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.”
Technology
Bunq, a neobank for ‘digital nomads,’ accelerates U.S. expansion effort as profit jumps 65%
Dutch digital bank Bunq is plotting re-entry into the U.K. to tap into a “large and underserved” market of some 2.8 million British “digital nomads.”
Pavlo Gonchar | Sopa Images | Lightrocket | Getty Images
Dutch digital bank Bunq on Tuesday said it’s filed for broker-dealer registration in the U.S. as it looks to further expand across the Atlantic.
Bunq CEO Ali Niknam said the broker-dealer application will be an initial step toward securing a full banking license. He couldn’t offer a firm timeline for when Bunq will secure this authorization in the U.S. — but said he’s excited for its growth prospects in the country.
Obtaining a broker-dealer license will mean Bunq “can offer our users who have an international footprint — which is the user demography we’re aiming for — a great number of our services,” Niknam told CNBC. Bunq mainly caters for “digital nomads,” individuals who can live and work from anywhere remotely.
Bunq will be able to offer most of its services in the U.S. with the exception of a savings account after securing broker-dealer authorization, Niknam added.
Bunq, which touts itself as a bank for “digital nomads,” currently has a banking license in the European Union. It has applied for an Electronic Money Institution (EMI) in the U.K. Bunq previously had operations in Britain but forced to withdraw from the country in 2020 due to Brexit.
Bunq initially filed for a U.S. Federal bank charter in April 2023. However, it withdrew the application a year later, citing issues between its Dutch regulator and U.S. agencies. The company plans to resubmit its application for a full U.S. banking license later this year.
65% jump in profit
Beyond the update on international expansion, Bunq also on Tuesday reported a 65% year-over-year jump in profit to 85.3 million euros ($97.2 million). That jump was primarily driven by a 55% increase in net interest income, while net fee income also grew 35%.
Similarly to fintech peers such as N26 and Monzo, Bunq has benefited from a high interest rate environment by pocketing yields on customer deposits sat at the central bank.
Bunq’s CEO told CNBC that, while high interest rates have certainly helped, more generally Bunq is seeing increased usage of the platform and has been focused on cost efficiency from an operational perspective.
“Because we are so lean and mean, and because we have set up all of our systems from scratch … we have been able to not only increase our profits, but also offer very good interest rates in the European market in general, and in the Netherlands specifically,” Niknam said.
More recently, central banks in the EU and U.K. and U.S. have moved to slash interest rates in response to falling inflation and concerns of an economic slowdown, which can bite into bank earnings.
Niknam said he’s not concerned by the prospect of rates coming down and expects potential declines in interest income to be offset by a “diversified” revenue mix that includes income from paid subscription products, as well as new features. Bunq recently launched a tool that lets users trade stocks.
“This is different in continental Europe to the U.K. We had negative interest rates for long,” Niknam told CNBC. “So as we were growing, actually our cost base was also growing because we had to pay for all the deposits that people deposited a Bunq so I think we’re in a great position in 2025
Bunq is coming up against heaps of competition, especially in the U.S. market. America is already served by established consumer banking giants, including JPMorgan Chase, Bank of America, Wells Fargo and Citigroup. It’s also home to several major fintech brands, such as Chime and Robinhood.
Technology
U.S.’ inability to replace rare earths supply from China poses a threat to its defense, warns CSIS
Workers transporting soil containing rare earth elements for export at a port in Lianyungang, Jiangsu province, China, Oct. 31, 2010.
Stringer | Reuters
As China imposes export controls on rare earth elements, the U.S. would be unable to fill a potential shortfall, according to the Center for Strategic and International Studies — and this could threaten Washington’s military capabilities.
Amid U.S. President Donald Trump’s escalating tariffs on China, Beijing earlier this month imposed export restrictions on seven rare earth elements and magnets used in defense, energy and automotive technologies.
The new restrictions — which encompass the medium and heavy rare earth elements samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium — will require Chinese companies to secure special licenses to export the resources.
Though it remains to be seen exactly how China will implement this policy, the CSIS report, published Monday, warns that it will likely result in a pause in exports as Beijing establishes the licensing system, and cause disruptions in supply to some U.S. firms.
The New York Times reported earlier this week that a pause in China’s rare earth element exports was already occurring.
As China effectively holds a monopoly over the supply of global heavy rare earths processing, such restrictions pose a serious threat to the U.S., particularly its defense technology sector.
“The United States is particularly vulnerable for these supply chains,” CSIS warned, emphasizing that rare earths are crucial for a range of advanced defense technologies and are used in types of fighter jets, submarines, missiles, radar systems and drones.
Along with the export controls, Beijing has placed 16 U.S. entities — all but one in the defense and aerospace industries — on its export control list. Placement on the list prevents companies from receiving “dual-use goods,” including the aforementioned rare earth elements.
Not ready to fill gap
According to CSIS’s report, if China’s trade controls result in a complete shutdown of the medium and heavy rare earth element exports, the U.S. will be incapable of filling the gap.
“There is no heavy rare earths separation happening in the United States at present,” CSIS said, though it noted the development of these capabilities is underway.
For example, the Department of Defense set a goal to develop a complete rare earth element supply chain that can meet all U.S. defense needs by 2027 in its 2024 National Defense Industrial Strategy.
Since 2020, the DOD has committed over $439 million toward building domestic supply chains and heavy rare earths processing facilities, according to data collected by CSIS.
However, CSIS said that by the time these facilities are operational, their output will fall well short of China’s, with the U.S. still far from meeting the DOD’s goal of an independent rare earth element supply.
“Developing mining and processing capabilities requires a long-term effort, meaning the United States will be on the back foot for the foreseeable future,” it added.
U.S. President Trump has also been seeking a deal with Ukraine, which would give it access to its deposits of rare earth minerals. However, questions remain about the value and accessibility of such deposits.
Implications
The CSIS report warns that the export controls pose direct threats to U.S. military readiness, highlighting that the country is already lagging behind in its defense manufacturing.
“Even before the latest restrictions, the U.S. defense industrial base struggled with limited capacity and lacked the ability to scale up production to meet defense technology demands,” its authors said.
They cite an estimate that China is acquiring advanced weapons systems and equipment five to six times faster than the U.S., originating from a U.S. Air Force official in 2022.
“Further bans on critical minerals inputs will only widen the gap, enabling China to strengthen its military capabilities more quickly than the United States,” the report concludes.
The U.S. is not alone in its concerns about China’s monopoly on rare earths, with countries like Australia and Brazil also investing in strengthening domestic rare earth elements supply chains.
CSIS recommends that the U.S. provide financial and diplomatic support to ensure the success of these initiatives.
However, China’s new export licensing system for the rare earths could also incentivize countries across the world to cooperate with China to prevent disruptions to their own supply of the elements, CSIS said.
A research report from Neil Shearing, group chief economist at Capital Economics, on Monday also noted how controls on rare earths and critical minerals have become part of Beijing’s playbook in pushing back against Washington.
Shearing notes that in addition to China’s hold on some rare earths, the supply of many other critical minerals, including cobalt and palladium, is concentrated in countries that align with Beijing.
“The weaponising of this control over critical minerals — and the race by other countries to secure alternative supplies — will be a central feature of a fractured global economy,” he said.
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