SB 54 Increases Transparency in California’s Venture Capital Industry

The Senate Bill 54 (the “SB 54”) was signed into law in California and will take effect March 1, 2025 for all investments made during calendar year 2024. The law will require “covered entities” to report the demographic information of “founding team members” of all companies in which the covered entity has invested. The law is meant to address the lack of venture capital funding flowing to diverse founders and is the first of its kind. While the law could still be challenged based on various doctrines, the mere introduction of it could establish a legacy on the landscape of venture financing going forward.