New California Reporting Obligation: The FIPVCC and What It Means for Funds and Advisers

The California Fair Investment Practices by Venture Capital Companies Act (FIPVCC) (Cal. Corp. Code § 27500) was passed in 2023 and later amended in 2024. Starting March 1, 2026, the FIPVCC will require certain entities which invest in startup, early‑stage or emerging growth companies to register with the California Department of Financial Protection and Innovation (DFPI) and provide DFPI with identification and contact information. Subsequently, no later than April 1, 2026, a covered entity must report on an annual basis, among other things, aggregated demographic information¹ about the founding team members of the companies in which they have invested during the preceding year. Minimal nexus with California is needed in order for reporting to be required under the FIPVCC. For instance, having a single limited partner from or investment in California could bring a private fund within the scope of the law, and the compliance burden for investment advisers whose funds fall within the FIPVCC’s scope could be substantial.

Covered Entities Under the Law

The reporting obligations of the law extend to “venture capital companies” (as defined below) that:

(i) Primarily engage in the business of investing in, or providing financing to, startup, early-stage or emerging growth companies.

(ii) Which are either:

• • Headquartered in California.
  • Have a significant presence or operational office in California.
  • Make venture capital investments in businesses that are located in, or have significant operations in California.
  • Solicit or receive investments from persons who are residents of California.

Venture capital companies are defined in Title 10, Section 260.204.9 of the California Code of Regulations as being an entity that satisfies one or more of the conditions below:

(A) On at least one occasion during the annual period commencing with the date of its initial capitalization, and on at least one occasion during each annual period thereafter, at least fifty percent (50%) of its assets (other than short-term investments pending long-term commitment or distribution to investors), valued at cost, are venture capital investments, as defined in subsection (a)(5) of this rule, or derivative investments,² as defined in subsection (a)(6) of this rule.

(B) The entity is a “venture capital fund” as defined in rule 203(l)-1 adopted by the Securities and Exchange Commission under the Investment Advisers Act of 1940, as amended (17 C.F.R. 275.203 (l)-(1)).

(C) The entity is a “venture capital operating company” as defined in rule 2510.3-101(d) adopted by the U.S. Department of Labor under the Employee Retirement Income Security Act of 1974 (29 C.F.R. § 2510.3-101(d)).

A venture capital investment, in turn, is:

“an acquisition of securities in an operating company as to which the investment adviser, the entity advised by the investment adviser, or an affiliated person of either has or obtains management rights.”

Management rights means:

“the right, obtained contractually or through ownership of securities, either through one person alone or in conjunction with one or more persons acting together or through an affiliated person, to substantially participate in, to substantially influence the conduct of, or to provide (or to offer to provide) significant guidance and counsel concerning, the management, operations or business objectives of the operating company in which the venture capital investment is made.”

The definition of management rights is broad and determining what constitutes a venture capital investment will at times require a careful analysis. This analysis occurs at the fund and not the adviser level, so an investment adviser will need to analyze each fund that it advises to evaluate whether reporting is required.

Obligations for Covered Entities

Covered entities must provide to the DFPI their name; the name, title and email address of a designated contact person; and the email address, telephone number, physical address and internet website of the covered entity by March 1, 2026. This information must be updated annually.

For the purpose of collecting the information below, a covered entity must provide each founding team member for each business that has provided funding with an opportunity to participate in a survey the form of which is provided by the DFPI. To the extent a covered entity is controlled by another business, that other business may provide a report if the report contains all the required information.

Covered entities must provide by April 1, 2026, for the prior calendar year, to the extent such information was provided pursuant to the required survey, and annually thereafter, a report which includes:

1. For the founding teams of all businesses in which the covered entity made a venture capital investment in the prior calendar year seven categories of demographic information at an aggregated level.
2. The percentage of venture capital investments made in businesses primarily founded by diverse founding team members, in the aggregate and broken down by the relevant demographic informational categories above.
3. The percentage dollar amount of venture capital investments made in businesses primarily founded by diverse founding team members.
4. The total amount of money in venture capital investments the covered entity invested in each business during the prior calendar year.
5. The principal place of business of each company in which a venture capital investment was made.

Conclusions and Next Steps

Investment advisers to funds which invest in startup, early-stage or emerging growth companies should carefully examine each of their funds to see if they fall within FIPVCC’s purview. For those which do, the gathering of the necessary information should begin promptly because if information is submitted more than 60 days late, DFPI may pursue penalties of up to $5,000 for each day in which the entity is in violation. The reports provided will be made publicly available and the DFPI may charge covered entities a fee of not less than $175 to cover the expenses of the administration of the law. Finally, a covered entity must preserve records related to its obligations for at least five years after it delivers each report. These records should be securely stored, and investment advisers should have a proper retention disclosure component included in their privacy policy memorializing applicable retention obligations.  

^{1 Demographic information required to be requested includes:
  (i) The gender identity of each member of the founding team, including nonbinary and gender-fluid identities.
  (ii) The race of each member of the founding team.
  (iii) The ethnicity of each member of the founding team.
  (iv) The disability status of each member of the founding team.
  (v) Whether any member of the founding team identifies as LGBTQ+.
  (vi) Whether any member of the founding team is a veteran or a disabled veteran.
  (vii) Whether any member of the founding team is a resident of California.
  (viii) Whether any member of the founding team declined to provide any of the information described in subparagraphs (i) to (vii), inclusive.}

^{2 “Derivative investment” means an acquisition of securities by a venture capital company in the ordinary course of its business in exchange for an existing venture capital investment either (i) upon the exercise or conversion of the existing venture capital investment or (ii) in connection with a public offering of securities or the merger or reorganization of the operating company to which the existing venture capital investment relates.}