The California Senate Bill 54 (SB 54) - 2022

Revolutionising venture capital against all odds

[By Holly Richards]

In 2022, the world of venture capital (VC) showed  a shocking drop in funding for women from the already abysmal numbers of prior years. For F5 CEO Tracey Warren and Chairman Kelly Kimball, this wasn’t just another depressing setback for female founders; it was a call to arms.

California Senate Bill 54 (SB 54) was born out of frustration with systemic inequity and the refusal of those in power to enact change. It became the first legislation of its kind in the world, aiming to mandate venture capitalists to disclose the diversity metrics of their investments. This is the story of how a small Australian-born collective with a big vision fought against one of the most powerful industries in California to push for equity in the distribution of capital.

From frustration to action

“In 2022, Tracey said something to me that really struck me,” Kelly recalls. “We had spent a lot of time on Zoom calls for F5, and all people did was talk about the problem — complain about how difficult and disheartening the issue of the gender funding gap in venture capital is. As they should. But it was just noise. One day, Tracey said, ‘I’m tired of hearing about the numbers. What are we going to do?’”

Kelly — a technology entrepreneur, political strategist, and Harvard Executive Fellow — spent decades evolving as an activist. In his youth, he joined marches and later, he raised funds and worked within institutional systems. Throughout his career, Kelly became a pioneer of practical eGovernment solutions and strategies bridging the gap between paper and digital transmission of sensitive government data. In fact, he created the country’s first electronic filing system for political reporting. By 2022, he had learned how to channel his energy into laser-focused action and results.

Once again, he got angry. And this time, F5 got to work.

A late-night call sparks a movement

Fresh off a call with Tracey, it was a Saturday night when Kelly called his friend Toni Atkins, the first woman to lead the California Senate and a former Speaker of the Assembly. Toni immediately recognised the urgency.

“She called over her wife who just that morning had been to two venture capitalists on something she’s been working on,” Kelly explains. “She's a very accomplished businessperson and she’s made tons of money for investors. But these VCs shut the door on her with no reason. All she could figure out is either because she's female or she's a lesbian or both.”

Toni then looped in Senator Nancy Skinner, head of the California Legislative Women’s Caucus and Chair of the Senate Budget Committee. By Sunday morning, SB 54 was born.

“Each year every legislator passes what they call spot bills,” Kelly explains. “They submit bills to various committees, but they only change one word, in essence saving the bill in case it’s needed after the deadline. You’re never going to pass those bills but they’re there to beat the deadline. Now you can do what’s called ‘gut and amend,’ where you can replace it with a whole new bill. It's a way to do things late. Toni says, ‘Nancy, do you have a spot bill for banking?’ She said, ‘Yeah. I happen to have one.’”

With one swift stroke, it was repurposed into SB 54, aiming to hold venture capitalists accountable through mandatory disclosure of their investment demographics.

Entering the belly of the beast

F5 became the bill’s sponsor, stepping into the epicentre of global venture capital. With one-third of all VC funding in the world domiciled in California, the stakes couldn’t have been higher. Yet, the initial reaction was eerily quiet.

“We started hearing rumours that they were opposed, but they were afraid to go public,” Kelly said. “How do they oppose this and not look bad?”

Through committee after committee, SB 54 advanced. Kelly brought on fellow F5 founding partners Divya Reddy and Marchesa Finch, four-time Grammy award-winning sound engineer Derek Ali, and founder and CEO of Scroobious Allison Byers. The team testified, rallied allies, and lobbied persistently, including across both aisles of government[LS4] .

“I did call a number of Republican legislators who are opposed to any kind of regulation,” Kelly, a staunch Democratic party supporter, admits. “And a few of them agreed to sit it out and not vote.”

While the bill sailed smoothly through the legislative process, the chair of the Senate Budget Committee was successful in initially securing $1 million in funding to get the proposal implemented if signed into law — funding that was ultimately stricken during final budget negotiations.

Meanwhile, the venture capitalists — especially the most powerful players — remained behind the scenes, relying on their usual playbook of pressure and quiet opposition.

Facing blatant sexism

As the bill advanced, resistance from the industry became more overt. Kelly recounts a particularly insulting meeting with the National Venture Capital Association.

“It was one of the most brutally sexist discussions I’ve ever been involved in,” he said. “He shut down any of the women who tried to talk and would only address me. These are people who don’t consider themselves sexist — they think they’re part of the solution.”

This interaction crystallised the problem: systemic bias cloaked in good intentions. It wasn’t just about a lack of diversity — it was about power structures that actively excluded women and people of colour from the table.

