Tariffs And The Venture Value Chain: A Blip Or Long-Term Pain?
By Rohit Yadav
Tariff uncertainty is impacting the entire venture capital value chain. One report calls it the “biggest changes to the world trading system since the General Agreement on Tariffs and Trade came into effect in 1947.”
A wave of tariffs and trade restrictions is reshaping alliances and redrawing global commerce. As governments rethink partnerships, startups must face a new reality.
Geopolitics was once background noise for startups. Let’s explore the value chain — VC fundraising, startup fundraising and exits — to see how tariffs are driving both direct and indirect impacts.
VC fundraising
Limited partners were already cooling on venture before the latest tariff developments. Tariffs could impact LP capital flow into venture in three key ways:
- Capital pullback: Tariff-related volatility adds to the reasons LPs may try stepping away from venture. If overweight on venture due to falling public markets, many may look to rebalance or push GPs for liquidity.
- Shift to other asset classes: As stock market volatility rises, LPs may turn to other asset classes — such as private credit, hedge funds and infrastructure — seen as offering more predictability, better hedging or better alignment with this macro environment, leading to reduced VC commitments.
- Flight to familiarity: LPs may continue to double down on established VC firms with strong track records. As capital shifts to perceived safety, newer funds may continue to face steeper headwinds.
Startup funding
Startup fundraising in Q1 appeared to be gaining momentum. However, tariffs can impact from multiple dimensions.
- General risk-off sentiment: Despite record dry powder and signs of recovery, tariff uncertainty can quickly reignite a risk-off mindset, making VCs more cautious. Early 2025 fundraising optimism may fade fast, with capital flowing mainly to startups with strong key performance indicators and proven resilience.
- Certain sectors more deeply impacted: Startups with international exposure may face a higher funding bar. Hardware and consumer startups may be hit hardest. Tariffs can raise costs, delay production and complicate go-to-market plans. Trade restrictions also hinder cross-border hiring and revenue, making global growth tougher.
- Certain geographies may be hit harder: China’s startup fundraising slump predates recent tariff issues. The bigger risk lies in the U.S.-EU equation. If tensions rise, expect longer fundraising cycles, flat valuations and more selectivity. The margin for error is shrinking fast.
Exits
This is where the impact of tariffs may be most acute. Exits remain the venture ecosystem’s collective Achilles’ heel — and tariffs could affect all three exit paths: IPOs, M&A and secondaries.
- IPOs freeze: IPOs make up a small share of exit count but drive major value. When this window shuts, ecosystem liquidity suffers — as seen over the past two years. Early Q1 2025 brought a brief IPO revival hope, with several firms planning debuts. But renewed tariff concerns rattled markets, cut valuations and shook investor confidence. Klarna and StubHub delayed pre-IPO roadshows, citing market conditions.
- M&A Is heating up, cautiously: Focus is shifting to M&A, but the landscape remains complex. The 25 highest-valued public companies, including Big Tech, have largely avoided venture-backed acquisitions since 2021. Alphabet’s planned $32B acquisition of Wiz in Q1 2025 was a standout but still an outlier. Real momentum may come from early-stage M&A, particularly startup-to-startup deals. These acquisitions — driven by team acqui-hires, product consolidation or market access — often fly under the radar. Tariffs and economic pressure could accelerate this trend, as scarce capital and falling valuations push well-funded startups to acquire.
- Secondaries quietly gain power: Secondaries are becoming a vital third path to liquidity. Unlike other exits, they’re driven more by LP and GP needs than startup performance. Tariff-driven uncertainty adds complexity, putting liquidity and discounts in focus. In tough markets, sellers — especially those offloading newer or underperforming funds—may face steeper markdowns. GPs under LP pressure may turn to GP-led secondaries to offer liquidity or extend aging funds. Still, in a constrained exit market, secondaries may be the most practical and essential way to cash out.
Adapt or stall
Tariffs — once peripheral — now influence decisions across the venture stack, from capital allocation to hiring to exits. In a fragmented, unpredictable world, old playbooks may lose relevance. The months ahead, especially Q2, will be pivotal. If tariff tensions ease, this could be a temporary jolt. If not, the venture ecosystem must adapt for the long haul.
Rohit Yadav is the creator of The Big Book of VC, a quarterly insights project known for its “Venture Knowledge Alpha” tagline. His investment expertise goes beyond venture, spanning real estate, renewables, infrastructure and equities. As the host of TheOnePoint podcast, he explores niche venture topics with founders, VCs and LPs, bringing fresh perspectives to the industry. Yadav has hands-on experience in tech, sales and product roles, and combines investment acumen with real-world operational and tech knowledge.
Further reading:
- Q1 Global Startup Funding Posts Strongest Quarter Since Q2 2022 With A Third Going To Massive OpenAI Deal
- China Leads Asia’s Venture Downturn — But Other Countries Didn’t Help
- The Longer IPOs Delay, The Less Likely Debuts Will Happen
- Global M&A Startup Dealmaking Sees Year-To-Year Boost In Q1
- With Google’s $32B Bid For Wiz, Big Exits Are Finally Picking Up
- Tariffs And Market Uncertainty: A Drag On Investment Activit
- Tariffs, Volatility And The Startup Exit Dilemm
- Tariff-Induced Market Meltdown Worrisome For Startup Valuations And Exit
- Private Equity In Flux: How Tariffs, AI And Infrastructure Define A New Investment Er
- How Trump’s Tariffs Impact Personal Care Products And Small Businesses Like Mine
- With Trade War Brewing, Can Canada Venture Build Off Strong 2024?
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Tariffs And The Venture Value Chain: A Blip Or Long-Term Pain?
