public. It is currently difficult to accurately track where project funding goes because the industry is not transparent in allocating funds. Aside from collection, the bill proposes that the state Department of Civil Rights investigate those who violate the bill’s terms, and businesses that fail to report could face punishment decided by the courts.
Founder and technology activist Alison Byerswho helped craft and draft SB 54, said bills like this take precedence in California, noting SB 826, which mandated greater gender equality on the boards of public companies. This requirement has helped increase the number of women on boards of directors and influenced companies to follow suit. (this is the law He was hit By a judge who ruled that it violated the state’s equal protection clause, consider the law not necessary. The state is looking to appeal.)
“Funding is declining. It’s not just bad, it’s overwhelming,” Byers told TechCrunch+ regarding the dismal amount allocated to women and Black founders. “We know that this type of bill can make a measurable difference.”
However, not everyone is a fan of SB 54. TechCrunch+ reviewed letters that the National Venture Capital Association (NVCA) and TechNet wrote to the bill’s sponsors last week opposing SB 54.