What Is the FIP VCC Law? A Plain-Language Overview

California's Fair Investment Practices by Venture Capital Companies (FIP VCC) law was signed into law in June 2024 as part of SB 164. It adds Division 2.5 to the California Corporations Code (Sections 27500–27506) and is enforced by the Department of Financial Protection and Innovation (DFPI).

The first annual filing deadline is April 1, 2026.

Who is covered

The law applies to any venture capital company that primarily invests in or finances startup, early-stage, or emerging growth companies and meets any one of the following criteria:

• Headquartered in California
• Has a significant presence or operational office in California
• Makes venture capital investments in businesses located in or with significant operations in California
• Solicits or receives investments from any person who is a resident of California

That last criterion is notably broad. A fund with even a single California-based limited partner may be considered a covered entity.

What covered entities must report

By April 1 each year, a covered entity must submit a report to the DFPI that includes:

Part I — Aggregate demographic data

For all founding teams of businesses the fund invested in during the prior calendar year, the following must be reported at an aggregated level:

• Gender identity (including nonbinary and gender-fluid identities)
• Race
• Ethnicity
• Disability status
• LGBTQ+ identification
• Veteran or disabled veteran status
• California residency
• Whether any founding team member declined to provide information for any of the above categories

Part II — Diversity investment breakdown

The number and percentage of investments made in businesses "primarily founded by diverse founding team members," broken down by each demographic category listed above.

A business is considered "primarily founded by diverse founding team members" when more than half of the founding team responded to the survey and at least half of respondents are diverse founding team members.

Part III — Investment details

For each business that received a venture capital investment during the prior calendar year:

• The total amount invested
• The principal place of business

How data must be collected

Covered entities must provide each founding team member with a survey using a standardized form specified by the DFPI. The survey must include a "decline to state" option for every question.

Before or alongside the survey, the fund must disclose:

• Participation is voluntary
• No adverse action will be taken for declining
• Aggregate data will be reported to the DFPI

Critically, the law requires that survey responses be collected and reported in a manner that does not associate the data with an individual founding team member. The fund may not send the survey until after the investment agreement has been executed and funds have been transferred.

Neither the fund nor the DFPI may encourage, incentivize, or attempt to influence a founder's decision to participate.

Penalties for non-compliance

If a covered entity fails to file by the April 1 deadline, the DFPI will notify them and provide a 60-day cure period to submit without penalty.

After that window closes, the DFPI may pursue enforcement actions including:

• Fines of up to $5,000 per day for each day of continued violation
• Higher penalties for reckless violations
• Even higher penalties for knowing violations
• Orders to desist and refrain
• Recovery of attorney's fees and investigative costs

The commissioner has discretion to compromise, modify, or remit penalties based on factors including the fund's financial standing, assets under management, nature of the violation, and compliance history.

Record retention

All records related to a filed report must be preserved for at least five years. The commissioner may examine a covered entity's records to verify compliance.

Public disclosure

Reports filed with the DFPI are made publicly accessible, searchable, and downloadable on the department's website. The DFPI may also publish aggregate results based on the information received.

Filing fee

The DFPI charges a fee of at least $175 per report to cover administrative costs, with the ability to adjust as needed.

Key definitions from the law

• Founding team member: A person who owned initial shares, contributed to the concept or development of the business before initial shares were issued, and was not a passive investor — or the CEO or president.
• Diverse founding team member: A founding team member who self-identifies as a woman, nonbinary, Black, African American, Hispanic, Latino/Latina, Asian, Pacific Islander, Native American, Native Hawaiian, Alaskan Native, disabled, veteran or disabled veteran, lesbian, gay, bisexual, transgender, or queer.
• Venture capital company: As defined in Section 260.204.9 of Title 10 of the California Code of Regulations.

Summary

The FIP VCC law creates an annual demographic reporting obligation for most venture capital funds with California exposure. It requires aggregate-level data collection with strong privacy constraints — funds must collect the data without associating it with individual founders. Non-compliance can result in daily fines after a 60-day cure period, and all filings are made public.

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This post is an informational summary and does not constitute legal advice. Consult qualified legal counsel for guidance specific to your fund.