In a never-before-seen governmental move, the state of California — the original startup home to the startup boom as we know it — now requires venture capital companies to report on the diversity of the founding members of businesses in which they invested during the prior year. This includes venture capital companies that exist in California, invest in California-based companies, or solicit funds from state residents. Recorded information will be reported to the state’s Civil Rights Department and available to the public.
This legislation, known as SB 54, is the first government mandate to increase diversity within the venture landscape by establishing transparency. Race, gender, and sexual orientation are all data points that will be collected as part of SB 54.
Senate Bill 54 is part of Governor Gavin Newsom’s push towards economic justice, a platform he has already successfully launched two campaigns and laws around, including California’s Equal Pay Pledge: “This bill resonates deeply with my commitment to advance equity and provide for greater economic empowerment of historically underrepresented communities,” Newsome stated in an open letter.
Through transparency of where investment funds are going, the bill’s ambition is to increase the diversity of funding, of which less than 2.5% has ever gone to women, and no more than 1% has ever gone to Latina and Black women-owned companies.
“We applaud Governor Newsom’s ability to do what petitioning could not: mandate increased transparency in an industry deeply lacking the same,” says digitalundivided’s Interim CEO, Brittany S. Hale. “digitalundivided is prepared for a moment like this. We’ve carefully nurtured a community of investment-ready founders for the moment when investors decide to diversify their portfolios and the founders within them. digitalundivided offers a diverse array of programs for Latina and Black women founders that supports them to take their ideas into businesses, scale, and grow past the $1 Million mark.”
You can find more about digitalundivided’s programs and services here.