The global innovation economy remains largely defined by agglomeration dynamics. Worldwide, 19 ecosystems dominate the innovation landscape, increasingly concentrating innovation demand (corporates) and supply (scaleups) — attracting further growth capital (investors).

Meanwhile, other ecosystems struggle to achieve a meaningful presence on the global innovation map and are at serious risk of technological disruption and economic downfall.

Yet something is happening below the surface. Over the past decade, the composition of the Global Innovation Ecosystems Life Cycle Curve changed dramatically, as the number of scaleup ecosystems worldwide has more than doubled.

The trend is not stopping just here: we expect these figures to even triple in the coming years.

In this new scenario, emerging innovation economies hold the potential for disrupting the agglomeration paradigm, toward a new scheme of interconnected networks of specialized local innovation hot spots.

Among them, there is also Africa. While the continent still lacks ecosystems at the most advanced stages of maturity, it now counts four ecosystems at the startup stage and 40 at the standup stage, compared with respectively 25 of those 10 years ago, according to by my organization, , in collaboration with and .

Africa: the awakening giant of the coming decade?

As of today, Africa’s innovation economy includes 883 tech scaleups that have raised a combined $24.7 billion. Despite this progress, the continent still represents only about 1% of global figures.

The African innovation landscape remains highly concentrated around four main hubs: South Africa, Egypt (North-East), Nigeria (West Africa) and Kenya (East Africa). The North-Western corner of the continent still lacks a dominant hub, although Tunisia, Morocco and Algeria remain the leading candidates.

A testbed for clean technologies?

Emerging innovation economies that thrive on the global innovation map typically build on top of highly specialized, unique local strengths.

Our recent analysis has identified clear evidence that Africa holds significant potential over the development of clean energy systems and technologies.

The relative prominence of the cleantech sector in Africa is evident from the data:

• Africa is home to 95 cleantech scaleups, representing roughly 11% of the total scaleup base.
• Collectively, they have attracted approximately one-fifth of all capital deployed to African ventures.
• Cleantech has also generated a disproportionate share of high-growth leaders, accounting for around 20% of both scalers (scaleups that raised more than $100 million) and super scalers ($1 billion-plus).

Within cleantech, a highly specialized vertical is also emerging, what we might call “gridtech”:

• It comprises 16 scaleups (17% of the cleantech total) and two scalers (25% of total).
• It has attracted around 30% of total cleantech funding.
• Africa’s sole cleantech tech giant, Kenya-based , operates within this gridtech vertical.

That said, the numbers still point to a gap.

The elephant in the room

The main challenge is the grid infrastructure deficit, which remains the primary bottleneck to scaling energy system technologies. As shown in the map below, Africa’s grid infrastructure is highly fragmented: High-voltage networks are concentrated in a few densely populated areas, while large parts of the continent remain largely disconnected.

As a result, grid infrastructure development and electrification are key to unlocking Africa’s growth — consider that Africa still accounts for only about 5% of global energy supply — and its innovation potential.

At the same time, the continent holds world-class renewable resources, including approximately 13% of global technical hydropower potential and around 60% of the world’s best solar resources.

Africa’s energy system is expanding, but fully unlocking its economic and innovation potential will depend on accelerating electrification and strengthening grid infrastructure.

Blended finance will be critical to enable this growth. Both private and public capital are required: private capital drives innovation, while public finance enables foundational infrastructure such as grid expansion.

In particular, private capital needs to be complemented by structured public finance initiatives to address the inherent limitations of a relatively small domestic VC market, which remains heavily focused on early-stage investments.

Public capital will be essential for infrastructure development. In gridtech especially, public investors are expected to account for up to about 80% of total investments by 2030, reflecting the capital intensity and risk profile of grid infrastructure.

International capital still dominates the market, with approximately 69% of active investors originating outside Africa, underscoring continued reliance on foreign capital despite growing local participation.

Get the full story in our report:

is chairman of and a professor at . He is a serial entrepreneur who has started three startups in his career, the last of which is , among the five Italian scaleups that have raised the largest amount of capital. He is recognized among the leading international experts in open innovation and has wide experience in setting up and managing open innovation projects — venture clients, venture builders, intrapreneurship, CVCs — with large multinational companies, as well as advising and training on this subject. Onetti has a column on () and several other tech blogs.

Photo by on .

This tracker includes layoffs conducted by U.S.-based companies or those with a strong U.S. presence and is updated at least bi-weekly. We’ve included both startups and publicly traded, tech-heavy companies. We’ve also included companies based elsewhere that have a sizable team in the United States, such as , even when it’s unclear how much of the U.S. workforce has been affected by layoffs.

Layoff and workforce figures are best estimates based on reporting. We source the layoffs from media reports, our own reporting, social media posts and , a crowdsourced database of tech layoffs.

We recently updated our layoffs tracker to reflect the most recent round of layoffs each company has conducted. This allows us to quickly and more accurately track layoff trends, which is why you might notice some changes in our most recent numbers.

If an employee headcount cannot be confirmed to our standards, we note it as “unclear.”

Venture firms that set up shop in the Texas capital city included , , and 1, among others. famously moved ’s headquarters to Austin in 2021, while also purchasing a house and establishing a residence there.

