This feels like a full economic eclipse.
The sun has vanished, and everyone’s feeling around in the dark asking the same question: What do tariffs mean for me? It’s not an ideal metaphor, because a total solar eclipse is a far more common—and limited—occurrence than the global “Liberation Day” confusion sown by Trump’s tariffs.
That’s not to say there isn’t historical precedent here, even if it’s alarming. In 1930, less than a year after Black Tuesday, President Herbert Hoover signed the Smoot-Hawley Act, which set tariffs on almost 2,000 imported goods. It’s a move widely described as worsening the Great Depression, and Fortune’s Shawn Tully thinks these tariffs could be worse.
It’s been a rough 24 hours. On Thursday, the S&P 500 saw its worst drop since June 2020, while the Nasdaq fell over 1,000 points, or roughly 6%, with Mag 7 stalwarts like Apple and Nvidia taking it on the chin.
Right about now is when I turn to VCs and ask how they’re affected by macroeconomic turmoil. Usually what I hear is something like: “We invest so long-term this doesn’t apply to us.” Not so this time. In fact, in speaking to half-a-dozen VCs on Thursday, the refrain I heard was pretty much the opposite: many startups—particularly hardware and semiconductor companies—are about to get slammed; and consumer behavior will see big changes that VCs are already trying to position themselves for.
“Tariffs are expected to affect venture firms and venture-backed companies, especially those in hard tech and physical technology sectors that depend on tariffed materials,” said Marlon Nichols, MaC Venture Capital cofounder and managing general partner, via email.
For tech startups with hardware products and global supply chains, countries like Taiwan, China, the Philippines, and Vietnam are all critical. But the tariffs’ bite won’t be limited to companies that sell consumer end products like smartphones and other gadgets. Hardware is also (famously) an input in cloud-based services like AI.
Thomvest Ventures managing director Umesh Padval worries that the Trump tariffs could increase computing costs and potentially slow AI innovation. Padval’s case is this: AI compute costs per token have dropped 90% over the past three years, but tariffs on AI, networking, and power chips could reverse this trend, driving computing costs back up. If chip prices rise sustainably, it could negatively impact AI startups and their customers, increasing expenses.
“I think people in the hardware world completely know this,” said Padval. “Lisa Su [CEO at AMD], Chuck [Robbins] at Cisco, all the gear companies, know this impact. Younger software engineers think they’re isolated. They don’t understand yet, because AI is so new. They’ve never gone through up-and-down cycles, and they don’t know the long-term effect, what it could be. And they won’t get affected short-term—but if the tariffs stay high, I think this should slow down the innovation of AI, just because the cost of compute will end up going up.”
MaC Ventures’ Nichols agrees that the tariffs could drive up cloud infrastructure costs, though he believes that aside from those “indirect” impacts, SaaS and software companies will largely remain unaffected.
Ultimately, reckons Thomvest’s Padval, much will depend on where the final tariff rates land as negotiations play out.
“I think this could be a negotiating tactic of the president right now,” said Padval. “So, when it settles to a reasonable level, we’ll know more. If it’s 5%, it won’t make a difference. If it’s 30%, it will make a difference. You tell me a number. I’ll tell you about the economy.”
Despite the uncertainty and worries, Eclipse Ventures partner Aidan Madigan-Curtis isn’t discounting the potential for some positive business impact.
“U.S. businesses that may have previously not been ‘globally’ competitive, may now be able to win on a unit-economics basis, opening up a new frontier of venture-backable businesses,” she said via email.
And Vanessa Larco, a former NEA partner who’s starting her own consumer-focused fund, says she’s looking for startups that will thrive as consumers lean into bargain-hunting mode.
“It’s only going to push consumers to reconsider their purchases,” said Larco. “More people are going to look for bargains more than usual. I’m looking for companies that help people save money because I think this trend will continue.”
Redpoint partner Meera Clark agrees there will be consumer opportunities around savings, even though it’ll be a complex landscape.
“To put it bluntly, tariffs create dark clouds for everyone, consumer companies included,” Clark told Fortune via text. “Whether it’s weaker spending power from end customers or depressed capital availability in the event of a downturn, no one is immune. That said, with chaos comes new possibilities…Your sucker punch is their opportunity.”
So, startups will need to be proactive and aggressive, as will their investors. Because what remains to be seen is how the tariffs will affect the exit-starved venture business itself, as Promise Phelon, founder and managing partner at Growth Warrior Capital, said: “This uncertainty will result in the tactic of most holding their breath to find out what’s happening.”
