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WIRED
22-04-2025
- Business
- WIRED
Investors Worry Trump's Tariffs Could Cause a ‘World of Hurt' for Startups
Apr 22, 2025 7:00 AM Donald Trump's unpredictable tariff policies have unsettled the venture capital world, further darkening an already gloomy outlook for IPOs. Traders on the floor of the New York Stock Exchange during morning trading on April 15, 2025. Photograph:At the start of the year, Tom Drummond, managing partner at the San Francisco-based venture capital firm Heavybit, was feeling mildly anxious about the state of the world and how political volatility in the US might affect capital markets. Now? 'No one knows what the hell is going on,' he tells WIRED. Drummond was referring to President Donald Trump's so-called reciprocal tariffs, which sent global markets into a tailspin when they were announced on April 2. Trump later backpedaled, pausing import duties on most countries for 90 days, though a 145 percent tariff on Chinese goods has remained in place. It's unclear what will happen when the pause ends in early July. 'There's just as much chance for these tariffs to be pulled as for Trump to dig his heels in,' says Drummond. Several venture capitalists working at small-to-mid-sized firms told WIRED in recent weeks they are concerned that Trump's tariffs could slow down tech investments, further decelerate an already sluggish market for initial public offerings, and possibly even put some tech startups out of business. Some investors say they're planning to lengthen their investment cycles, and will be looking to sell their stakes in private companies to other asset managers. Others say that, at least for now, they're staying away from investing in hardware companies, which may be hit particularly hard by Trump's tariffs. 'The tariffs are undoubtedly the main thing that was discussed in every partner meeting the past couple weeks,' says M.G. Siegler, an independent investor and former partner at GV Management Company. "The key question is how real this ends up being, how long will it last, versus just some sort of weird temporary blip.' Bracing for Impact The biggest factor determining how much a VC firm will be impacted by the tariffs, Drummond says, is whether its portfolio companies are subject to first-order effects of the tariffs, meaning they're directly reliant on global trade, or whether they'll primarily feel the second-order effects of an eventual reduction in customer spending if the economy goes into a recession. 'If you're looking at a portfolio of industries that rely substantially on cross-border trade or transactions, like hardware, clean tech—even biotech to a degree—you're in a world of hurt right now,' he says. One of Drummond's portfolio companies is an internet-of-things platform, which he says is now scrutinizing its inventory management strategy, trying to determine when to order from suppliers and if it can find new ones outside of China in places like Vietnam. Siegler says that if the tariffs remain in place, he believes VC firms are going to 'distance themselves even further from basically all hardware startups.' He adds that some investment funds have stayed away from hardware for a long time for other reasons. 'Hardware is much harder and riskier than software—but this just escalated that to the nth degree.' Chip Hazard, a Boston-based general partner and cofounder of Flybridge Capital, recently sent out an email to over 400 startup company founders urging them not to panic, but warned that capital markets are in 'turmoil' and institutional investors might 'freeze up,' thereby reducing access to funding, according to a copy of the message viewed by WIRED. Hazard encouraged startup founders to think through the risks and opportunities the tariffs will likely create for their businesses, as well as to evaluate their financing strategies. 'To the extent you are mid-stream in raising capital, get that closed as soon as possible. We repeat, close anything mid-stream ASAP,' Hazard wrote. 