But as more employees returned to in-office work, Austin slowly seemed to fall out of favor with the tech community, some of whom said it had been overhyped as a startup hub.

There were reports of tech workers who had moved to the city during the pandemic and , saying they were going back to places like the Bay Area. Musk back to California in 2023.

Funding tops pandemic peak

Undeterred by the “tourists,” the startup and venture community in Austin kept plugging away. And those efforts are reflected in a surge in funding to startups headquartered there last year, with 2025 posting an all-time high for Austin venture investment, Crunchbase data shows.

Investment into Austin-based startups spiked 64.8% to $7.19 billion in 2025 as more investors poured money into companies based in the region, according to Crunchbase . That’s compared with the $4.37 billion raised by Austin-area startups in 2024 and tops even the $6.1 billion raised in 2021, at the height of the venture funding frenzy.

Notably, deal counts actually decreased from 312 in 2024 to 272 year over year, signaling an increase in later-stage deals. Indeed, the data corroborates that with $4 billion of the total raised in 2025 classified as late-stage rounds.

Last year’s totals were also more than double — 130% higher — than the $3.1 billion raised in 2023. That money was raised across 403 deals, signaling much smaller round sizes at the time and a more mature market.

A tech scene decades in the making

, managing partner of , doesn’t believe that the Austin funding performance in 2025 was anomalous.

Rather, he calls it “the payoff from decades of compounding.”

“Talent density in venture categories such as software, fintech, health tech, defense and�� robotics has reached a critical mass, driven by waves of Bay Area relocations, both full HQ moves and satellite offices, that brought technical, product and operational talent into the market,” Flager said.

That talent eventually left to build new companies, he said, and the cycle repeated.

“On the capital side, the stack has matured across all stages, from pre-seed through growth, with local firms that have now cycled through multiple funds and understand the market deeply,” Flager said. “Layer in a business-friendly regulatory environment, a relatively lower cost of living, as well as a lower effective tax rate, and Austin becomes an attractive place to start and scale a company.”

Former Austin Mayor saw so much potential in the city’s startup scene that he began a career in venture investing after his tenure ended in early 2023. (He now works for New York-based ).

Part of the city’s success as a startup hub stems from its reputation as a haven for mavericks and risk-takers, Adler has said.

“Most cities in the world, you try something, you fail; it’s hard to have access to the capital the second time,” he told co-founder in a in 2022. “In Austin, the civic folk heroes are the people that tried something and it didn’t quite work out and they worked on it until it did.”

, founder of , a solo GP venture firm based in nearby San Antonio, said that it feels like Texas and the Austin metro area specifically are becoming more attractive to manufacturing- and engineering-heavy businesses.

“Some of that may be thanks to Tesla, and some of it may simply reflect the physical advantages of the state,” he told Crunchbase News. “Either way, this [surge in financing] feels less like hype returning and more like capital concentrating around a narrower set of serious, technically differentiated companies.”

Deal sizes grow

That diversity among funded startups is reflected in last year’s investment totals for Austin, which were boosted by several large, late-stage deals across a broad range of industries.

The largest was a $1 billion Series C round for energy provider in October. New York-based led that financing, which valued the 2-year-old company at $4 billion.

Looking back, February in particular was a busy month for venture funding. That month alone saw the second-, third- and fourth-largest rounds in Austin for the year. They included:

• A February Series C round in which autonomous surface vessels maker raised $600 million at a $4 billion valuation. led the round for the defense tech startup.
• Also in February, , which provides endpoint management, security and monitoring, raised $500 million in Series C extensions at a $5 billion valuation — more than doubling its value from just 12 months prior. The funding came in separate tranches led by and ’s , with participation from other investors.
• Robotics company in February raised $415 million in Series A financing led by�� and accelerator (A $520 million extension to that Series A was raised in February 2026, taking the total round to over $935 million.)

The findings correspond with Flager’s observations.

“A good chunk of the capital raised in Austin was driven by several large deals. Similar to what we saw across the U.S. in 2025, venture funding in Austin was more concentrated than it has been in the past,” he told Crunchbase News. “Roughly 38% of the capital deployed went to the top five venture financings in Austin. I believe the top 10 deals nationally accounted for more than 40% of the capital raised last year. We’ll see if this trend continues into 2026 and beyond. The start of the year suggests it will.”

, founding partner of , agrees, noting that from a dollars perspective, the surge in financings was driven by a handful of outsized capital-intensive deals in newer categories such as defense and deep tech.

“These companies require a combination of technology, land for manufacturing facilities, and talent for manufacturing tasks. Austin has unique skillsets for that,” he said. “It has a density of three things: talent in deep tech with , and many others moving to Texas in light of favorable business conditions with expertise in these industries; expansive land around Central Texas that is inexpensive, especially compared to California; and lower cost manufacturing-related labor especially given the surge in manufacturing jobs such as at Tesla in recent times.”

Burgeoning industries

Once upon a time, Austin was better known as home to software and CPG companies. And while those types of companies certainly still exist, a number of other industries are growing increasingly robust, as the local investors have pointed out.

As with many top tech markets, Flager said Austin has long been strong for application and infrastructure software, which is currently being challenged by AI. In his view, that talent has migrated to building “quality” vertical agentic software and AI-native businesses.

