Finance
Tariffs spell trouble for VCs amid Klarna, StubHub IPO delays
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.”
Finance
Stocks making the biggest moves midday: Frontier Group, JPMorgan, Apple, Stellantis, BlackRock and more
Egg prices keep soaring, but inflation is moving in the right direction. (iStock)
Consumer prices fell 0.1% in March, according to the Consumer Price Index (CPI) released by the Bureau of Labor Statistics (BLS). This is the first monthly drop since July 2022.
Annual inflation increased 2.4% compared to a 2.8% increase registered in February. Core inflation, which excludes volatile energy and food prices, grew at a pace of 2.8% over the last year, the smallest 12-month increase since March 2021. A decline of 6.3% in gas prices more than offset increases in the indexes for electricity and natural gas. Food, however, rose 0.4% in March. The meats, poultry, fish and eggs index rose 7.9% over the last 12 months and the price of eggs alone jumped 60.4%.
Inflation continues to move towards the Federal Reserve’s 2% target rate. Still, the impact of President Donald Trump’s implementation of new tariff measures could derail this progress and hinder economic growth, according to Jim Baird, Plante Moran Financial Advisors’ chief investment officer.
“As consumers brace for the impact of tariffs on prices on a host of staples and discretionary goods, there’s considerable uncertainty on what that near-term magnitude of the impact will be for growth and inflation, although the direction for each is clearer,” Baird said. “That’s sent economists scrambling to update their forecasts to lower growth and increase expected inflation for the duration of the year.”
Despite concerns about the effects of President Trump’s tariffs, the Fed continues to hold interest rates steady, and it’s not expected to make any significant changes soon, including a potential rate cut. While tariffs could lead to higher inflation and slower economic growth, the Fed is waiting for more clarity on the full impact of these policies before deciding on any course of action.
If you are struggling with high inflation, consider taking out a personal loan to pay down debt at a lower interest rate, reducing your monthly payments. Visit Credible to find your personalized interest rate without affecting your credit score.
MORTGAGE RATES HIT A TWO-MONTH LOW THIS WEEK, REMAIN UNDER 7%
Recession risks increasing
President Trump’s tariffs are also contributing to an increased risk of recession. Several major financial institutions, including Goldman Sachs and J.P. Morgan, have raised their recession probabilities. According to Baird, part of the problem is that as prices rise due to tariffs, consumers may decide to curb their spending.
“Sentiment has soured in recent months, and there are already signs of not only a more cautious mood but more constrained spending,” Baird said. “Prices may rise, but that doesn’t mean that consumers will pay any price for any product. Some may grumble but continue to spend, but many are much more likely to trade down to cheaper alternatives or delay discretionary purchases.
“That reality raises the probability of a more notable slowdown in the pace of the economy, with the risk of recession also rising,” Baird continued.
You can take out a personal loan before future rate hikes to help pay down high-interest debt. Visit Credible to find your personal loan rate without affecting your credit score.
CALIFORNIA’S HOMEOWNERS INSURANCE INDUSTRY FACES ROUGH ROAD AHEAD AS WILDFIRES CONTINUE
Spring homebuying season looks promising
March shelter inflation data showed it dropped to 4.0% from 4.2% in February. That’s good news since shelter inflation has been a major force in keeping inflation elevated in recent years and could help move the needle on interest rates.
Mortgage rates continue to trend down, remaining under 7% for the twelfth consecutive week and could boost spring sales, according to Freddie Mac Chief Economist Sam Khater.
“As purchase applications continue to climb, the spring homebuying season is shaping up to look more favorable than last year,” Khater said.
The average 30-year fixed-rate mortgage was 6.62% for the week ending April 10, according to Freddie Mac’s latest Primary Mortgage Market Survey. That’s a decrease from the previous week, when it averaged 6.64% and lower than the 6.88% it was a year ago.
“Unfortunately, inflation remains painfully stubborn, well above the Fed’s 2% target for lowering rates,” said Gabe Abshire, Move Concierge CEO. “Considering the housing sector has lower exposure to the current global trade environment, it would be helpful for the Fed to lower rates and boost the Spring and Summer home buying market.”
If you want to become a homeowner, you can find your best mortgage rates by shopping around. Visit Credible to compare your options without affecting your credit score.
FHFA ANNOUNCES HIGHER MORTGAGE LOAN LIMITS FOR 2025
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A global trade slowdown tied to U.S. tariffs will likely create a more challenging environment for bond fund managers, according to financial futurist Dave Nadig.
“All of these capital holding requirements that led to buying U.S. Treasurys are kind of unwinding at the same time,” the former ETF.com CEO told CNBC’s “ETF Edge” on Wednesday. “So, the traditional math of things are bad for stocks, [and] everybody is going to buy bond just isn’t working out this time because the kind of shock we’re seeing is one we’ve never seen before.”
The benchmark 10-year Treasury Note yield increased to 4.4% on Thursday. The yield is up more than 10 percent just this week. Last Friday, it touched 3.86%.
Nadig thinks slowing trade will continue to impact market activity.
“When you have less trade, you need to finance less trade,” he said. “Historically, people have needed to finance dollars. That’s why every country in the world buys U.S. Treasurys. It helps them manage their international trade with the United States. So, if we’re slowing down the amount of international trade, we should expect in aggregate the holdings of bonds to probably come down.”
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