'And be really judicious about how your capital is being deployed.' Managing partner Charles Hudson told WIRED that his venture firm, Precursor, has stakes in several ecommerce startups that could be 'heavily impacted' by Trump's tariffs. But, Hudson adds, he doesn't know the best way to strategize around the tariffs because 'the logic for their timing, scale, and scope seems to reside only in the head of our president, and tariffs aren't being discussed as part of the normal policy-making process that would give us more clarity.' Precursor, which invests in early-stage startups, just raised more than $65 million for its fifth fund. Hudson said in a recent interview with The Information that he currently plans to make investments over a three-year period, rather than the standard two years. The hope is that the extra time horizon will give limited partners, who supply the funding to venture capital firms, to see returns on their investments. Hudson also predicted that selling stock in private startups on the secondary market will make up the overwhelming majority of liquidity that investors see over the next five years, rather than returns from acquisitions or initial public offerings. Other VCs agree that the secondary market is likely to heat up. 'VCs used to be the ultimate HODLers, holding on for dear life, riding it out until a startup they invested in IPO'ed,' says Drummond. 'But over the past 10 years they've had to become much more disciplined sellers, and figure out how to deliver liquidity sooner.' That's been true for a while because of rising interest rates and VCs being more cautious, but it's 'especially true now,' he says. Analysts from PitchBook, a database for statistics about the venture capital and private equity markets, warn the tariffs could have a cooling effect on international investments, noting that startups once celebrated for having 'global first' strategies might now be seen as vulnerable. In the first quarter of this year, prior to Trump's official tariff announcements, a smaller share of US capital was already flowing to VC deals in Europe and China than in recent periods. Around 47 percent of European deals included US funding, down four percentage points from the final quarter of 2024. 'For decades, VC has flourished in an increasingly borderless world, but another week of tariff wars is prompting a major reassessment,' PitchBook reporter Leah Hodgson wrote earlier this month. Bad News for IPOs Before Trump took office, investors had been hopeful that the tech IPO market would continue rebounding this year after falling into a slump in 2022. The market was showing signs of recovery in 2024: There were 176 initial public offerings in the US last year, compared to 127 in 2023 and 90 in 2022, according to data collected by the consulting firm EY. Accounting firm KPMG noted in a report published earlier this month that 'lingering market uncertainties' had led many startups to delay their imminent public debuts this quarter. The mobile banking service Chime, ticket giant StubHub, and Swedish 'buy now, pay later' firm Klarna all hit pause on planned public offerings. AI infrastructure firm CoreWeave was the outlier—it began trading shares in late March. 'With expectations for the recovery of the IPO market moving farther out again, we could see a shift in VC firms needing to reallocate investment priorities, as some companies may need additional funding prior to a now more-distant IPO,' Conor Moore, global head of KPMG Private Enterprise, said in the report. Some investors and analysts say there are reasons to be optimistic, despite unpredictable US trade policy and instability in the broader markets. Industries like AI, defense tech, and security could now be ripe for investment. 'Pockets like defense tech might be 'safe' bets because those startups were trying to shy away from the Chinese supply chain anyway, for obvious reasons,' says Siegler. Logistics startups, especially those specializing in nearshoring, also stand to benefit from Trump's policy changes. Hazard, who sounded the alarm about the impacts of tariffs in his note to founders, and whose firm manages $1 billion in assets, says he remains particularly confident about long-term trends in AI. 'If we're headed into a period of economic uncertainty, and our AI companies are focused on helping their customers be more agile and generate more revenue, there's a lot of potential value there,' he tells WIRED. American companies continue to receive the lion's share of global investment in AI, according to KPMG. OpenAI and Anthropic alone have announced investments totaling more than $43 billion this quarter. But those massive fundraising rounds are outliers that likely exclude most small- and mid-sized investors. And a booming AI market—which includes startups that haven't yet proven a path to profitability—may not be enough to offset the volatility of this new geopolitical era. Still, Hazard tells WIRED, 'I'm a little less alarmed than I was two weeks ago.'
