VCs prepare for the fog of (trade) war

February 4, 2025

Good morning. Greg McKenna here pinch-hitting for Allie and Leo today. Venture investors have been licking their lips for a wave of deregulation and lower interest rates to unlock pent-up demand for exits and a boom in M&A.

What happens to those dreams—and the venture business broadly—in a trade war though? It’s a question that’s likely to become increasingly top-of-mind for anyone in the startup economy in coming months, as tariffs, counter tariffs, and other bellicose measures roil the waters of global trade.

I polled some VCs and others close to the startup scene to take their temperature as Trump’s tariffs on Mexico, Canada, and China were announced (and in two out of the three cases, delayed).

Bradley Tusk, founder and CEO of Tusk Venture Partners, told me over text, many startups won’t be impacted by the tariffs directly. But the tariffs could have ripple effects that are felt across the technology industry ecosystem. The concern lies in broader economic consequences as VCs and companies expect a liquidity boom from an uptick in IPOs and M&A.

“When the markets are plunging because of tariffs, that hurts potential venture exits too,” Tusk wrote, “so tariffs are a problem even if indirectly.”

Umesh Padval, a managing director at Thomvest Ventures, says the short-term impact of tariffs on his portfolio companies—mostly software firms involved with cybersecurity, cloud, or GenAI infrastructure—is virtually nonexistent.

But, he said, he’s assuming everything will be resolved in the next three to four months. If they’re not, and widespread tariffs cause persistent inflation, “then I would have a different answer,” said Padval, who is a former tech CEO and partner at Bessemer.

Monday’s eleventh-hour deals with Mexico and Canada delaying the tariffs offered a temporary reprieve, but the risk of a trade war continues to loom large, not least because of Trump’s warning to the European Union that it could be his next target.

All that uncertainty creates a challenge for VC dealmakers, says Hooman Yazhari, a partner at law firm Michael & Robinson with over 25 years of experience in private capital. While Yazhari stressed that he’s not professing doom and gloom, he said that VCs may handle the uncertainty by standing pat and waiting for clarity—“which is very difficult if you’ve got a portfolio company that needs money for the next round,” he said, “or were diligencing someone and suddenly you’re like, ‘Okay, we’ll talk to you again in six months.’”

Another question is how foreign funds, including Canadian LPs, will react to the geopolitical tensions.. The Ontario Teachers’ Pension Plan, which manages $216 billion in assets, per PitchBook, did not respond to a request for comment.

At Eclipse, meanwhile, partner Aidan Madigan-Curtis is focused on companies set on disrupting areas like manufacturing, logistics, minerals, and energy—all places where tariffs loom large. She’s far from panicking, though. She believes Eclipse, which boasts $5 billion in assets under management and is invested in top IPO candidate and Nvidia competitor Cerebras, is well-positioned to take advantage of America’s recent shift to onshoring.

“There [are] lots of different ways things can play out,” she said. “I think what I heard, and what we heard, from the last few days was this focus on re-industrialization is real, and it’s going to be a key priority, and that companies and talent that are focused on this will really stand to benefit.”

As the current U.S. President is fond of saying: We’ll see what happens.

Greg McKenna
Email: Greg.Mckenna@fortune.com
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VENTURE DEALS

- Hidden Level, a Syracuse, N.Y.-based drone detection technology developer, raised $65 million in Series C funding. DFJ Growth led the round and was joined by Booz Allen Ventures, Revolution Growth, Costanoa Ventures, and others.

- Riot, a San Francisco-based employee cybersecurity platform, raised $30 million in Series B funding. Left Lane Capital led the round and was joined by existing investors Y Combinator, Base10, and FundersClub.

- Lula, an Overland Park, Kan.-based property maintenance solutions platform, raised $28 million in Series A funding. PeakSpan Capital led the round and was joined by existing investor RET Ventures.

- Jump, a Salt Lake City-based AI solutions provider for financial advisors, raised $20 million in Series A funding. Battery Ventures led the round and was joined by Citi Ventures and existing investors Sorenson Capital and Pelion Venture Partners.

- GenLogs, a Washington, D.C.-based freight intelligence platform, raised $14.6 million in Series A funding. Venrock and HOF Capital led the round and were joined by Steel Atlas, AutoTech Ventures, Venture 53, and others.

- Enduro Genetics, a Copenhagen-based biomanufacturing technology developer, raised €12 million ($12.4 million) in Series A funding from Supernova Invest, NOON Ventures, and Sandwater.

- hallo theo, a Berlin-based property management company, raised €10 million ($10.3 million) in seed funding from Insight Partners.

- Warmly, a San Francisco-based AI-powered revenue orchestration platform, raised $6 million in Series A+ funding. RTP Global led the round and was joined by existing investors Felicis, NFX, and others.

- Perspective AI, a Palo Alto-based customer conversation platform, raised $4 million in seed funding. Village Global led the round and was joined by Array Ventures, Honeystone VC, Recursive Ventures, Darkmode VC, and angel investors.

PRIVATE EQUITY

- Affiliates of Warburg Pincus and Berkshire Partners agreed to acquire TRIUMPH, a Radnor, Pa.-based aerospace and defense systems spare parts provider, for an enterprise value of $3 billion.

- Sophos, backed by Thoma Bravo, acquired Secureworks, an Atlanta-based cybersecurity platform, in an all-cash transaction valuing Secureworks at $859 million.

- Godspeed Capital acquired InSite Engineering, a Hoover, Ala.-based water and wastewater systems solutions provider. Financial terms were not disclosed.

- Marlin Equity Partners acquired a majority stake in Napier AI, a London-based compliance solutions platform. Financial terms were not disclosed.

- The Thermal Group, a portfolio company of Behrman Capital, acquired Applied Composite Technology Aerospace, a Gunnison, Utah-based aerospace and defense manufacturing company. Financial terms were not disclosed.

- Tidalis, a portfolio company of Agilitas Private Equity, acquired Made Smart Group, an Amsterdam-based SaaS provider for the maritime industry. Financial terms were not disclosed.

EXITS

- Court Square Capital Partners and WindRose Health Investors acquired a majority stake in Soleo Health, a Frisco, Texas-based pharmacy and infusion services provider, from H.I.G. Capital. Financial terms were not disclosed.

IPOS

- Sionna Therapeutics, a Waltham, Mass.-based cystic fibrosis therapies developer, plans to raise $158.4 million in an offering of 8.8 million shares priced between $16 and $18 on the Nasdaq. Atlas Venture, OrbiMed, RA Capital, Enavate Sciences, TPG Growth, and Viking Global back the company.

PEOPLE

- Maverick Ventures, the San Francisco-based venture capital fund of investment firm Maverick Capital, added Ryan Isono as a managing director. Previously, he was at Felicis.

- Permira, a London-based investment firm, added Chris Buchanan as a partner and global head of capital formation and Nader Salman as managing director, head of Middle East on the capital formation team. Previously, Buchanan was at Apollo Global Management and Salman was at Neuberger Berman.

- Portage, a Toronto-based venture capital firm, promoted Jake Bodanis to partner.

- Summit Partners, a Boston-based investment firm, promoted Sergio Mur and Nick Oppedisano to partner; Adesh Jain, Daniel W. Kim, and Cathy Tanimura and Kurt Brimberry to principal; Chandler Scott to vice president; and Ryan Grimshaw to portfolio manager.

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VCs and the fog of trade war