“We are seeing these companies grow quickly and build scale, while using less capital — which is exciting,” he added. “The domain experts who built and scaled application software companies here over the last two decades are spinning out to build the next generation of native AI businesses.”

The market overall is also broadening in interesting ways. Defense and autonomy have emerged as breakout categories, with Austin becoming one of the stronger markets in the country for dual-use and autonomous systems companies, noted Flager.

“The combination of software and hardware skills now in Texas, along with a business-friendly regulatory environment, has allowed Austin to take a leadership position in these important and developing markets,” he said. “Energy tech is also a natural fit given Texas’ grid scale and the surging power demands of AI infrastructure.”

Finally, robotics and advanced manufacturing are also gaining momentum, driven by deep engineering talent and the ability to scale manufacturing near Austin cost-effectively, allowing engineers, executives and other factory employees to coexist and collaborate in close proximity.

Srinivasan noted that his firm is seeing strong activity in vertical AI companies, or companies that serve vertical markets with AI that is tuned on specialized proprietary vertical data, often targeting the services and labor expenditures by their customers.

“These companies deliver ‘Services as Software’ with close to software gross margins and pricing models that are based more on usage and outcomes as opposed to the traditional seat-based models,” he said.

Srinivasan also expects the city to continue to see large funding deals in defense and deep tech, given the combination of local strengths and robust global demand for such products.

Continued momentum

Investors and companies continue to be drawn to Austin. In late December, San Francisco-based venture firm in the city. One of the firm’s founders, , also announced that he had personally moved to Austin. The firm’s other founder, , had lived and worked in the city since 2022.

In late March of this year, Musk to build two semiconductor factories totaling 100 million square feet in Austin to supply advanced chips for and Tesla. The venture, known as Terafab, aims to manufacture 1 trillion watts of computing power per year, he said. Media outlets valued the initiative at nearly

Also this week, Barcelona-based AI health tech startup announced it will open an office and hire in Austin.

CEO told Crunchbase News that with the company’s New York office already established, the next step was not just expansion, “but choosing the right place to build.”

“And we chose Austin for one reason above all: talent,” he said. “As an AI health tech company, our success depends on attracting exceptional people across engineering, data and life sciences. Austin has rapidly become one of the most competitive talent markets. The city is one of the fastest-growing in the United States. This brings together deep tech expertise, entrepreneurial energy and a growing concentration of healthcare innovation. Ideal for our goal of building an R&D hub. “

Coelho also points out that Biorce has witnessed a “trend” of people moving from the Bay Area to Austin, noting that “the quality of life has gained notoriety.”

“But for us, this isn’t about following a trend,” he added. “It’s about building where the best people are — and where they want to be.”

Related Crunchbase query:

Related reading:

• Only 2 States Saw Their Share Of US Venture Funding Rise Last Year
• Texas Startup Funding Declines, Led By Dip In Austin-Area Investment
• Lower Costs, Laid-Back Lifestyle Continue To Draw Tech Companies To Austin, Texas
• The 10 Biggest Rounds Of February: Saronic And NinjaOne Lead Big Month
• NinjaOne Snags $5B Valuation In Massive $500M Round
• Amid Record Robotics Funding, Apptronik Raises $520M Series A Extension To Boost Production Of Humanoid Robot Apollo

Illustration:

Last year was a stellar one for venture funding, in large part thanks to AI. Preliminary Crunchbase data shows global venture investment in 2025 was on pace to be the third-highest on record, after the peak years of 2021 and 2022.

A total of $205 billion was raised through mid-2025, up 32% from H1 2024, and marking the strongest half-year for venture capital since the first half of 2022. In the third quarter, global funding jumped 38% year over year, with funding up at all stages, albeit concentrated at the top into the largest AI companies. (Final year-end 2025 numbers were not yet available at the time of this writing.)

Both of the two largest venture fundings on record were also raised last year, and both were AI-related. They were , with $14.3 billion in Q2, and with $40 billion in Q1.

With that momentum behind the industry, what’s ahead for 2026? Will it be more of the same, or will investors finally pull back on AI?

To get a sense of the startup funding outlook for the year ahead, Crunchbase News reached out to four investors via email: , managing director at ; partner at ; , managing director and partner at Menlo Ventures; and , partner at . The following interviews have been edited for brevity and clarity.

Crunchbase News: In 2026, do you expect total dollars deployed to be up, flat or down vs. 2025, and by roughly what percentage?

Mathew: We expect global venture capital deployment to increase from the low $400 billion to the high $400 billion mark, which implies a 10% increase in dollars deployed.

Tully: The data indicates about $340 billion was invested in 2024, and we are on track for north of $400 billion in 2025, which was a 17.6% increase, so I’d ballpark this goes up even further, perhaps closer to 25%. You’re seeing large funds raise progressively larger funds, giving them more capital and dry powder to deploy. Additionally, the round sizes themselves are getting larger at all stages. Putting those two ideas together would lead to this prediction.

Murphy: Up, mainly due to the fast growth and maturation of AI native companies that will raise large expansion rounds. Early-stage will be robust, likely the same as this year, but we could see some slowdown as the bloom comes off the rose in competitive overfunded categories.

Ranum: Up vs. 2025, by roughly 10% to 15%, driven by reopening growth rounds and fewer, but larger checks from scaled funds.