By Rohit Yadav
Tariff uncertainty is impacting the entire venture capital value chain. One report calls it the “biggest changes to the world trading system since the General Agreement on Tariffs and Trade came into effect in 1947.”
A wave of tariffs and trade restrictions is reshaping alliances and redrawing global commerce. As governments rethink partnerships, startups must face a new reality.
Geopolitics was once background noise for startups. Let’s explore the value chain — VC fundraising, startup fundraising and exits — to see how tariffs are driving both direct and indirect impacts.
VC fundraising
Limited partners were already cooling on venture before the latest tariff developments. Tariffs could impact LP capital flow into venture in three key ways:
- Capital pullback: Tariff-related volatility adds to the reasons LPs may try stepping away from venture. If overweight on venture due to falling public markets, many may look to rebalance or push GPs for liquidity.
- Shift to other asset classes: As stock market volatility rises, LPs may turn to other asset classes — such as private credit, hedge funds and infrastructure — seen as offering more predictability, better hedging or better alignment with this macro environment, leading to reduced VC commitments.
- Flight to familiarity: LPs may continue to double down on established VC firms with strong track records. As capital shifts to perceived safety, newer funds may continue to face steeper headwinds.
Startup funding
Startup fundraising in Q1 appeared to be gaining momentum. However, tariffs can impact from multiple dimensions.
- General risk-off sentiment: Despite record dry powder and signs of recovery, tariff uncertainty can quickly reignite a risk-off mindset, making VCs more cautious. Early 2025 fundraising optimism may fade fast, with capital flowing mainly to startups with strong key performance indicators and proven resilience.
- Certain sectors more deeply impacted: Startups with international exposure may face a higher funding bar. Hardware and consumer startups may be hit hardest. Tariffs can raise costs, delay production and complicate go-to-market plans. Trade restrictions also hinder cross-border hiring and revenue, making global growth tougher.
- Certain geographies may be hit harder: China’s startup fundraising slump predates recent tariff issues. The bigger risk lies in the U.S.-EU equation. If tensions rise, expect longer fundraising cycles, flat valuations and more selectivity. The margin for error is shrinking fast.
Exits
This is where the impact of tariffs may be most acute. Exits remain the venture ecosystem’s collective Achilles’ heel — and tariffs could affect all three exit paths: IPOs, M&A and secondaries.
- IPOs freeze: IPOs make up a small share of exit count but drive major value. When this window shuts, ecosystem liquidity suffers — as seen over the past two years. Early Q1 2025 brought a brief IPO revival hope, with several firms planning debuts. But renewed tariff concerns rattled markets, cut valuations and shook investor confidence. Klarna and StubHub delayed pre-IPO roadshows, citing market conditions.
- M&A Is heating up, cautiously: Focus is shifting to M&A, but the landscape remains complex. The 25 highest-valued public companies, including Big Tech, have largely avoided venture-backed acquisitions since 2021. Alphabet’s planned $32B acquisition of Wiz in Q1 2025 was a standout but still an outlier. Real momentum may come from early-stage M&A, particularly startup-to-startup deals. These acquisitions — driven by team acqui-hires, product consolidation or market access — often fly under the radar. Tariffs and economic pressure could accelerate this trend, as scarce capital and falling valuations push well-funded startups to acquire.
- Secondaries quietly gain power: Secondaries are becoming a vital third path to liquidity. Unlike other exits, they’re driven more by LP and GP needs than startup performance. Tariff-driven uncertainty adds complexity, putting liquidity and discounts in focus. In tough markets, sellers — especially those offloading newer or underperforming funds—may face steeper markdowns. GPs under LP pressure may turn to GP-led secondaries to offer liquidity or extend aging funds. Still, in a constrained exit market, secondaries may be the most practical and essential way to cash out.
Adapt or stall
Tariffs — once peripheral — now influence decisions across the venture stack, from capital allocation to hiring to exits. In a fragmented, unpredictable world, old playbooks may lose relevance. The months ahead, especially Q2, will be pivotal. If tariff tensions ease, this could be a temporary jolt. If not, the venture ecosystem must adapt for the long haul.
Rohit Yadav is the creator of The Big Book of VC, a quarterly insights project known for its “Venture Knowledge Alpha” tagline. His investment expertise goes beyond venture, spanning real estate, renewables, infrastructure and equities. As the host of TheOnePoint podcast, he explores niche venture topics with founders, VCs and LPs, bringing fresh perspectives to the industry. Yadav has hands-on experience in tech, sales and product roles, and combines investment acumen with real-world operational and tech knowledge.
Further reading:
- Q1 Global Startup Funding Posts Strongest Quarter Since Q2 2022 With A Third Going To Massive OpenAI Deal
- China Leads Asia’s Venture Downturn — But Other Countries Didn’t Help
- The Longer IPOs Delay, The Less Likely Debuts Will Happen
- Global M&A Startup Dealmaking Sees Year-To-Year Boost In Q1
- With Google’s $32B Bid For Wiz, Big Exits Are Finally Picking Up
- Tariffs And Market Uncertainty: A Drag On Investment Activit
- Tariffs, Volatility And The Startup Exit Dilemm
- Tariff-Induced Market Meltdown Worrisome For Startup Valuations And Exit
- Private Equity In Flux: How Tariffs, AI And Infrastructure Define A New Investment Er
- How Trump’s Tariffs Impact Personal Care Products And Small Businesses Like Mine
- With Trade War Brewing, Can Canada Venture Build Off Strong 2024?
Read More
These Private, VC-Backed Companies Are The Most-Active, Spendiest Startup Acquirers