Why a fund for young innovators is challenging California’s intrusive reporting mandate
There are thousands of venture capital firms competing to find promising tech startups, but remarkably few cater specifically to young college dropouts. In 2015, Michael Gibson and Danielle Strachman cofounded 1517 Fund with a specific mission in mind: to invest in young, renegade dropouts and “sci-fi scientists” developing tomorrow’s breakthrough technologies.
Neither Danielle nor Michael views traditional credentials as a prerequisite for success. They believe that some of the most transformative innovations come from people willing to challenge conventional paths. 1517 Fund looks for companies in their earliest stages, led by founders too eager to wait until after graduation before building their companies.
On paper, the pair might be the last people you’d expect to steer people away from pursuing a college degree. Danielle cofounded and directed Innovations Academy, a K-8 charter school in San Diego, serving 400 students. Michael was raised in Connecticut, one of the states with the highest rates of college attainment in the country. He even had plans to be a professor of philosophy and was working on his Ph.D. at Oxford University.
For Michael and Danielle, schooling and education are not one and the same. As Michael puts it, “It’s like the Mark Twain quote, ‘I never let my schooling interfere with my education.’”
Michael’s time at Oxford heavily influenced the work he does at 1517 Fund. While he loved studying philosophy and its endless quest to find the meaning of life and the nature of justice, he discovered that he didn’t enjoy teaching. “When it came to teaching in a college, it just felt so barren to me,” he recalls.
He began supplementing his schooling with a more personalized curriculum, devouring the great voices of New Journalism like Tom Wolfe, Hunter S. Thompson, and Joan Didion. Eventually, his path became clear, “I should just drop out. So I dropped out,” he says.
Betting on talent, not credentials
While Michael’s own college experience changed his views on the university system, he still believed strongly in the importance of encouraging young minds.
Prior to starting 1517 Fund, Michael and Danielle worked together on another program that aimed to inspire young talent by awarding $100,000 grants to innovators who met two conditions: They were under 19, and they had to drop out of college.
With this first program, Michael and Danielle focused on giving grantees a rich education experience outside of school, where participants received one-on-one tutoring that they needed to pursue their dreams. Through this program, they were able to help a young man named Chris Olah. In 2012, Michael and Danielle gave him a grant that empowered him to move out to California and work on his ideas. Years later, Chris went on to work for Google Brain and OpenAI, before co-founding Anthropic, the company behind the AI assistant, Claude.
1517 Fund builds on the earlier program as Michael and Danielle continue to fix what they see as a growing problem: Outside of computers, scientific progress isn’t occurring as fast as it used to. “You look at energy, you look at healthcare, you look at transportation, the improvements in progress just haven’t come as swiftly as it did, let’s say from the past from 1900 to 1970,” Michael says.
“One of the things slowing that down is the bottlenecks in young people’s lives. We don’t trust young people to do great work. Instead, you have to prove yourself by getting all these credentials until you’re in your thirties, and only then might you get the chance to pursue something wonderful.”
Michael believes that traditional higher education abbreviates people’s careers artificially. Through 1517 Fund, he wants to get young people out on the innovation frontier faster.
“If we’re going to raise our civilization to the next level, we’re going to increase our living standards. It’s important for us to really trust young people to pursue crazy ideas. There are going to be some wild ones, failed ones, but you really need that variety in order to find the ones that really matter.”
“I get to meet young people working on cures for cancer or devising new forms of fusion energy. And I’m just deeply inspired by that,” he says.
It’s not hard to feel inspired when you see the incredible work done by founders in whom 1517 invested. Take founder and CEO Stephen Balaban, for example, who was able to launch his company, Lambda, which provides the massive computing power that AI companies need. Likewise, Joe Thomas co-founded Loom, a video communication platform that helps people share information through quick recorded videos instead of meetings. These are just two examples of the many startups that have received support from 1517 Fund.
Helping people overcome barriers to entry is central not only to 1517 Fund’s mission, but also to its name. In 1517, Martin Luther nailed the Ninety-five Theses to the door of the All Saints’ Church in Germany, which included an admonition against indulgences. To Michael, the significance of 1517 lies not in religion, but in Luther’s challenge to an institution that had placed itself between individuals and opportunity. He sees college degrees playing a similar role today.
While 1517 Fund is working to tear down the walls standing between young innovators and the execution of their ideas, the State of California is creating new obstacles.
More than a reporting requirement
In 2024, California amended its Fair Investment Practices by Venture Capital Companies Law (FIPVCC), mandating venture capital funds to survey the companies in which they invest and report on the race, ethnicity, gender identity, and sexuality of their founders.
Immediately, Michael was concerned by how intrusive this mandate was. When 1517 Fund selects young people in which to invest, it does so based on a person’s character and whether they have what it takes to build their ideas into a company. The personal details California is asking for are “none of my business and have nothing to do with my decision-making,” he says.
Yet, Michael and other venture capital firms have no choice but to comply with the requirement, or face fines of up to $5,000 for each day of noncompliance.
While some say the intent of the law is to shed light on disparities in the venture capital startup world, what it does in practice is much worse.
The legislative record makes clear that the reporting requirement was designed to do more than collect data—it is a pressure campaign intended to force changes in investment behavior. By publicly reporting demographic information, the law seeks to pressure venture firms to direct capital toward founders based on race, sex, ethnicity, and other immutable characteristics, rather than individual merit.
As if this wasn’t bad enough on its own, California is also using this law to assert far more power than it legally possesses.
1517 Fund is based in Colorado—not California—and invests in many companies located outside of California. Yet because the law applies to venture capital firms nationwide that invest in California startups, 1517 is subject to its reporting requirements. And once a firm is covered, those requirements extend beyond California investments, requiring firms to report demographic information about all founders in their portfolios, including those with no connection to the state.
The constitutional case against California’s reporting mandate
California’s requirement is unconstitutional three times over. First, it violates freedom of speech by compelling 1517 Fund to ask questions it does not want to ask and collect and report sensitive information to the government. It also controls how these questions are framed by forcing venture capital firms to use a specific form.
The law also violates the Fourteenth Amendment’s Equal Protection Clause by compelling venture capital companies to consider immutable characteristics like race or sexuality instead of focusing on their individual merits.
Last, the Commerce Clause prohibits states from directly regulating commercial activity outside of its own borders, especially when it involves entities with no meaningful connection with the state.
Michael saw the law for what it was—unconstitutional. He was eager for a chance to challenge the mandate; he just needed to find the right constitutional attorneys to take on his case.
Pacific Legal Foundation was able to connect with Michael, and, together, we have filed a lawsuit to hold California accountable to the Constitution.
To Michael, winning this case would mean protecting the innovation economy, respecting the privacy of the brilliant young minds he and Danielle work with, and fending off an “intrusive state.” He also worries that if California’s unconstitutional law is allowed to proceed, the government will get a “foot in the door that could lead to all sorts of mischief.”
While California sees each new startup founder as a datapoint, Michael sees promising innovators with unique ideas to cure cancer, develop new forms of clean energy, increase the yield of rain clouds, or build a nuclear battery. To Michael, Danielle, and the 1517 Fund team, the question isn’t how to collect arbitrary information about these innovators—it’s how to help them get to work and bring their ideas to life.