In 2026, do you expect more rounds to be priced up, priced flat or priced down? What does “normal” look like?

Mathew: This will likely be a tale of two cities. AI funding will be about half the total funding and will continue to accelerate with likely large raises, especially in growth and later stage.

Murphy: For the AI native companies, rounds will continue up, but there will be a bifurcation as the winners emerge and the number 3 to 8 players in categories really struggle to raise and likely seek M&A. Winning SaaS companies from the ZIRP era will finally start to exceed previous valuations and raise flat to slightly up rounds. Those that didn’t rebound substantially will seek liquidity, with PE increasingly becoming the option.

Ranum: “Normal,” meaning hyper-growth AI companies clearing at premium valuations, while the median remains flat with tighter terms and less available capital.

Where do you expect net new dollars to concentrate in 2026: seed, Series A or growth? Why?

Mathew: We believe that seed and Series A will aggregate the highest number of deals, but the net new dollars will continue to concentrate on growth, especially in the megarounds of AI infra and foundational models.

Tully: I expect net new dollars to concentrate more in seed and growth deals, primarily because the seed rounds are getting quite large thanks to fundraises by the likes of neolabs, neoclouds, and others. Furthermore, the capital needs of existing high-growth companies will continue to grow due to dependencies on frontier lab and hardware spend.

Murphy: Bigger rounds in growth. The early AI winners will continue to separate, and the enormous capital in the private growth market continues to pour in. Seed likely sees an uptick, but dollar-wise, it’s trumped by growth.

Ranum: Series A, as seed remains crowded and growth selectively reopens for companies with real revenue and AI leverage. It’s a bit of a barbell where concentrated bets continue to take place on the growth end.

Which three sectors will gain share of venture dollars in 2026, and what’s the concrete catalyst for each? Which will lose share?

Mathew: Simply put, AI, AI and AI are the three sectors that are positioned to gain. In all seriousness, foundation models, agentic infrastructure and vertical AI are all expected to expand in 2026. That said, it will likely be very difficult for a SaaS company without native AI/agentic capabilities to find VC dollars at any stage.

�ճܱ�����:�� I expect an increase in:

• AI infrastructure: As the old saying goes, when there’s a gold rush, invest in picks and shovels …
• Defense tech: The current administration’s focus on defense procurement will create increased near-term contract wins, particularly for startups.
• Robotics: The convergence of decreasing hardware costs for sensors, batteries, etc. … combined with increased AI capabilities will make 2026 an inflection point where physical AI becomes not only more viable, but rather likely.

I expect a decrease in:

• Climate tech: They will still get funding, but I predict this sector will lose share because climate tech requires long-term patient capital along with long development cycles.
• Crypto: decreasing crypto prices in the back half of 2025 will continue to sour investors and force them into a wait-and-see mentality in 2026 and vertical SaaS.
• Vertical SaaS without AI differentiation or a technical moat: This will be hard to justify for investors demanding strong fundamentals and dramatically higher multiples relative to the past for their companies.

Ranum: AI infrastructure (cost/performance breakthroughs), defense (geopolitical), healthcare AI (provider margin pressure) will gain share, while consumer and horizontal SaaS will lose.

In 2026, does capital shift from “AI wrappers” to infrastructure, data and verticalized workflows — or do apps still attract venture dollars?

Mathew: We believe that shift has already happened. Last year demonstrated that it’s difficult to survive as an AI wrapper company. Even the vertical AI providers have to be deeply embedded into industry workflows to differentiate themselves from a foundation model doing more of the repetitive work in the market.

Murphy: The market is more balanced in 2026 as the number of companies deploying AI apps scales up significantly, and operational challenges of scale require more tooling and more great infra products to help replatform. Apps remain strong, but more 50-50 in 2026.

Ranum: There are enough dollars chasing exposure to continue to support apps on generic AI wrappers and to infrastructure, data and deeply verticalized workflows. We will also see a few app-layer winners breaking out in accounting, ITSM and ERP.

What’s your 2026 base case for liquidity: More IPOs, more M&A, secondaries or still mostly private?

Mathew: We would expect more IPOs and more M&A as drivers for liquidity in 2026.

Tully: According to , for companies that went public in 2025, the median time to IPO for those valued at $500 million or more has reached over 11 years, the longest in a decade. The bar for IPOs has risen in recent years, with the bar now set at close to $500 million-plus in revenue, at least 30% growth if not more, as well as positive rule of 40. There are only a handful of companies positioned to go public based on these factors. Based on that, I do believe we will see continued growth in M&A and secondaries in 2026 as shareholders seek outlets for liquidity.

Murphy: IPOs slightly up, continued upward trend in M&A as legacy companies seek AI assets and as private-market players consolidate to gain scale. Secondary continues to rise as VCs get more intentional about liquidity, and even become more active in buying and selling to each other.

Ranum: I’m excited to see more M&A and secondaries, as well as an uptick in IPOs at the high-end/scaled companies.

How do you expect 2026 venture fundraising to impact deployment? Are too many firms “underfunded” to keep pace?

Mathew: Again, a tale of two cities. Scale and domain expertise will matter. It will be increasingly harder to be a generalist tech investor, especially in venture markets.

Murphy: Given the size of AI rounds, multistage firms have an advantage. Smaller funds are forced to go earlier or write small participation checks. It could be a great time to be an early-stage firm if you can pick well and get in before the big uptick rounds, which are increasingly happening at the A stage.

