With IPOs on hold even longer, tariffs spell trouble for private tech investors
A VIX volatility index chart on the floor of the New York Stock Exchange (NYSE) in New York, US, on Wednesday, March 19, 2025. Federal Reserve officials held their benchmark interest rate steady for a second straight meeting, though they telegraphed expectations for slower economic growth and higher inflation.
Photographer: Michael Nagle | Bloomberg | Getty Images
Already under pressure amid last week’s multitrillion-dollar stock market rout, the venture capital industry now faces an even tougher outlook amid ongoing uncertainty stemming from U.S. tariffs.
A dearth of initial public offerings or mergers and acquisitions — coupled with the trend that startups are now staying private for longer — has put immense strain on VC funds. Venture capitalists can typically only realize gains on their investments when a company goes public or is sold, allowing them to cash out.
Mere days after U.S. President Donald Trump announced plans to impose so-called reciprocal tariffs on a swathe of countries, it emerged that two major tech unicorns — fintech firm Klarna and ticketing platform StubHub — were delaying plans to go public due to a sharp plunge in global equity markets. Notably, both companies had filed initial public offering prospectuses in recent weeks.
“No one can go out with this turbulence,” Tobias Bengtsdahl, a partner at VC firm Antler’s Nordics fund, told CNBC on a call last week. “When the market plunges like it has now … you have to do the same prediction on the private markets.”
Tough outlook for VC
As private markets don’t move in the same way public markets do, it becomes more difficult for tech startups to go out and raise capital — whether from the stock market or venture capital — as they could end up seeing their valuations go down.
“We don’t change the valuations of our startups just because the stock market goes down,” Antler’s Bengtsdahl said. Venture-backed startups’ valuations only tend to change when they’re raising a new equity round.
“That has a huge impact on funds raising right now and startups raising from multi-stage investors,” he added.
That could soon make it more difficult for startups — and especially growth-stage firms — to raise venture capital. Later-stage firms tend to be more exposed to swings in public markets than early-stage startups, given they’re closer than most to reaching the IPO milestone.
Private markets are less liquid than public markets, meaning investors can’t sell shares easily. The main way private equity owners sell part or all of their stake in a company is via an IPO or M&A — also known as an “exit.” The other alternative is to sell shares to another investor on the secondary market.
“[General partners] will be under pressure from [limited partners] to make sure these exits happen,” Alex Barr, partner and head of private market fund management firm Sarasin Bread Street, told CNBC last week, adding that IPOs remain a “very fickle beast to manage.”
General partners are investors who manage a venture fund, whereas limited partners are institutional investors — like pension funds and hedge funds — or high-net-worth individuals who pour money into funds.
Limited partners invest in a venture fund in the hope that they’ll generate sizable returns over its lifetime, which can span as long as 10 years. Early-stage funds invest in the hope that a few startups in their portfolio will generate the kind of returns outcomes like Uber and Spotify reaped for their private backers.
Hope for Europe tech?
On the bright side, the uncertainty could be a chance for Europe’s private tech startups to shine, according to Sanjot Malhi, a partner at London-based venture capital firm Northzone.
“The short-term pause in IPO activity is a natural response to recent market turbulence, and we can expect to have more clarity on company positions once some sense of stability is restored,” Malhi told CNBC.
He nevertheless added that, “if talent and liquidity find the U.S. environment less hospitable, that flow has to go somewhere, and Europe has a chance to benefit.”
Christel Piron, CEO of startup investor PSV Foundry, told CNBC that the “silver lining” from uncertainty created by tariffs is how “Europe is moving closer together amid the turbulence.”
“We’re seeing more founders choosing to stay and scale here, driven by a growing sense of responsibility to help build a resilient European tech nation,” Piron said.
There could also be other routes to exit for venture capital funds, according to Northzone’s Malhi — including acquisitions or even so-called “down rounds” where startups raise funds at reduced valuations.
“If the global IPO window does narrow in the longer term, then we would still expect a strong M&A landscape, as stakeholders seek ‘problem-solving’ exits,” he told CNBC.