The final push

“We were tenacious once we decided to go in and fight this fight,” Kelly says. “We did not back down. Toward the end there in the last couple of committee hearings, the last floor vote, we had a lot of push-back.”

By the time the bill reached the governor’s desk, the venture capitalists had ramped up their lobbying. Pressure mounted on Governor Gavin Newsom to veto the bill.

“The VCs are probably the wealthiest and most powerful people in the state,” Kelly notes. “They thought all they had to do was call the governor and kill it. How insulting is that?”

Against all odds, however, the bill survived. “We were waiting, day-by-day, hour-by-hour,” Kelly remembers. “And then, finally, word came down from the governor that the bill was signed. Now, the real work began.’”

SB 54 signed but work isn’t done. Defending and funding

After the bill was signed and technically law, the team was on defense and offense at the same time. They had to defend the policy and the core of the legislation to ensure that the entities and powerful people in secret opposition didn’t water down the bill to make it meaningless or were successful in never seeing the law implemented due to a lack of funding.

Following the Governor’s message in his signing of SB 54, the F5 team started communications with his Administration in the early Spring of 2024. They worked together to help push back on certain proposed language and to push for funding in the 2024 Budget.

One of the major victories during the negotiation process was pushing back on the initial proposal that would have made SB 54 effective only upon appropriation — a condition that would have effectively killed the bill post-signature. This critical revision helped secure the bill’s enactment and allowed it to move forward.

Additionally, specific exclusions were negotiated to refine the bill’s scope. Foreign investors domiciled in California and public retirement systems were also removed from the bill’s coverage, refining its applicability and addressing stakeholder concerns.

To provide a smoother implementation process, the effective dates were extended, granting affected entities additional time for compliance. Another significant structural change involved shifting enforcement responsibility from the Civil Rights Department to the Department of Financial Protection and Innovation (DFPI). This transition required modifications to the bill’s investigative and enforcement mechanisms, aligning them with DFPI’s existing regulatory authority.

These strategic amendments were instrumental in securing SB 54’s passage and implementation, ensuring it met its intended policy objectives while addressing stakeholder concerns. The success of this legislation underscores the importance of proactive engagement, strategic negotiation, and thoughtful policy design in shaping effective lawmaking.

Funding

As it pertained to the funding component, which was crucial to ensure implementing the law, the chances for an appropriation in the budget was bleak earlier given the state’s large budget deficit post COVID. The F5 team was engaged with its authors and other legislative champions to help push for funding in budget negotiations. The overall negotiations with legislative leaders did not focus on who was going to get new funding for programs, but what safety net programs were going to get reduced funding or unfortunately completely cut. In a swift political change of events in our favor, there was a communication that there will be $1M appropriated for the implementation of SB 54 as there were also other reporting/transparency bills more focused on climate and emissions reporting that were getting the necessary funding appropriated to get off the ground. It was good political and policy sense to ensure SB 54 was included as well.

A first step toward equity

SB 54 will take effect in January 2026, allowing time to build the systems needed to enforce it. At its core, the bill requires venture capitalists operating in California to disclose the demographic breakdown of the founders they fund.

“While this might seem like a modest step, its implications are massive,” Kelly explained. “This isn’t charity. This is just smart investing.”

The transparency SB 54 demands will force the industry to confront its biases.

“Now we get to see exactly who the people are that are doing the damage,” Kelly states. “Everyone who's in the know knows, but anyone outside of that doesn't because they can hide it so easily. The vast majority of VCs are small mom and pop VCs. They're making a conscious effort to do the right thing because it makes good financial sense. But the big kids? They don't want to be bothered. They do what they do. They're the masters of the universe and they don't ever want to be regulated. They're the problem.”

Kelly says industry excuses like “We don’t have the deal flow” no longer hold water.

“They have the deal flow, they're just not letting them in the front door,” he says.

The bigger picture

For Kelly and F5, SB 54 is just one piece of the puzzle. True equity will require systemic change across education, legislation, and cultural attitudes.

“We need to teach little girls how to be investors,” Kelly asserts. “We need women and people of colour to become capital allocators. We need policies, investment, and the collective effort of everyone.”

As the world grapples with crises from climate change to social inequity, Kelly sees a deeper urgency. “We’ve got issues we need to solve before they’re unsolvable. And the people allocating the money are saying only people who look like me are allowed to fix those problems. What are they saying — that women and people of colour aren’t smart enough to solve these problems?”

From noise to action

The journey of SB 54 shows what happens when frustration transforms into action. It’s a story of grit, strategy, and hope. Against immense odds, a small group of determined individuals stood up to an industry that has long resisted change. And they won.

“We stopped with the noise,” Kelly says. “And we started doing something.”