Ranum: I don’t expect there to be less capital available to funds. I think total fundraising in 2026 will be comparable to, or stronger than, 2025. The totals for 2024 were notably low relative to prior years, and LPs are actively seeking exposure to the AI wave.

Give me your 2026 predictions in one sentence.

Mathew: We are accelerating to a world where models and agents can complete a full day’s worth of work with minimal or no human intervention, and we may already be there in some domains.

Murphy: AI hits a further inflection in the enterprise as security issues and technology choices are largely addressed, and enterprises substantially increase their application development velocity with tools like Claude Code.

Ranum: 2026 is a fundamentals-first year where capital rewards revenue growth, efficiency and real AI advantage, and punishes anything that is AI veneer on old ideas.

Related Crunchbase query:

Related reading:

• Crunchbase Predicts: Why The Race For Talent And Tech Could Accelerate Startup M&A In 2026
• Crunchbase Predicts: IPOs Picked Up In 2025 And The Outlook For 2026 Is Even More Optimistic��
• 6 Charts That Show The Big AI Funding Trends Of 2025
• What We Learned In 2025 From 6 Active AI Investors Backing Startups Across The Stack

Illustration:

Signed into law on July 4, the U.S.’ One Big Beautiful Bill Act is a reconciliation package intended to reshape business taxation — and there are opportunities for founders to achieve fresh momentum.

Several specific provisions deserve special attention: immediate domestic R&D expensing, a revamped Qualified Small Business Stock, or QSBS, framework with earlier exits, and reinstated bonus depreciation.

Here’s what’s new, as well as how startups can make the most of these developments.

Innovation gets immediate relief with R&D expensing

A longstanding issue with Section 174, where businesses had to amortize R&D costs over multiple years, is now history for startups. Effective starting in the 2025 tax year, U.S.-based R&D expenses are fully deductible as soon as they’re spent. That’s a win for tech-driven startups looking to reinvest aggressively in product development.

And even better, startups with less than $31 million in average annual gross receipts may elect to apply this change retroactively. This means 2022-2024 tax returns can be amended, which potentially unlocks refunds.

Actions for founders to take now include:

• Inventorying R&D expenditures by year to determine if amending earlier returns is worth it.
• Planning for accelerated deduction strategies — either by amending or applying expensing in 2025-2026.
• Preparing for guidance around elections and technical filing details.

Early exits just got more attractive in the QSBS overhaul

The QSBS program just became friendlier to founders by:

• Raising the gross asset cap from $50 million to $75 million, expanding eligibility.
• Offering new tiered capital-gains exclusions: 50% exclusion for stock held at least three years, 75% for stock held at least four years, and the full 100% for stock held at least five years.
• Increasing the gains exclusion to $15 million per issuer (up from $10 million) or up to 10x your basis.

This is important, as founders and early employees will face less pressure to wait the full five years before cashing out. The move has already sparked interest (particularly in fast-moving sectors like AI) around earlier M&A opportunities and secondary transactions, as well as liquidity events.

Action steps for founders:

• Monitor your company’s gross asset level to stay within the $75 million threshold.
• Educate your employees, investors and potential acquirers about tiered QSBS benefits.
• Consider restructuring exit timelines to leverage partial exclusions.

Evaluate the implications of Simple Agreement for Future Equity, SAFE, options, and equity conversion timelines, noting the current rules lack clarity around SAFE-treated stock.

Bonus depreciation reinstated to ignite capital investment value

Here’s the great news for hardware-heavy, capital-intensive startups. With this change, 100% bonus depreciation is back and permanent for qualifying tangible property. It applies to property placed in service after Jan. 19, 2025, and includes everything from equipment and machinery to specific production property.

This shifts capital purchases from long-term depreciation schedules into immediate write-offs — freeing up critical cash flow to put back into the business.

Take action by:

• Accelerating the procurement of qualifying equipment slated for deployment.
• Considering lease vs. buy scenarios, as buying may carry greater upfront tax advantages.
• Consulting your tax adviser to coordinate capex planning with bonus depreciation timelines.

Putting the new law to work requires proactive planning and expert guidance. Start by auditing your R&D ledger, revisiting exit strategies and locking in accelerated tax breaks. But to truly stay on top of regulatory details, with IRS and tax guidance still emerging, engage help to keep an eye on deadlines, definitional clarity and depreciation rules. Also keep the broader landscape in mind.

This act marks a wave of entrepreneur-friendly tax reform, and timing is ideal for nimble startups to save big and reap benefits — but as always, legislation is only as valuable as your strategy. Make sure to pair new policy with smart planning and early alignment.

Speak with your adviser today and you’ll be well-positioned to turn these provisions into founder fuel.

�� is a senior income tax manager at , an agency providing outsourced CFOs, accountants, tax advisers and HR professionals for fast-growing startups. She has more than 15 years of experience in U.S. corporate income taxation, working with both the Big Four and U.S. CPA firms, is licensed as an enrolled agent, and has represented clients before the IRS. Tabasum holds a bachelor’s degree in management accounting and advanced financial accounting from in India.

