Yeah, you probably think that I’m grasping for straws when I try to link pensions to technology. That is only if you are one of the many people who do not pay careful attention to the billion dollar question, “where is the money coming from?” It is obvious that there appears to be quite the boom going on in the technology sector. With billion dollar valuations seemingly coming out of nowhere, the speculation regarding whether or not the tech sector is experiencing a bubble is starting to make rounds. Is there a bubble in tech? I am one of the people who actually do not think so, but this is not the point of this article. Forget about whether or not we are in a tech bubble, lets ask a more pertinent question, “what happens to silicon valley when the venture capitalist money dries up?”
Pensions fund VCs
I would like to think that we all know that venture capital funds, VC for short, are a pool of funds by investors who desire to participate in the potential returns in a risky class of investment- in this case technology. These funds are the primary investors in early stage start ups and usually participate in every fund raising round. What people may not know is that over 20% of the funds in VC’s coffers come from pensions that belong to states and universities.
Yes, that’s right! Now, let’s think about this for a moment. It should be well known that we are experiencing a pension crisis in our country. States and municipalities are missing a total of 4.5 trillion dollars in their budgets; In order words, they owe 4.5 trillion dollars and they do not have the money. Once this hits the proverbial fan, you can be sure that the party for VCs getting all those pension dollars will be over. This will definitely affect the number of startups that will be funded as well as the number of startups that will be brought to market. We all know that the market has a tendency to overreact. The possibility that we do not achieve some sort of soft-landing regarding this pension crisis through negotiation and enacting comprehensive pension reform means that the shock will not only reverberate through the municipal bond market. It has the potential to take Silicon Valley down with it. Just at a time when we need technological innovation and progression more than ever!
Yes, really! It is often puzzling why we as a society put things off until the last moment. I implore everyone reading this to do their research and become inform about what lies at the horizon. The pension crisis has the ability to literally cripple our nation, but what makes the situation even worse is that it is completely avoidable.