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Welcome back! Natasha and Sri here. 

President Donald Trump's decision to impose big tariffs on imported goods may feel like an issue for supply chain managers or chip developers. But the stock market's decline today shows that all markets are interconnected. 

For venture capital, the impact may be more indirect. Asked if the tariffs would affect venture investors, Tomasz Tunguz, the founder of Theory Ventures, which invests in early-stage software companies, responded emphatically: "Absolutely."

"As an industry, we thought that going into 2025, the liquidity markets would be open," he said. Now, Tunguz said, investors are not seeing as many public market listings or acquisitions as hoped because stocks have been so volatile. "If it sustains—if we have 12 to 18 months of this environment—I would expect valuations to decrease." 

In the short term, Tunguz said, investors will focus on distributing cash to their investors in any way they can: "The golden ticket is [distributions to paid-in capital]. Any kind of DPI within the last five years is a very important ingredient in a fundraising pitch tool." 

Ethan Batraski, a partner at early-stage venture firm Venrock, also anticipated an IPO window in the second half of this year and next year. But the tariffs push "out the IPO window by six to 12 months," he said. 

A representative of a university endowment that is a limited partner in venture funds said tariffs could hurt returns, by increasing inflation and slowing growth. That would hurt the university's operating budget, which relies in part on funds from the endowment. 

Some investors may be more insulated from the tariffs than others. Trump's tariffs are more painful for mid-stage and late-stage funds, Batraski said. For funds that focus on early-stage investments, "it doesn't matter…We live in 10- to 15-year horizons, and this is still the greatest time ever in history, I believe, to build a company."

"We're watching to see how this unfolds," Mitchell Green, founder and managing partner of growth-equity firm Lead Edge Capital, which backed Zoom and Spotify, said in an email. "We invest primarily in high-gross-margin digital businesses, so we're currently more insulated from the direct effects of tariffs." 

Jake Saper, a general partner at Emergence Capital, said software startups that could help businesses offset rising costs from the tariffs and logistics startups that could help improve businesses' visibility of their supply chains could benefit from the tariffs.

"VCs that lean in to identify startups that are well-positioned to help with adaptation to tariffs could do well. Or they could lose their shirts," he said. "That's venture."

On to our Next GPs

"Ferraris with Felicis?" 

That was the subject line of a cold e-mail that helped James Detweiler, a partner at early-stage venture firm Felicis, win an introductory meeting with the team behind Mercor, a staffing startup that helps companies get subject matter experts to train their models. "I needed a Trojan Horse that could catch their attention," he told me. "And Surya [one of the Mercor co-founders] was a big F1 fan."

Detweiler is one of the 16 investors that made our list of The Next GPs, people who are likely to become general partners at venture firms or start their own funds. We spent the past few months asking founders, managing partners and general partners at top firms for who is at the top of their game. These are the names we came up with.

One of the best parts of assembling the list was learning what made each person stand out—in other words, what wins in venture capital these days. In Detweiler's case, flying the founders of Mercor to Las Vegas to race Ferraris was a glamorous example. But others spent months, or even years, before writing a check. 

Casber Wang of Sapphire Ventures courted security startup Cyera over two years, including introducing Cyera to more than 10 potential customers, before leading Sapphire's piece of Cyera's $300 million Series D in November. "When a founder is working with me, I'm taking a bet on them," he said. "But they're also taking a bet on me."In other cases, it's scrappy product building, like in the case of Andreessen Horowitz's Yoko Li, that stands out.

Resend CEO Zeno Rocha, who is building a developer e-mail tool, says he met Li when going through Y Combinator – but after only raising his seed round from angel investors, the two decided to still stay in touch. He often sent her products for feedback. When Rocha got a pre-emptive termsheet from another venture firm for his company's Series A, he called Li. That evening, he had dinner with her, and the following day, a Saturday, he pitched Andresessen Horowitz partners at their offices and landed a term sheet within a few hours.

"Yoko was the one making all that happen," he said. "Pooling all the resources to seal the deal."

Fast forward a few months, Li helped the company build its own model context protocol, a simple way to interact with an AI model. "I've never seen a board member code for you. Her lines of code are now in our own GitHub organization." 

A message from RBC Capital Markets Global Financial Sponsors hot button topics and trends Private capital strategies are booming, driving a multitrillion dollar increase in global private equity AUM. With record "dry powder" and Sponsor-backed transactions showing a steady yet moderate recovery, how will firms deploy capital? Will M&A activity pick-up? Are IPOs making a comeback? In this podcast episode of Strategic Alternatives, RBC's Global Financial Sponsor Coverage leaders Harold Varah, Graham Tufts, and Ram Amarnath discuss key trends and prospects for the year.