The dollar built Silicon Valley, says VC researcher — and it can't be copied
What's the deal? Nicolas Colin, head of research at Vsquared VenturesDealroom has a profile for this one. Try Dealroom →, argues that US venture capital dominance stems from what he calls the "overflow mechanism" — foreign money pouring into US Treasuries and blue-chip stocks, which pushes domestic institutional capital up the risk curve into venture.
The numbers: Colin charts foreign holdings of US federal debt rising from about 10% to 29% of GDP between 2001 and 2024, alongside alternative-asset allocations in US public pensions climbing from roughly 9% to 31% over the same period. He says the foreign line moved first, especially between 2008 and 2012, and the pension line followed.
How it works: In Colin's telling, foreign demand for safe US assets compresses yields; he points to the 10-year Treasury yield falling from 10.6% in 1985 to 0.9% in 2020. Pension funds that need returns of around 7% a year to meet their obligations are nudged toward riskier bets further out on the curve, eventually spilling into venture capital. The result, he says, is innovation funded "at a scale that no deliberate policy could produce."
The caveats: Colin flags two himself. US federal debt also doubled over the period, so part of the rise in foreign holdings simply reflects more debt to hold. And after 2008 the Federal Reserve also bought Treasuries and held rates near zero; the chart does not separate foreign purchases from Fed purchases. He adds that after 2022 foreign holdings fell as rates rose, yet alternatives stayed above 30% of pension assets, arguing that institutions do not move back down the risk curve quickly.
Why now? Colin frames the thesis as the product of two forces combining: decades of deliberate state engineering, plus a macro structure that continuously floods the US with foreign capital. He singles out the Yale endowment model as a codification of that overflow dynamic rather than a universal, exportable strategy — a pointed note for anyone trying to copy it elsewhere. His argument lands as Europe weighs how to channel more domestic pension savings into private assets; in a September post he put European pension and insurance assets at around $15T, with only about 0.12% going to VC versus roughly 3% in the US.
The signal: Colin's thesis is a provocation worth debating for Europe's pension-capital debate — that US venture scale is as much a byproduct of global capital flows as of culture or regulation. If he's right that the mechanism can't be replicated, the implications for Europe's catch-up efforts are stark: more pension money alone may not be enough without the same gravitational pull of foreign capital into safe assets first.
Read more: X, ardenletter.com, LinkedIn (Sept 2026)
Chart: Vsquared Research (sources: US Treasury and OMB via FRED; Reason Foundation)