The good news, I suppose, is that even a total eclipse is ephemeral. So, a clearer economic picture will start to emerge in the foreseeable future. But until then we sit in the dark and, as Jim Morrison said, wait for the sun.
ICYMI…AI video leader Runway has raised a $308 million round at a $3 billion valuation. Elsewhere, Fortune’s Jessica Mathews has the scoop on Trump appointee Scott Kupor and where he still does (and doesn’t) have financial ties to Andreessen Horowitz.
See you Monday,
Allie Garfinkle
X: @agarfinks
Email: alexandra.garfinkle@fortune.com
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VENTURE DEALS
- Plaid, a San Francisco-based financial institutions connector, raised $575 million in funding. Franklin Templeton led the round and was joined by Fidelity, BlackRock, and existing investors NEA and Ribbit Capital.
- Runway, a New York City-based AI research and media company, raised $300 million in Series D funding. General Atlantic led the round and was joined by Fidelity Management & Research Company, Baillie Gifford, NVIDIA, and others.
- Unframe, a Cupertino, Calif.-based enterprise AI platform, raised $50 million in funding from Bessemer Venture Partners, TLV Partners, Craft Ventures, and others.
- Bloom, a Marly, Switzerland-based petroleum alternative developer, raised 13 million Swiss Francs ($15.1 million) in Series A funding. Anaïs Ventures and Valquest Partners led the round and were joined by BEV and others.
- Hi Auto, a Dayton-based AI-powered voice technology developer for the quick-service restaurant industry, raised $15 million in Series A funding. Delek Motors, the Zisapel family, Vasuki Tech Fund, and another investor led the round and were joined by Allied Group, Goldbell Investments, and the Meir Barel Group.
- Daymark Health, a Philadelphia-based cancer care company, raised $11.5 million in seed funding. Maverick Ventures and Yosemite led the round and were joined by Oncology Ventures.
- RapidClaims, a New York City-based AI-powered revenue cycle management platform, raised $11 million in funding. Accel led the $8 million Series A round and was joined by Together Fund. Together Fund led the $3 million seed round and was joined by angel investors.
- Fuse, a London-based payments platform for the Middle East, raised $6.6 million in funding. Northzone led the round and was joined by Flourish Ventures, Alter Global, and angel investors.
- AutonomyAI, a New York City-based front-end software development AI agents provider, raised $4 million in pre-seed funding from Inbound Capital, Gilad Shany, Vikram Makhiija, and others.
PRIVATE EQUITY
- Clearview Capital recapitalized Advantage Behavioral Health, a Laurel Springs, N.J.-based mental health treatment provider. Financial terms were not disclosed.
- ELIQUENT Life Sciences, backed by GHO Capital, acquired Truliant Consulting, a Baltimore-based pharmacovigilance and risk management consulting firm for the life sciences industry. Financial terms were not disclosed.
- General Atlantic acquired a minority stake in Frazier & Deeter, an Atlanta-based accounting and business transformation firm. Financial terms were not disclosed.
- Hoffmann Family of Companies agreed to acquire N.G. Heimos Greenhouses, a Millstadt, Ill.-based geranium and poinsettia grower. Financial terms were not disclosed.
- Jennmar, a portfolio company of FalconPoint Partners, acquired All Tech Engineering, a Wyoming, Mich.-based specialized automated machinery provider. Financial terms were not disclosed.
- Lockmasters, a portfolio company of Dominus Capital, acquired Astic Signals Defenses, an Owings Mills, Md.-based radio frequency and infrared shielding solutions provider. Financial terms were not disclosed.
- Summit Partners acquired a majority stake in Simply.TV, a Copenhagen-based video metadata provider. Simply.TV acquired the content discovery business of Red Bee Media, a London-based media services provider. Financial terms were not disclosed.
- Wellspring Capital Management acquired Summit Spine & Joint Centers, a Lawrenceville, Ga.-based minimally invasive spine services provider. Financial terms were not disclosed.
IPOS
- SmartStop Self Storage REIT, a Ladera Ranch, Calif.-based self-storage facilities owner and operator, raised $810 million in an offering of 27 million shares priced at $30 on the NYSE. The company posted $237 million in revenue for the year ending Dec. 31, 2024. Extra Space Storage backs the company.
FUNDS + FUNDS OF FUNDS
- Investindustrial, a London-based investment group, raised €4.0 billion ($4.4 billion) for its eighth fund focused on family-owned, mid-market businesses.
- Trive Capital, a Dallas-based private equity firm, raised $2.7 billion for its fifth fund focused on middle-market companies.