“If that is the case, we may also see an increase in later-stage fundraises, as companies look to bridge the capital gap until they can find such opportunities, albeit at potentially lower valuations.”
Further down the line, investors are holding out hope for big tech IPOs to return later into Trump’s presidency. VCs had counted on the Trump administration resulting in a reinvigorated IPO market.
“A lot of people feel Trump has promised them open up the IPO market and open up the M&A market,” Antler’s Bengtsdahl said.
“It’s now 6 months into his term,” he added, noting the market can tolerate the new administration’s failure to meet this pledge in its early days. “But people are demanding that it happens within his term.”
An image of a Quantix drone made by AeroVironment.
David Mcnew | Getty Images News | Getty Images
AeroVironment shares fell 7% Tuesday after the defense contractor said it plans to offer $750 million in common stock and $600 million in convertible senior notes due in 2030 to repay debt.
The drone maker said it would use leftover funding for general purposes such as boosting manufacturing capacity.
AeroVironment shares have soared 85% this year, ballooning its market value to about $13 billion.
Last week, shares of the Arlington, Virginia-based company rallied on strong fourth-quarter results, lifting higher as CNBC’s Jim Cramer called it the “next Palantir of hardware.”
Last month, the company also closed its $4.1 billion acquisition of space-related defense tech company Blue Halo.
Earlier this month, President Donald Trump signed an executive order intended to boost drone production in the U.S. and crack down on unauthorized uses.
The company also has a high short interest level, which may have contributed to some of the recent gains, creating a short squeeze. This phenomenon occurs when a stock price surges, forcing those shorting the stock to purchase shares to cover their positions and prevent losses.
Aerovironment 1 month stock chart
Jaque Silva | Nurphoto | Getty Images
Internet firm Cloudflare will start blocking artificial intelligence crawlers from accessing content without website owners’ permission or compensation by default, in a move that could significantly impact AI developers’ ability to train their models.
Starting Tuesday, every new web domain that signs up to Cloudflare will be asked if they want to allow AI crawlers, effectively giving them the ability to prevent bots from scraping data from their websites.
Cloudflare is what’s called a content delivery network, or CDN. It helps businesses deliver online content and applications faster by caching the data closer to end-users. They play a significant role in making sure people can access web content seamlessly every day.
Roughly 16% of global internet traffic goes directly through Cloudflare’s CDN, the firm estimated in a 2023 report.
“AI crawlers have been scraping content without limits. Our goal is to put the power back in the hands of creators, while still helping AI companies innovate,” said Matthew Prince, co-founder and CEO of Cloudflare, in a statement Tuesday.
“This is about safeguarding the future of a free and vibrant Internet with a new model that works for everyone,” he added.
What are AI crawlers?
AI crawlers are automated bots designed to extract large quantities of data from websites, databases and other sources of information to train large language models from the likes of OpenAI and Google.
Whereas the internet previously rewarded creators by directing users to original websites, according to Cloudflare, today AI crawlers are breaking that model by collecting text, articles and images to generate responses to queries in a way that users don’t need to visit the original source.
This, the company adds, is depriving publishers of vital traffic and, in turn, revenue from online advertising.
Tuesday’s move builds on a tool Cloudflare launched in September last year that gave publishers the ability to block AI crawlers with a single click. Now, the company is going a step further by making this the default for all websites it provides services for.
OpenAI says it declined to participate when Cloudflare previewed its plan to block AI crawlers by default on the grounds that the content delivery network is adding a middleman to the system.
The Microsoft-backed AI lab stressed its role as a pioneer of using robots.txt, a set of code that prevents automated scraping of web data, and said its crawlers respect publisher preferences.
“AI crawlers are typically seen as more invasive and selective when it comes to the data they consumer. They have been accused of overwhelming websites and significantly impacting user experience,” Matthew Holman, a partner at U.K. law firm Cripps, told CNBC.
“If effective, the development would hinder AI chatbots’ ability to harvest data for training and search purposes,” he added. “This is likely to lead to a short term impact on AI model training and could, over the long term, affect the viability of models.”
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