#205: New Requirement in VC
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77% of venture capital money goes to companies with white founders, less than 10% to women founders, and less than 1% go to black founders, which is a huge disparity from how the US population is distributed (Forbes, 2022)
Last week, California passed a new law requiring VCs to report on the demographics of the founders in whom they invest
Senate Bill No. 54
Taking into effect March 1, 2025, this bill requires any "entity" defined as a VC to:
Report to the Civil Rights Department the specified demographic information for the founding teams in which the entity made a venture capital investment
Annually survey their founders (they are allowed to opt-out without recrimination) on their gender identity, race, ethnicity, disability status and veteran status
Firms that do not submit survey data could be fined (amount undisclosed)
Where have the VC dollars been?
There has been discrepancies between the DEI (diversity, equity and inclusion) investments that have been promised and the assets actually committed
Per a report from the nonprofit Diversity VC, of $31B+ in combined AUM (assets under management) from a sample of 213 firms, only 1.87% was dedicated to DEI investments
Interestingly enough, per Dot LA, nearly 30% of the companies funded in Los Angeles have a female founder, a bit higher than the national average of 22%
72% of founders were white, 35% were based in Silicon Valley, and almost 14% were Ivy League-educated
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