Last night, California Governor Gavin Newsom signed into law Senate Bill 54, which will require venture capital firms in the state to annually report the diversity of the founders they are backing. This is the United States' first piece of legislation that aims to increase diversity within the venture capital landscape. The law will go into effect on March 1, 2025.

Once the law goes into effect, any venture capital firm operating in the state (that includes VC firms headquartered in California, have operations in the state, have invested in companies that operate in or are based in the state, or have received investments from California residents) must report, for example, the race of the people they back, as well as their disability status and whether they're a member of the LGBTQ+ community. It notes that disclosing information is voluntary and founding teams won't be penalized for not answering. The bill also requires firms to collect and release their diversity data to the public.