Federal funding cuts, tariffs and project pauses hit the wallets of Pittsburgh startups
Funding freezes and rising tariffs are stunting startup growth, founders said at a dinner last week celebrating the 2025 Pittsburgh RealLIST Startups. Adapting to those shifts is their only option as the founders weather direct financial hits, like Nolan Sulpizio, founder of the food waste startup Clean Plate Innovations, who's missing out on a big project.
'They didn't say no,' Sulpizio said about a partnership with a major research university, 'but they said not now.' The unnamed school went on a contract freeze, like many other institutions have been doing, because future federal funding isn't guaranteed.
The uncertainty around university funding isn't deterring Supizio, though. He said he's pivoting and looking to other types of institutions that will help him grow his company.
For other startups, however, there's limited room for flexibility.
Startups are already feeling tariff pain
President Donald Trump's rapidly shifting plans for global tariffs are making it harder to source cost-effective products, according to some founders. Recently, the administration authorized a 90-day pause on most of his reciprocal tariff plans but increased tariffs on China.
The tariffs on imported goods from China will make products from Lead-In Record Co., an on-demand vinyl record manufacturing service for independent artists, more expensive, said Maximillian Obasiolu, founder of the startup.
Obasiolu sources hardware electronics from China and said he will be forced to pass on any extra costs to his customers.
'These tariffs are bad for early-stage startups,' Obasiolu said.
For other founders, the effects of the tariffs haven't fully materialized, but they're bracing for impact.
'We're six months away from it affecting us,' said Marshall Darr, founder of fintech startup StretchDollar. His company provides a platform that helps small businesses give pre-tax health allowances to employees so they can buy their own health plans.
While companies with fewer than 50 full-time employees aren't legally required to offer health insurance, many still do. Darr said if tariffs raise operating costs for small consumer goods businesses, a significant portion of StretchDollar's customer base, some may opt to cut benefits like health coverage to stay afloat. That could mean fewer customers for StretchDollar.
Cuts to research funds and anti-DEI rhetoric stifle growth
Federal staffing cuts are also having an impact on local startups, according to Cally Myhrum Watts, founder of Lotus Fertility Insurance. Myhrum Watts's company works to expand access to affordable fertility care by offering add-on insurance policies that cover expensive treatments like IVF and egg freezing.
Despite President Trump calling himself the 'fertilization president' and promising to expand access to IVF, his administration recently eliminated a team at the Centers for Disease Control and Prevention that researched fertility treatments, Myhrum Watts said.
For Lotus, losing data on the safety and effectiveness of in vitro fertilization at clinics around the country makes it harder for insurers to decide whether and how much to cover a treatment, Myhrum Watts said.
The Trump administration's mandates surrounding diversity, equity and inclusion (DEI) are also impacting the customers who work with local startups.
'The whole dating app market is worried about DEI restrictions,' said Brandon Teller, founder of the queer dating app Bindr and the AI-driven content generation platform ColdStart.
ColdStart was born out of a need to generate more users for Bindr, so the marketing around its services are inherently linked to the queer dating app, Teller said. Companies that don't want to be associated with anything LGBTQ+ are increasingly demanding that ColdStart not mention its link to Bindr.
Teller said he has no plans to comply with these demands, but it's losing him potential customers.
Grant cuts could cause some ecosystems to 'completely collapse'
Disruptions to federal funding and the uncertainty around the future of government investment in startup ecosystems could have massive implications, according to Ben Klaber, a partner at the law firm Morgan, Lewis & Bockius LLP. The firm works with clients ranging from established, global Fortune 100 companies to enterprising startups.
Ecosystems are built on government incentives, he said. For example, developments in clean energy have been made possible through the federal government's previous investments in the sector.
Without federal investments, the ecosystem 'completely collapses,' Klaber said.
Pittsburgh's startup ecosystem has received over $400 million in non-dilutive federal funding since the 1980s through Small Business Innovation Research and Small Business Technology Transfer grants. It's helped many Pittsburgh-based startups get off the ground, but the future of what companies will get these types of grants is unclear.
As a result of the uncertainty around government funding, some founders are actively avoiding it, like Todd Feiler, founder of the networking platform Ringlet, Inc.
'It's early enough in our journey,' Feiler said, 'that we have commercial alternatives.'
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