The tariff storm impacts the US venture capital market; humanoid Bots and SaaS welcome opportunities?

On April 8, the Science and Technology Innovation Board Daily reported (by reporter Yang Xiaoxiao and intern reporter Li Lu) that the AI "boom" in the U.S. venture capital market is facing a cooling due to the tariff storm.

The globally renowned investment institution KKR stated earlier this year in its 10-K filing that tariffs "have the potential to increase the costs of portfolio companies, reduce profits, and decrease the competitiveness of products or services, thus negatively impacting the revenue and profitability of portfolio companies."

According to media reports, Eric Bahn, co-founder of early-stage venture capital firm Hustle Fund, bluntly stated in a memo sent to portfolio companies on Monday that the previous round of financing should be regarded as the last round of financing for the company in the recent period. He suggested that portfolio companies should make purchases, such as laptops and mobile phones, before prices increase and be more cautious with external expenditures, "while leveraging AI technology to reduce cash flow spending and improve efficiency."

The rising supply chain costs due to tariffs have had a more significant impact on startups producing and selling physical products. Polina Veksler, the founder of the clothing brand Universal Standard, stated that the company’s business is facing a heavy blow due to tariff policies. "For years, we have built a global network of suppliers, but the new tariff policies are striking this network and the company’s business." She indicated that they must choose to either absorb the costs themselves or pass them on to consumers, with the latter potentially leading to millions of dollars in losses for the company.

Scott Birnbaum, founder and managing partner of Red Sea Ventures, stated that only a small number of invested companies will be directly affected by tariffs; however, he also mentioned that the secondary impact caused by the decline in consumer purchasing power within the customer base should not be overlooked.

In addition to the risks that the headwinds faced by startup businesses may pose to private equity investment firms, the turbulence in the secondary market has also had a negative impact on fundraising and exits for VC/PE.

According to the aforementioned media reports, at least two LPs have stated that they will stop investing money in GPs until the capital markets return to stability. However, most institutional LPs had already made allocation plans for annual funding earlier, so the potential impact on fundraising for venture capital firms can be deferred.

However, in terms of exit, whether through IPO or mergers and acquisitions, the original optimistic expectations have vanished due to tariffs.

According to an investor, in the past few weeks, potential acquirers have canceled acquisition deals for two invested companies. Previously, the U.S. market expected that M&A transactions would show an upward trend in 2025. "But now, before the market conditions clarify, M&A should be put on hold."

Regarding IPO exits, Tomasz Tunguz, founder of Theory Ventures, stated that the entire industry previously believed that the liquidity market would reopen in 2025. However, due to the severe fluctuations in the stock market, investors have not seen the anticipated wave of public listings or mergers and acquisitions. "If this environment continues for 12 to 18 months, I expect project valuations to decline."

According to Ethan Batrask, a partner at early-stage venture capital firm Venrock, who spoke to The Information, the IPO window that was originally expected to open in the second half of this year and next year will be delayed by 6 to 12 months due to tariff policies.

But challenges and opportunities coexist. Ryan Phillips, head of private equity investment firm WP Global, stated that manufacturers planning to relocate their operations from overseas to the U.S. may leverage robotic automation to reduce costs. It is reported that the firm will lead a new round of financing of approximately $400 million for humanoid robot manufacturer Agility.

Hans Swildens, the founder of Industry Ventures, believes that tariffs may bring new revenue to port management software companies (which help importers handle tax compliance).

Source: Science and Technology Innovation Board Daily

Author: Science and Technology Innovation Board Daily