Illustration:

By

Every hard-tech and international marketplace founder I’ve spoken to in the past couple of months is working on a response to tariffs. They’re reforecasting burn, adjusting margins, negotiating with suppliers and customers, and exploring new supply chains.

Many founders in ’ portfolio and across our extended network anticipated this scenario in 2024 and spent much of the past year hedging against this exact scenario. Below, I share some ever-true business advice based on what we’ve observed founders do over the past year.

‘Only The Paranoid Survive’

The concept of ’s eponymous 1988 book “Only The Paranoid Survive” still holds true today. The founders we spoke to last year, who I believe are setting the right example, were quite concerned about the tariffs campaigned on, and put plans in motion to hedge against them. This kind of foresight is essential, and these founders’ businesses will become stronger and more enduring because of this crunch moment.

Here are a few examples:

1. Anticipating China-specific tariffs, one hard-tech founder worked with their OEM partner to move manufacturing from China to Vietnam.
2. Worried about single-party risk with Mexico, one managed marketplace founder evolved his business from a nearshoring play to a global procurement play, expanding his supplier network to Europe and North Africa.
3. Many founders communicated early with their customers about potential tariffs, messaging them that they intend to pass on some or all tariffs to them. To our collective surprise, many buyers readily accepted the premise.

It’s not too late — you can still be ‘paranoid’ today

Tariff policy remains fluid, and significant changes are likely to occur over the next few months. If you’re a founder who’s affected by tariffs, it is not too late to start planning your tariff response. The examples above are just some of the many ways you can respond to tariffs, optimize your business and build a more enduring company.

The margin of safety

Also known as ’s three most important words in investing, a “margin of safety” across as much of the business as possible is more important than ever.

The founders we spoke with were looking for a margin of safety across the following:

1. Unit economics: One founder with a 30%-plus gross margin business was able to absorb a quarter’s worth of tariff shocks. Another with less than 15% gross margin is considering canceling some orders as he’ll likely have to deliver them at a loss. A third founder in the robotics space conducted a comprehensive analysis of the cost of goods sold, which included the bill of materials, operating costs (including AI infrastructure and remote operators), and preventative and proactive maintenance. This analysis enabled a reduction of each lever by 15% to 20%, dulling the net impact of tariffs on his business.
2. Market diversification: Refusing to settle for a lower-margin business, one hard-tech founder in the ESG space prioritized the European market, building a large pipeline in Europe throughout 2024, and now expects Europe to drive most of his revenue in 2025.
3. Capital reserves: Multiple founders were able to raise additional capital, not always on favorable terms, ahead of tariff announcements to extend their runway beyond the current moment of uncertainty and avoid a potentially worse fundraising outcome while they lacked the business proof points in a new market environment.

Improve your margin of safety now

No one should need to wait on tariffs to optimize their business model and improve their margin of safety. However, now is a better time than any to do just that. Arguably, even if you’re not affected by tariffs, you ought to constantly be thinking about ways to improve your margin of safety and continuously level up your business.

Embrace your innate antifragility

defines antifragility as a property that goes beyond merely being resistant to shock, but rather becoming better and stronger because of shocks.

Early-stage founders have one advantage that many entrenched incumbents don’t: the ability to quickly adjust their businesses in response to shocks and market pressures.

We believe that the ultimate impact of tariffs on startups (that can withstand them, of course) will be that they will not only survive, but thrive on the other end. Improving unit economics, diversifying manufacturing and supplier relationships, and repositioning market opportunities will all make these businesses better and improve their long-term prospects.

Strength in crunch times

Pressure turns coal into diamonds, and when we look back on this period in venture, the founders who built stronger businesses through the crunch will outpace their competitors and be in a position to capture larger shares of their target markets, setting strong examples for generations to come.

is a partner at , a venture capital firm he joined at inception in 2022 to drive transformational change in our physical world. Prior to joining Era, Ghawi worked at . While there, he helped to found Suffolk’s venture arm, , which invests in startups in the AEC industry and helps them to scale by leveraging Suffolk’s network and resources. At the end of 2020, he was named Suffolk Tech’s investment director. While at Suffolk, he founded and led , Suffolk Technologies’ accelerator program, a leading AEC innovation accelerator, which has since graduated 30 companies.

Illustration:

In recent days, we’ve seen a tariff-induced market meltdown, a partial bounce-back, and a startup exit pipeline that went from heating up to effectively stalled. As a result, our fresh quarterly data on the most-active investors already seems to have a retro vibe.

It was an optimistic vibe, while it lasted. Global startup investment hit its highest level in years, driven by AI enthusiasm.

The busiest venture backers also upped their game. Among the 14 most-active post-seed investors, a majority backed more deals in Q1 of 2025 than they did a year ago, as charted below.

For the just-ended quarter, had the No. 1 ranking among post-seed investors.�� At first glance, this seems a bit surprising as it’s best known as a seed-stage accelerator.

However, Y Combinator has been putting more capital of late into follow-on rounds for promising accelerator participants. That includes stakes in large deals this past quarter, such as surveillance provider ’s $275 million Series F and rocket developer ’s $260 million Series C.

The other front-runners on our most-active venture investor list, meanwhile, are among the “usual suspects” — deep-pocketed, cross-stage investors such as , and .

More money invested, too

Lead investors also got serious about spending in Q1. This is evidenced by our list of investors who led or co-led rounds valued at at more than $500 million, charted below.

