A step has been taken toward more transparency in the VC space.

On Oct. 8, 2023, California Governor Gavin Newsom signed Senate Bill 54, a law that mandates VC firms to release annual reports regarding the number of diverse founders they’re investing in — making it the inaugural law focused on increasing diversity in VC funding in the U.S. — TechCrunch reports.

“This bill resonates deeply with my commitment to advance equity and provide for greater economic empowerment of historically underrepresented communities,” Gov. Newsom wrote in a letter as he signed the bill, per the outlet.

In addition to providing information related to race, VC firms operating in California must report on disability status and sexual orientation of the individuals they provide funds to, the outlet details. The data from the reports will be available to the public.

“With Governor Newsom’s signing of SB 54, California is extending its nation-leading efforts to expand equity by bringing transparency to venture capital investment decisions with the goal of helping more women- and minority-owned startups access the VC lifeline upon which entrepreneurs depend,” said Sen. Nancy Skinner, who sponsored the bill.

SB 54 is set to be enforced on March 1, 2025, but ahead of that date, the bill’s wording will be “cleaned up” due to “problematic provisions and unrealistic timelines,” per Gov. Newsom. Additionally, he emphasized that the update is to “ensure this important policy to improve the diversity of venture capital investments can be implemented properly.”

Supporters of SB 54 are hopeful that it’s only the beginning of addressing the significant gap in funding that diverse-led startups experience. The outlet notes that tech advocate and fundraiser Allison Byers, who played a role in the law’s formation, is on a mission to get similar bills established across the U.S.

“We are already in discussions with leaders in other states and countries who are interested in enacting similar policies,” Byers said.