The Fed’s probably going to hold rates steady for longer than expected. But even when that awaited rate cut comes, it may not be all that cathartic

Seems obvious, but it bears repeating. The federal funds rate currently stands at a 23-year high, between 5.25% and 5.5%. And, as a reporter, I feel like I’ve been on rate-cut-watch for a…long time. But, coming into 2024, there was a lot of optimism (rightfully so) that rate cuts were imminent, with the Fed telegraphing that three were on the horizon for the year.

No cuts have materialized, more than four months into 2024. Earlier this week at a Washington event, Powell said that inflation’s proving sticky and that “recent data have clearly not given us greater confidence.” I don’t know about you, but that’s not sounding to me like there’s going to be a rate cut in a couple weeks. 

Fed discourse can get tense. As I’ve been thinking about why, I realized this: I was only 16 when the Fed began quantitative easing and slashing rates to historic lows. I’m now 31, and there are all sorts of private markets investors right now who are my age or a little bit older, who grew up with roughly the same frame of reference—a low-rate environment is pretty much all we’ve ever known. Are millennials like me actually thinking through the likelihood that, even when rate cuts come, they won’t go back to what we grew up most familiar with?

“I definitely think there’s denial right now—if you haven’t lived through an elevated rate environment, then you might not even view that it’s possible to be in an elevated rate environment for an extended period of time,” said Ajay Bijoor, Baird’s head of capital structure advisory. 

Just because you know something in theory, doesn’t mean you know it in practice. So, my question became: What does history say about all this? As it turns out, conversations around interest rates have always been tense. 

Don’t believe me? Consider this: Interest and interest rates date back to ancient Babylon—where they were engraved into a pillar more than seven feet high (literally and metaphorically set in stone) in Hammurabi’s Code. Most famous for the memorable and terrifying “eye for an eye” edict, Hammurabi’s Code actually focuses heavily on finance, especially interest rates, spelling out for example that “the maximum rate of interest for silver loans was set at 20 per cent and for barley at 33.33 per cent,” reads Edward Chancellor’s The Price of Time: The Real Story of Interest. 

But history can be a guide in other ways, because the reality is this: If you take the long view, rates aren’t actually that high right now. In the context of my lifespan, sure, but in 1980, the federal funds rate hit a staggering 20%. The decade low would ultimately be 6%––a low still higher than the federal funds rate is today. 

So, the interest rate environment of the last two decades feels normal to me, but historically just isn’t. That said, a 23-year high is still a 23-year high, and it does create less leeway in the private markets, especially for private equity firms: “As we look at new transactions, the cost of debt has an impact on our ability to take on leverage,” said Will Manuel, American Securities managing director. 

VCs aren’t out of the interest rate crosshairs either, as rates affect fundraising prospects and LPs’ expectations while pressuring portfolio companies.

And, to be completely clear, I’m not saying that the Fed cutting rates wouldn’t be a big deal. It would, and will. Since the Fed began raising rates in March 2022, these hikes have caused consternation in some parts of the economy, going as far as to create desperation in others. But, for now, at least there’s stability.

“People can plan around the current rates and then, if rates come down, that’s a little bit of a bonus,” said Thomas Smale, FE International CEO and founder. 

What I am saying is this: It’s hard to fully conceptualize living through history, level-setting what’s normal in the grand scheme of things. And we’re at the tail end of a historic experiment in divergent monetary policy. So while a zero-rate environment felt oddly normal to me, it’s now gone—and it’s not coming back.  

See you tomorrow, 

Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
Submit a deal for the Term Sheet newsletter here.

Joe Abrams curated the deals section of today’s newsletter.

VENTURE DEALS

- Allen Control Systems, an Austin, Texas-based defense tech startup focused on robotic gun systems, raised a $12 million seed round. Craft Ventures led the round, joined by Forum Ventures and Rally Ventures. 

- Cape, a Washington, D.C.-based mobile carrier with a variety of privacy-first measures for subscribers, raised $61 million across funding rounds. A* Capital and Andreessen Horowitz led the rounds and were joined by XYZ Ventures, ex/ante, Costanoa Ventures, Point72 Ventures, Forward Deployed VC, and Karman Ventures. 

- UniUni, a Richmond, Canada-based last-mile delivery platform for the e-commerce industry, raised $50 million in Series C funding from DCM.

- Flatpay, a Copenhagen, Denmark-based provider of payments and financial management solutions for small and medium-sized merchants, raised $47 million in Series B funding. Dawn Capital led the round and was joined by Seed Capital and others.

- Anvilogic, a Palo Alto, Calif.-based multi-data security information and event management platform, raised $45 million in Series C funding. Evolution Equity Partners led the round and was joined by existing investors Foundation Capital, Cervin Ventures, Myriad Ventures, Point72 Ventures, Outpost Ventures, Stepstone Group, and G Squared.

