VIX Volatility Index Chart is located on the floor of the New York Stock Exchange (NYSE) in New York, USA on Wednesday, March 19, 2025. Federal Reserve officials stabilized benchmark interest rates for their second consecutive meeting, but telegraphed expectations for slower economic growth and higher inflation.
Photographer: Michael Nagle | Bloomberg | Getty Images
The venture capital industry, already under pressure amid last week’s several dollar-dollar stock market defeat, faces even more harsh outlook amid the ongoing uncertainty caused by US tariffs.
The initial shortage of public offerings, mergers and acquisitions, combined with the trend of startups staying longer than they are now, puts a major strain on VC funds. Venture capitalists typically only realize the profits of their investments when the company is publicly or sold, allowing cash out.
A few days after US President Donald Trump announced plans to impose so-called mutual tariffs on the country, it was revealed that two major tech unicorns, fintech company Klarna and ticket platform Stubhub, will delay plans to be made public due to a sharp plunge in the global stock market. In particular, both companies have submitted prospectuses for an initial public offering in recent weeks.
“No one can go out with this turbulence,” Tobias Bengtsdahl, partner at VC Firm Antler’s Nordics Fund, told CNBC last week. “When the market is plummeting like it is now… you have to make the same predictions in the private market.”
The VC’s tough outlook
The private market is not moving like the open market, making it even more difficult for technology startups to raise capital, whether it’s the stock market or from venture capital.
“Just because the stock market declines won’t change the valuation of startups,” said Antler’s Bengtsdahl. The valuation of ventured-backed startups tends to change only when they are procuring new equity rounds.
“It will have a major impact on fundraising and start-ups from multi-stage investors right now,” he added.
It could soon make it more difficult for startups, particularly those in the growth stage, to raise venture capital. Late stage companies tend to be exposed to open market fluctuations than early stage startups because they are almost closer to reaching IPO milestones.
The private market is less fluid than the open market. This means that investors cannot easily sell stocks. The main way for private equity owners is to sell some or all of the shares of the company. Also known as “exits” via IPOs or M&As. Another option is to sell the stock to another investor in the secondary market.
“[General partners] There’s pressure [limited partners] To ensure these exits occur, “Alex Barr, partner and head of private market fund management company Sarasin Bread Street, told CNBC last week, adding that the IPO will remain “a very whimsical beast to manage.”
The typical partner is the investor who manages venture funds, while the limited partner is institutional investors such as pension funds and hedge funds, or the net wealthy who pour money into the funds.
Limited Partners invests in venture funds in the hopes of generating substantial revenue over a lifetime that can last for ten years. Early stage funding expects several startups in the portfolio to acquire returns results like Uber and Spotify for private backers.
A hope for European technology?
On the bright side, European private tech startups could shine, according to Sanjot Malhi, a partner at London-based venture capital firm Northzone.
“The short-term pause in IPO activities is a natural response to recent market turbulence, and once a sense of stability is restored, we can hope to make the company more clear,” Malhi told CNBC.
Nevertheless, he added, “The talent and fluidity feel unfriendly in the US environment, and the flow must go somewhere, and Europe has the opportunity to benefit.”
Christel Piron, CEO of Startup Investor PSV Foundry, told CNBC that the “silver lining” from uncertainty created by tariffs “is approaching Europe together in turbulence.”
“We are driven by a growing sense of responsibility to help build a resilient European technological nation, and more founders are choosing to stay here and expand,” Piron said.
According to Northzone’s Malhi, there could also be other routes to leave for venture capital funds.
“If the global IPO window becomes narrower over the long term, a strong M&A landscape is still expected as stakeholders seek a ‘problem-solving’ exit,” he told CNBC.
“If that’s the case, we may see an increase in fundraising in the later period as we aim to close the capital gap until we can find such opportunities, although potentially low ratings.”
Additionally, investors have hopes that the big tech IPO will return to Trump’s presidency. VCS relies on the Trump administration and has become a revitalized IPO market.
“Many people feel that Trump has committed to opening the IPO market and opening the M&A market,” said Antler’s Bengtsdahl.
“Now it’s six months after his term,” he added, saying the market could tolerate the failure of the new administration that failed to meet this early pledge. “But people are demanding that it happens within his term.”
