Covid-level fear grips Silicon Valley after tariff turmoil delays IPOs

By Katie Roof, Kate Clark and Yazhou Sun | Bloomberg

This was supposed to be the year that Silicon Valley’s yearslong backlog of billion-dollar startups were finally able to go public, delivering riches to venture capitalists. Instead, President Donald Trump’s promises of sweeping tariffs and the havoc in global markets have thrown those plans into limbo, threatening to plunge the VC and startup industry into crisis.

Most major public listings planned for this year are on ice, with StubHub Holdings Inc., payments firm Klarna Group Plc and trading platform eToro Group Ltd. all pausing their preparations. Some of these businesses, like Klarna, intend to list as soon as the market stabilizes. But others aiming to go public this year, particularly those directly impacted by the tariffs, may struggle to reach that goal altogether.

A significant delay to initial public offerings could starve venture capitalists of cash at a critical moment. “A major source of anxiety is going to be around the exit markets and whether or not they are open,” said Tomasz Tunguz, founder of Theory Ventures. “If we have another two years of no liquidity, it’s going to be really problematic for the asset class.”

On Monday, the mood inside Silicon Valley VC firms was tense — similar to the environment in March of 2020, in the run-up to the global pandemic. “We’ve had a lot of Slack traffic over the last few days,” said Jake Saper, a general partner at Emergence Capital, with investors and founders rushing to make sense of the new policies. One founder told Saper her company’s customers were feeling “Covid-level fear and uncertainty.”

“We’ve been through so many crises now,” Saper said, that the firm has an emergency playbook, starting with identifying the hardest-hit companies and helping them respond. Tariffs are likely to impact startups dealing with hardware and international trade, such as e-commerce-related businesses, investors say. And AI companies may also see an increase in computing prices.

“We are trying to triage and figure out which ones will have the most pain early on,” Saper said.

Uncertainty and Doubt

Many in the industry caution that it’s too early to know what the impact of the tariffs will be — partly due to uncertainty over whether the policies will stick. Meanwhile, volatility in the public markets is “going to be giving everyone whiplash,” said Pegah Ebrahimi, a co-founder of venture firm FPV Ventures.

Stock prices reflect “an incredible amount of self-imposed tariff chaos,” said Byron Deeter, a partner at Bessemer Venture Partners and chair of the National Venture Capital Association. The result is that potential IPO investors are “completely distracted.” His firm, a backer of would-be public companies StubHub and Hinge Health, is watching the markets carefully, he said, and waiting for a reprieve. “Let’s all hope it’s in days or weeks instead of months or quarters.”

For some planned IPOs, “we’re now looking at 2026 at the earliest,” said Mitchell Green, founder of growth equity firm Lead Edge Capital. That means further delaying payouts to the investors in VC funds for another six to 12 months, he said, on top of an existing multiyear drought. “This comes amid an investment environment already starved for liquidity,” Green said.

Chris Farmer, partner and chief executive officer at SignalFire, expressed relief that the firm just completed its new fundraising, calling the timing “very fortunate.” He said there’s a risk that some limited partners are going to grow even more skittish, worsening an already tough environment. “Budgets will get pulled if they believe they are not going to get the distributions they are baking on.”

Plan B

Unable to sell their stakes in startups on the public markets, some investors may turn to private shares sales instead. “If the secondary market is the only place to access high-growth private companies in a closed IPO environment, we anticipate seeing high demand for quality companies,” said Charlie Grimes, head of global capital markets at Forge Global, a trading platform for private companies.

In the short term, market uncertainty could make it harder for buyers and sellers on secondary markets to agree on a price. But a sustained lack of public offerings could make private trading more active.

“The big question is on pricing and whether valuations will reset yet again,” Grimes said, referring to the slowly fluctuating share prices of pre-IPO companies. While Wall Street valuations have an effect on startups, private markets are less reactive to day-to-day volatility, he said, and it can take weeks or even months for pricing changes to materialize.

Investors looking to cash out of startup investments are also hopeful an uptick in large venture-backed acquisitions will provide some relief. David Chen, Morgan Stanley’s global head of technology investment banking, said last month that economic uncertainty meant “the sellers’ willingness to transact has actually improved” — and that with no clear IPO window in sight, acquisitions can become more attractive.

However, volatility can also lead to disagreements between buyers and sellers about acquisition prices. And tariffs could create added challenges for cross-border deal-making.

Some of Trump’s most vocal supporters in tech remain hopeful that tariffs could help America in the long-run, despite the recent investor unrest. Some VCs have stressed that the move will help the US reduce dependence on foreign trade for products like drones. “Do the hard things and have a 70% chance you win,” Sequoia Capital partner Shaun Maguire said in a post on X.

Nik Talreja, CEO of Sydecar, outlined a different potential upside to the market turmoil in a memo to employees reviewed by Bloomberg. “In an environment where public equity and debt markets pull back, there is the potential for private markets to remain an interesting place to invest capital,” he wrote.

But Talreja, whose company develops software for venture capitalists to manage their funds, also cautioned that the private markets could follow Wall Street to a slowdown in the second half of this year. “We do not know to what extent and how far-reaching the impact of any such slowdown will be,” he wrote.

Eric Liaw, a general partner at IVP, is broadly pessimistic about the impact of the tariffs on the VC industry, but said it’s hard to predict the impact of such a sprawling change to international trade. The firm will host a private event for portfolio CEOs and chief financial officers about navigating tariff volatility on Friday. For now, IVP is advising portfolio companies to exercise caution. “It’s tough to pick a fight with the whole world simultaneously,” Liaw said.

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