- Pliant, a Berlin, Germany-based B2B credit card platform, raised €18 million ($19.2 million) in a Series A extension. PayPal Ventures led the round and was joined by SBI Investment, Motive Ventures, and Alstin Capital. 

- Vorlon, a Mountain View, Calif.-based third-party API security platform, raised $15.7 million in Series A funding. Accel led the round and was joined by Shield Capital and others. 

- AI Squared, a Washington, D.C.-based platform designed to automate the production of data and AI insights into business applications, raised $13.8 million in Series A funding. Ansa Capital led the round and was joined by existing investors NEA and Ridgeline. 

- Found Energy, a Boston, Mass.-based developer of an aluminum-thermal power system designed to generate carbon-free industrial heat and hydrogen, raised $12 million in seed funding from KOMPAS VC, Munich Re Ventures, Good Growth Capital, the Autodesk Foundation, J-Impact, GiTV, and others.

- Breaking, a Boston, Mass.-based plastic degradation and synthetic biology company, raised $10.5 million in seed funding from Builders VC, Animal Capital, Climate Capital, and others.

- AIPERIA, a Würzburg, Germany-based developer of AI-powered demand planning software for fresh food, raised €7.5 million ($8 million) in Series A funding. ETF Partners and LBBW VC led the round and was joined by EarlyBird Venture Capital.

- Jago, a Jakarta, Indonesia-based mobile café company, raised $6 million in Series A funding. Intudo Ventures and BEENEXT Accelerate led the round and were joined by ORZON Ventures and D Global Ventures. 

- RIVET, a Detroit, Mich.-based workforce management platform for electrical construction labor, raised $6 million in funding. Brick & Mortar Ventures led the round and was joined by existing investors defy.vc, Augment Ventures, Detroit Venture Partners, Michigan Rise, and angel investors.

- NEBRA, a New York City-based zero-knowledge proof research and development organization, raised $4.5 million in a combined pre-seed/seed round. Nascent Ventures and Bankless Ventures led the round and was joined by a16z Crypto Startup Accelerator and angel investors. 

- Condoit, a Birmingham, Ala.-based app designed for electricians to collect and manage electrical data, raised $4.3 million in seed funding. The Westly Group led the round and was joined by Fontinalis Partners, Navitas Capital, C2 Ventures, and others. 

- Atomiq DeFi, a Dubai, U.A.E.-based developer of products for the Bitcoin DeFi market, raised $3 million in seed funding. X21 Digital led the round and was joined by AlphaBit, NXGen, Dutch Crypto Investors, Spicey Capital, and Altcoin Buzz.

- Ilant Health, a New York City-based provider of obesity management and cardiometabolic health solutions, raised $2.5 million in a seed extension from LifeX Ventures, Celtic House Asia Partners, Cornucopian Capital, and existing investors.

PRIVATE EQUITY

- Armis, backed by One Equity Partners, acquired Silk Security, a Santa Clara, Calif.-based cyber risk prioritization and remediation platform, for a total of $150 million. 

- BMC, backed by KKR, agreed to acquire Netreo, a Huntington Beach, Calif.-based IT network and application observability solutions provider. Financial terms were not disclosed. 

- Godspeed Capital Partners acquired Special Aerospace Services, a Boulder, Colo.-based provider of engineering and manufacturing services to aerospace, aviation, defense, and energy organizations. Financial terms were not disclosed. 

- One Equity Partners acquired Ballymore Safety Products, a Coatesville, Pa.-based designer, distributor, assembler, and manufacturer of engineered lifting, material handling, and safety-related products. Financial terms were not disclosed. 

- PestCo, a portfolio company of Thomas Street Capital Partners, acquired Sasquatch Pest Control, a Portland, Ore.-based provider of pest control services. Financial terms were not disclosed. 

EXITS

- Battery Ventures acquired Labguru, a Cambridge, Mass.-based laboratory data management platform for the life science industry, from Holtzbrinck Digital. Financial terms were not disclosed.  

- Oji Holdings Corporation acquired Walki Group Oy, an Espoo, Finland-based supplier of sustainable and high-performing packaging and engineered materials solutions, from One Equity Partners. Financial terms were not disclosed. 

OTHER

- Commvault (Nasdaq: CVLT) acquired Appranix, a Boston, Mass.-based cloud cyber resilience company. Financial terms were not disclosed. 

FUNDS + FUNDS OF FUNDS

- Wellington Management, a Boston, Mass.-based asset manager, raised $385 million for its first fund focused on companies developing tech-enabled solutions to mitigate and adapt to climate change. 

- SpringTide Ventures, a Boston, Mass., Salt Lake City, Utah, and San Francisco-based venture capital firm, raised $65 million for its second fund focused on the healthtech industry. 

PEOPLE

- Volition Capital, a Boston, Mass.-based growth equity firm, hired Pete Lamson as chief operating officer and head of portfolio operations. Formerly, he served as the CEO of Employ.