Last One Off the Clue Train is a Rotten Peach!

Urvaksh over at the Atlanta Business Chronicle recently published an article providing some coverage of the new $250M fund being launched by the State of Florida.  After reading it, I became engulfed in a sea of emotions, ranging from frustration to anger, finally settling on a mix of sadness and reflection.

The only thing that can save us now is the passing of time.


The short version: This new Florida Growth Fund will not only provide capital to venture capital firms (in the form of Florida being an LP – Limited Partner), it will also co-invest (follow, not lead) directly in technology and growth companies.  The fund will be managed by a private equity firm on behalf of the Florida Retirement Pension Fund.

Georgia is the last state in the Union that does not allow private equity investments out of the state’s pension funds.  “Last.”  Wow.  Now there’s a word that simply emanates innovation.  Nothing says “cutting edge” like being listed as “last”.

“Last.”  That means that North Dakota is ahead of us in terms of allowing private equity investments from state pension funds.  WTF? Pinch me.

For all the hemming and hawing we hear from the state government about how great Georgia is for innovation, we’re really doing a pretty lame job of walking the walk, and leading by example.  We can pass a bill that invites the 2009 Georgia Peach Queen to appear before the House of Representatives, and slash the budget of the ATDC, but we can’t drive through a key piece of legislation to propel the Georgia economy into the 21st century.

“Last”.   You may also recall that Georgia is also “last” (or at least close to being “last”) in another category as well – public education for our children.  It is no coincidence.  We clearly have a remarkably uneducated group of people keeping us from joining the rest of the country in diversifying the state’s investments in the private sector.  Guess that lack of education has already caught up to us.

Does our state government really take these issues seriously?  Certainly there are some – many of whom I’ve met and had great conversations with.  But as a whole, no.  There are those that are hell bent on laying down in the middle of the street and preventing progress.

The most common arguments that I hear from opponents of such legislation is that it is “too risky” and “wouldn’t provide much in the way of economic development for anyone but Altanta.”  Humor me for a moment.

The Georgia Public Policy Foundation, which is a non-profit, independent, public policy think tank, recently published a very interesting article.  In the article, they cite the “lack of diversity” within the investments of the state’s pension funds.   Every investment has risk, but obviously the only defense against market risk is diversification of investments.  “Diversify or die”, as I like to say.  Not diversifying is even riskier. They lay out a pretty compelling case across the board. Read the article – it’s short and worth it.

With respect to the whole notion that Atlanta would be the sole beneficiary of such investments – that is simply ludicrous.  What these pundits fail to realize is that this is an ecosystem, not a one-way street.  All boats rise with the rising tide.  Would those dollars necessarily create direct jobs in rural areas?  Probably not, or certainly not that many.  Companies that attract venture capital and private equity investment tend to be fast-growth and/or high-tech companies, and those require infrastructure and a large labor force.  And those things exist in abundance in Atlanta, but few other places within the state.  But, what those investment dollars would do is create an economic return for the state.  And those additional dollars eventually make their way into port projects in Savannah, highways, schools, agricultural programs, and other projects around the state. Viewing this issue through any other prism is negligent in my view.

Normally, I would tell everyone reading this to contact your local state representative or senator, and tell them why you think passing legislation to allow the state to invest in private equity funds would be a good thing.  But we’ve all done that already.  Several times (SB80, HR249, etc).  I tire of the whole thing.

The only thing that can save us now is the passing of time, and the hope that at some point, enough rational people are voted into office to get us back on the right track.

“Last”.  I hate being last, don’t you?

Cheers.

4 Comments

  1. Go Gators! “Why does the St. Johns river flow North? Georgia Sucks.”

    I can tell you though, that the envy goes both ways. @StephenFleming will attest that the UF venture lab equivalent is envious of what we have going on at GT.

    Also, I pitched in Gainesville, FL last year to a room of Angels who haven’t done a deal in a long time. Also, they made me buy dinner, so I don’t think I’ll be back that way for a while…

    Having said all of that, I hate losing, but it’s especially bad coming in dead last! Don’t count on the state to do anything about this anytime soon. :(

  2. Wow, are you serious? The angel group made you buy THEM dinner? Seriously – you need to email me so we can make sure we add them to our blacklist. That’s insane.

    Scott

  3. When talking about the Teachers Retirement Fund, you must remember this is the teacher’s retirement fund. :-) They overwhelmingly don’t want it going into alternative assets. Teachers are some of the most risk averse people out there. Those teachers not so risk averse have their money in a 403B instead.

    Be careful. Entrepreneurs complaining to their representative on this issue might just look like they are trying to take someone else’s money.

  4. Hey Paul. Call me crazy, but I’d rather not take financial advice of any sort from the heads of a teacher’s union in a state with one of the worst public education systems in the country. Anyone else see the silliness in this? :)

    You or Fleming may be able to answer this. Which pension funds are we talking about in the current iteration of this thing? Teachers, Firefighters, etc? Is it an “all or nothing” thing, whereby all of the various public pension funds have to be managed as a single entity, or can we just leave the teacher’s out of it and pass a bill that allows the state to invest the other various pension funds?

    Cheers.
    Scott

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