Associated Press
27-02-2025
- Business
- Associated Press
Continue Launches 1.0 with Open-Source IDE Extensions and a Hub that Empowers Developers to Build and Share Custom AI Code Assistants
$5M seed round raised from Heavybit, Y Combinator, and angels to meet developers where they are now SAN FRANCISCO, CA, February 26, 2025 (EZ Newswire) -- Continue, the open-source AI code assistant platform, today announced the launch of Continue 1.0, a major milestone on its journey to empower developers with fully customizable AI code assistants. Continue enables developers to create, share, and use custom AI code assistants with open-source IDE extensions that can now seamlessly leverage a vibrant hub of models, context, and other building blocks. With hundreds of thousands of users, 20k+ GitHub stars, and a thriving Discord community of 10k+ developers, Continue is setting a new standard for open-source AI-enhanced development. The release of Continue 1.0 includes a new hub that makes it frictionless to create AI code assistants with a registry for defining, managing, and sharing Continue building blocks. There are blocks published and maintained by verified partners like Claude 3.5 Sonnet from Anthropic, Codestral from Mistral, DeepSeek-R1 from Ollama, voyage-code-3 embeddings from Voyage AI, and MCP servers from Docker. Blocks and assistants may also be created and shared to the hub by individual developers, independent software vendors (ISVs), and other organizations. Also included is the first major release of Continue's open-source extensions for VS Code and JetBrains. Developers can use these extensions with assistants and blocks from the hub via a free, solo tier. Organizations can take advantage of paid teams and enterprise tiers. Working with early enterprise users such as Siemens, Morningstar, and IONOS helped to shape the product. The hub provides engineering leaders with governance, security, and infrastructure control over AI code assistants within their organizations. 'Continue 1.0 is a huge leap forward in making AI-powered development truly customizable, private, and developer-first. The 'one-size-fits-all' AI code assistant will be a thing of the past. With this release, we're making it easier than ever for individual developers and teams to take full control over their AI coding experience through both our open-source community and our hub of building blocks for custom AI code assistants,' said Ty Dunn, co-founder of Continue. Continue is built on the foundation of developer empowerment and data control. Unlike closed-source alternatives, Continue ensures that every developer has the power to decide how AI integrates into their coding environment. Key features of the teams and enterprise tiers on include: Standardize development practices: Teams can establish custom AI code assistants that help developers align with shared development, review, and testing practices Governance controls: Organizations can define and enforce policies around AI-assisted development, governing what blocks can be created, shared, and used within their teams Private data plane deployment: Enterprises can deploy a data plane within their own infrastructure, ensuring that all code and analytics remain secure without exposing API keys or sensitive data 'Developers thrive when they have the freedom to build with the best tools available. Continue 1.0 amplifies every developer, team, and organization with the power to choose and customize AI code assistants to fit their unique workflows and preferences. This launch isn't just about AI helping developers write code—it's about making AI a natural, customizable extension of how they already work. Continue gives developers superpowers that amplify and enhance the way they already work. This is why Heavybit has been investing in developer-first startups for more than a decade,' said Jesse Robbins, General Partner at Heavybit and co-founder of Chef. 'At Mistral, our mission has always been to democratize artificial intelligence. Our partnership with Continue perfectly aligns with our vision of a developer-first ecosystem where AI code assistants are both secure and customizable. Whether you need local, on-prem, in your VPC, on the public cloud, or via serverless APIs, you can use Mistral models with Continue,' said Arthur Mensch, co-founder and CEO of Mistral AI. 'Together, we're building the future of AI-powered development on a foundation of openness and trust.' 'We believe that when it comes to AI coding tools, developers should be able to consume with confidence. In this period of rapid change, confidence requires openness, pluggability, and modularity. Now is the time to embrace the transparency and innovation of open source solutions. We believe in Continue's approach, and we're excited to partner with them and the community to define this ecosystem,' said Craig McLuckie, co-founder of Stacklok, Kubernetes, and the Cloud Native Computing Foundation 'At YC, we invest in teams that put developers first, and Continue's 1.0 launch is a perfect example of that philosophy in action,' said Garry Tan, CEO of Y Combinator. He continued 'By making it easy to create custom AI code assistants, they're giving developers the power to tailor their coding experience like never before. This is a major step forward in building an open ecosystem where innovation and democratization go hand in hand.' Backed by Heavybit and Y Combinator, Continue has raised a total of $5 million in seed funding to create a developer ecosystem built on trust, privacy, and developer empowerment. With 1.0, Continue is not only revolutionizing the AI coding assistant landscape but also ensuring that developers everywhere have the tools they need to harness AI on their own terms. To learn more about Continue, visit If you're interested in working at Continue, apply online. About Continue Continue enables developers to create, share, and use custom AI code assistants. Loved by hundreds of thousands of developers worldwide at organizations ranging from small startups to Fortune 500 companies, our open-source IDE extensions fit into existing workflows, while letting users leverage our vibrant hub of models, context, and tools. Backed by Heavybit, Y Combinator, and angels, including Julien Chaumond (co-founder of Hugging Face), Lisha Li (founder of Rosebud AI), and Florian Leibert (co-founder of Mesosphere), Continue was founded in 2023 and is based in San Francisco. For more information, visit SOURCE: Continue
