Investors are split on whether California's diversity bill will make an impact

California passed a bill earlier this month that requires venture firms operating in the state to report the diversity breakdown of their investments. The news of its passing spread quickly through the startup world, and immediate reactions to it have been split.

There are those in favor of the bill, those who support it but with caveats, and those who simply don’t think this will bring any change. Oh yes, and those who simply made fun of it. Still, most people brought up good points in their support and criticism of the bill, called SB 54, and we spoke to industry players to put everyone’s thoughts on the bill into one place.

Bernard Coleman, a lawyer at the Coleman Law Firm, said that it remains to be seen whether SB 54 will result in any significant increase in the diversity numbers regarding VC investments. “It may end up being all bark and no bite,” he told TechCrunch+.

There are nuances in how money moves in tech, he said: Venture capitalists are funded by the wealthiest and most powerful people in society, many of whom have the means to circumvent legislation they don’t like and the power to fund the rescission or modification of legislation that threatens them.

“With California’s new legislation, I expect that many VCs will move operations out of California and make efforts to avoid becoming subject to this legislation,” he said.

Granted, it would be hard to avoid this bill. SB 54 targets any firm operating in the state, which includes funding startups based in California and even raising from California-based limited partners. Going to such extremes to avoid the bill would send a bad signal, said Madison Long, the CEO of Bay Area–based startup Clutch.

“If people are wanting to leave the state because of this type of reporting, then honestly, more power to them,” she said. The tech community is small, and “if that’s the message you want to send, the message will be received.”

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