Of course, there’s one name that’s miles in the lead for spendiest investor: . Its $40 billion investment in (of which $10 billion will come from a syndicate of co-investors) ranks as the largest venture investment of all time.

Even though SoftBank didn’t need other big deals to cinch the top spot, it completed some anyway. Large Q1 rounds led by include ’s $230 million financing, ’s $130 million Series C, and ’s $120 million Series H.

Lightspeed ranked as the second-spendiest lead investor in Q1, leading or co-leading rounds collectively valued at $4.25 billion. Most of that total came from a $3.5 billion March financing for .

Most-active lead investors

Silicon Valley-based Lightspeed was also the most-active lead venture investor by round counts in the first quarter, leading or co-leading nine post-seed deals.

For a sense of who else was busy leading deals, below we charted out the 16 most-active investors by this metric.

There was a three-way tie for the next most-active lead investor, with , and each leading or co-leading eight rounds in Q1.

Busiest seed dealmakers

Reported seed funding totals weakened sequentially and year over year in Q1. However, the most-active seed investors remained pretty busy, as evidenced in the chart below ranking the most-prolific dealmakers for the quarter.

As usual, Y Combinator came out on top, with 209 reported seed and pre-seed rounds. Next up was , a seed and early-stage investor with a presence in more than 20 countries that backed at least 34 global rounds.

Q2 is off to an unusual start

With the first quarter behind us, usually it seems appropriate to offer some prognostications about what prior months’ activity foreshadows for the weeks to come.

This time around, however, it seems like Q1 lessons probably don’t apply. Given the dramatic, mostly negative gyrations on public markets, the stalled IPO market, and added costs and complexities around international trade, startup investors will be contemplating new rounds with an altered mindset.

Related reading:

• Q1 Global Startup Funding Posts Strongest Quarter Since Q2 2022 With A Third Going To Massive OpenAI Deal
• SoftBank And OpenAI Make History With Largest Startup Financing Ever
• The 10 Biggest Rounds Of March: Anthropic’s Massive $3.5B Round Leads

Illustration:

At , we’ve been investing in venture for three decades, and yet today we face what feels like a novel turn of events: a potential recession and increasing exit uncertainty due to government-induced volatility.

For an ecosystem that has long awaited the return of robust exit volumes, the uncertainty in the markets couldn’t come at a worse time.

Record capital, weak exits

We are at a unique point in time given the record amount of venture capital put to work in companies since 2020. We have an overabundance of startups that have raised significant amounts of capital. After the IPO boom of 2021, we’ve seen anemic IPO volumes and weak M&A volumes.

The exit markets in the past few years have shown a flight to quality by both IPO and M&A buyers. Where the threshold to go public might have been $150 million to $200 million of annual recurring revenue in years gone by, that has risen to about $400 million today.

At the same time, the combination of high interest rates and uncertainty regarding a possible recession in the past few years led to weak M&A volumes by private equity and corporate buyers, with buyers placing primacy on the efficiency of the businesses being acquired.

The importance of exits

The venture capital ecosystem needs successful exits to thrive. The limited partners that invest in venture funds look to exits as vindication of both the asset class itself and the specific fund managers they have selected.

Many of us were optimistic that this would be the year we would see a return in IPO volumes and a resurgence in M&A under the new, more pro-business administration. While the outlook for regulatory approval of acquisitions has improved, the tariffs have introduced a new source of concern; we have replaced the excessive regulatory scrutiny of the past administration with uncertainty driven by regulatory volatility.

A glimmer of optimism?

One potential silver lining is that the pressures of a recession and tariff-induced inflation could eventually force a lowering of interest rates in the coming quarters. While this outcome is not guaranteed, such a move might help stabilize the market and mitigate some of the current challenges. A lowering of interest rates would not only make it easier for private equity firms to use debt for company acquisitions, but could also kickstart areas of the economy — such as the housing market — that have stalled.

As the VC ecosystem learns to adapt to this new type of volatility, the return of healthy exit volumes looks likely to remain an elusive goal for all but the very best of companies in this environment.

is a managing director at , a $750 million evergreen VC fund founded by (). His investments are focused on financial technology and marketing technology companies that leverage emerging and persistent data sources to better acquire and serve customers.

Related reading:

• Tariff-Induced Market Meltdown Worrisome For Startup Valuations And Exits

Illustration:

Eventually, however, private company prices do adjust to reflect trends in the broader markets.

And based on what we’re seeing today, things look worrisome.

The Composite Index was down a staggering 4.8% in midday trading today, following ’s decision to impose sweeping tariffs on imported goods. His order calls for a 10% baseline tariff, along with much higher rates for many countries.

Among its myriad impacts, the decision is expected to lead to higher consumer prices and depressed demand as manufacturers and retailers pass along tariff costs incurred by their businesses. That was reflected in some of today’s more pronounced drops��1 for tech and consumer bellwethers, including (down 7%), (down 8%),�� (down 10%), and (down 25%).

Startup correction delayed?

Now, over in startupland, we’re not seeing immediate revaluations. For hot startups, repricings might happen once every few months or quarters when there’s a new funding round. And ordinarily, it’s common for companies to go a couple years between revaluations.

