At the beginning of the year, Tom Drummond—managing partner at San Francisco venture capital firm Heavybit—was only mildly uneasy about the political shakeups rippling through the U.S.
Fast-forward a few months, and that unease has turned into full-blown confusion. “No one knows what the hell is going on,” Drummond told WIRED, capturing the mood across much of the startup and investment world.
The chaos was triggered on April 2, when President Donald Trump unveiled a set of so-called “reciprocal tariffs” that sent shockwaves through global markets. Investors scrambled, startups braced for impact, and uncertainty spread like wildfire.
While Trump later hit pause on import duties for most countries—buying a 90-day window of relief—a hefty 145% tariff on Chinese goods remains firmly in place. With the temporary suspension set to expire in early July, the future is murky.
“There’s just as much chance these tariffs get scrapped as there is of Trump doubling down,” Drummond says. For now, startups and investors are holding their breath, unsure whether they’re watching the beginning of a trade war—or just another round of brinkmanship.
Bracing for Impact
When it comes to how hard venture capital firms will be hit by Trump’s tariffs, it all boils down to one thing, says Tom Drummond: exposure.
“If your portfolio is stacked with companies that rely heavily on cross-border trade—like hardware, clean tech, even some biotech—you’re in a world of hurt right now,” says the managing partner at Heavybit.
That’s because the damage comes in waves. Startups might feel the immediate, first-order effects—like increased costs and disrupted supply chains—or they might suffer the second-order fallout if tariffs trigger a broader economic slowdown and customer spending dries up.
One of Drummond’s own portfolio companies, an internet-of-things platform, is already scrambling. The startup is rethinking its entire inventory strategy—trying to time orders more carefully and exploring suppliers outside China, in countries like Vietnam.
And it’s not just a temporary pivot. MG Siegler, a general partner at GV, says if the tariffs stick around, hardware startups could become VC kryptonite.
“VCs were already cautious about hardware—it’s more complex and risky than software—but now? This just turned that dial up to eleven,” Siegler explains.
Meanwhile, in Boston, Chip Hazard of Flybridge Capital is urging calm—but not complacency. In a message sent to over 400 startup founders, Hazard warned that capital markets are in “turmoil,” and that institutional investors may soon hit pause on funding entirely.
His advice: don’t panic, but do prepare. Think through where your business stands. Understand the risks and the potential openings the situation might create. And most importantly—revisit your fundraising strategy before the storm hits full force.