That means the $300 billion post-money valuation announced for this week, and the set for the newly combined and aren’t seeing an instant price cut like leading AI chip supplier (down 5%).

But looking ahead, the trajectory appears concerning.

For one, it’s only a couple years since the last massive startup valuation correction. Scores of companies that enjoyed unicorn status around the market peak in late 2021 later settled for down rounds, folded or filed for bankruptcy.

In addition, the tech IPO market was sluggish in 2023 and 2024, and only just recently shows signs of warming up. We had a mega-offering last week from , which had a recent market cap around $24 billion. Large offerings from and are also expected to hit markets in coming weeks.

In a similar vein, M&A was also on the rise, led by ’s planned $32 billion purchase of cybersecurity unicorn , and a bump in billion-dollar-plus acquisitions.

So, for startup exits, we were finally getting out of a slump, only to face a new obstacle in the form of a tariff-driven market pullback.

Dumb + unpopular = a case for optimism

Looking for a case for optimism in the current scenario, I find myself turning to reality TV. The principle of this media niche has long been that one can succeed with something dumb, so long as it’s popular. However, if a show is both pointlessly stupid and not fun to watch, it will flop.

The same notion applies to a lot of other areas, including movies, music, romance novels, podcasts, and the list goes on. So why not new tariffs?

As public markets have demonstrated today, investors find the current tariff moves both dumb and unpopular. Hopefully, those with power to revise foolish decisions will take this as a reason to reverse course. I’m not giving it the highest likelihood, but it’s at least within the realm of possibility.

Related reading:

• With Google’s $32B Bid For Wiz, Big Exits Are Finally Picking Up
• A Booming Start To The Year For The Billion-Dollar Exits Board

Illustration:

The next time you buy shampoo, lotion, bodywash or your favorite face mask you might notice prices creeping up. That’s because containers for personal care come heavily from China, Canada and Mexico, and these countries are the targets of tariffs by the administration.

You may not realize, but the beauty industry has a heavy reliance on China as a source of containers, and that’s not likely to change soon. The level of creativity in containers and choice of options in plastic or glass make China a major source of packaging materials for personal care and makeup products. Estimates from . Other substantial chunks came from Canada, Mexico and South Korea. estimates that 43% of personal care packaging globally comes out of the Asia-Pacific region.

Buyer appeal

As the founder of a skincare and personal care brand, I know that the choice of packaging for a personal care product is exceptionally important. Unique bottle colors, shapes, decoration and closures help differentiate brands and create shelf appeal. The choice of container may also consider issues like the viscosity of the product, sensitivity to light, how it needs to dispense, and possible eco-friendliness.

It’s not cheap or easy to change containers once a personal care brand has committed to a look and supply chain. The containers they use are often unique and may require tooling and special color mixing. The cost to package or repackage a line of products could encompass hundreds of thousands of dollars of expenses, including design, printing and photography assets.

In 2019, President Trump levied a 25% tariff on Chinese containers, theoretically because of their “unfair” competition with American-made containers. Now, in slightly over a month, another 20% has been added, totaling 45%

The additional 20% tariffs on Chinese containers that have been put in place in the past month will add about $0.108 of cost per container for my company, , which translates into about a 65-cent to 86-cent increase in the retail price paid by consumers for finished goods.

Every 10% additional tariff on Chinese containers could increase the price of many personal care products by 32 cents to 43 cents. Last fall Trump originally threatened tariffs totaling possibly 60% to 100% on Chinese goods. Based on the speed with which the Chinese tariffs were increased it’s very concerning that tariffs could reach those extreme levels.

The struggle is real

Tariffs are paid in cash when a shipment of containers arrives in the USA. That means brands have to consider pricing changes now in order to be able to afford their next shipment of containers and closures. The uncertainty and volatility with which tariff policies are being enacted does not allow for prudent planning, creating unnecessary risk.

Tariffs are the proverbial cherry on top of the personal care industry’s lengthy list of strains after handling MoCRA, or the Modernization of Cosmetics Regulation Act of 2022, registration, rising minimum order quantities for components and finished goods, increasing customer acquisition costs, rising shipping rates, increases to employee pay to keep up with inflation, and reduced consumer spending. There’s no margin left for additional expenses. In 2024, innovation in the personal care industry already hit its lowest level since 1996.

Brands need to be reinvesting and putting money toward staying competitive in the global market. Rising tariffs on containers and closures create real, substantial risk to manufacturing jobs in the personal care industry in the U.S.

We would gladly buy more containers from within the U.S. if they had more creative, cost-effective options to do so. The cost savings on shipping alone would be tremendous.�� We’ve had time to see the effect of tariffs since 2020, and container options in the U.S. are no more competitive than they were.

Tariffs don’t just fund innovation at container manufacturers in the USA. Instead tariffs go directly into the where they can be used for essentially anything. That pile of unearmarked money can go to pet projects, to pay for unelected advisers to fly on Air Force One, or to pay for costs of a historically high number of presidential golf outings.

Personal care products represent one area of government policy that will affect the purchasing power of every person. Soon American shoppers, employees in the personal care industry, and entrepreneurs will all be feeling the squeeze while someone else enjoys the juice.

is an herbal chemist and founder and owner of , a sophisticated, unique and potent collection of botanical skincare products that proactively heal skin and enhance health.

Illustration: