By Jorge Mercado Wednesday, April 9th, 2025

The tariffs that have sent the stock market into a frenzy could also be hitting the companies that were hoping to go public or raise more capital in 2025.

Nationally, tech firms like Klarna and Stubhub have paused their plans for an initial public offering in 2025, while locally, experts are cautioning small- to medium-sized businesses here on the Central Coast that wallets might be tightening up.

“Many investors pause or adjust their decision-making based on such an event, at least temporarily. Some investors will pause all investments until such a high degree of uncertainty is behind us, as investors in general no doubt dislike uncertainty,” Dan Engel, the managing director of Santa Barbara Venture Partners, told the Business Times. 

Engel added that, for his portfolio companies in the midst of raising capital, “I’d encourage them to attempt to close any rounds they have been working on if at all possible.”

Moreover, “If a firm hasn’t yet launched a fundraising process, best to launch once markets have settled down and investors are more relaxed and less overwhelmed by fear and uncertainty,” he said.

For some businesses, knowing that they just closed a round before all this turmoil and extended their runway is a great feeling.

Take Latigo Biotherapeutics, a clinical-stage biotech firm specializing in developing non-opioid pain treatments, which closed a $150 million round on March 17.

“Timing is everything, especially in biotech,” Nima Farzan, Latigo’s CEO, told the Business Times.

Farzan mentioned he was recently at a conference with investors in biotech companies who noted that they would not be deploying capital given the current environment.

An expert at raising capital himself, Farzan said it is not impossible to raise at this time, but he did say that it is “frustrating having your options limited,” especially if the IPO market is not something firms can count on for the next quarter.

“Biotechs tend to access the public markets because it allows you access to more money. If you needed to raise $150 to $175 million but now could only raise $50 to $75 million from private investors, you have to cut spend and ultimately what ends up being hurt are the patients, who may not be able to access the medicines as quickly,” he said.

Despite those cautions, Engel is also still a believer that “prudent investors don’t run away when fear is in the air.”

“Those who are regularly hearing pitches will continue to do so. Some investors will be less likely to act on what they are pitched until they feel a greater degree of certainty about where things are landing. A prudent long-term investor will look for bargains at a time when most other investors are overwhelmed by fear,” he said.

Additionally, the effects of the tariffs are still largely unknown. Though the stock market has seen a steep drop-off toward the end of March and the start of April, it is still too early to know if such a drop would hurt the markets for the entire year.

“The tariffs definitely have caught some people off guard last week, it caught some of Wall Street off guard, and that sends some reverberation through the market,” Jacob Furlow, market director for the Central Coast at J.P. Morgan Private Bank, told the Business Times.

“Certainly if this continues, we will see a slip in capital markets activity, but we just have to wait and see.”

J.P. Morgan Private Bank is the private wealth management practice of the firm. Furlow’s role mainly sees him working with high-net-worth individuals on the Central Coast.

He said the past week has been filled with speaking frequently with his clients.

“Markets gyrate like this and so it is very necessary for us to stay close to our clients because they’re going to get nervous, they’re going to have a lot of questions,” Furlow said.

He noted that most of the plans his clients have are not “down one-for-one with the stock market over the past week,” which does help settle some nerves and shows the importance of diversification.

“The market is very emotional and often acts very irrationally, and short-term moves may sometimes be just exactly that, very short term. So given that it’s only been a week, we just kind of take a step back,” Furlow said.

“We’ll let the volatility flow through the marketplace and let it stabilize before any decision-making is made.”

Volatility like this is also a good chance to teach young entrepreneurs. Barry Lieberman, an adjunct professor for the Orfalea School of Business at Cal Poly SLO, told the Business Times that “A startup or an entrepreneur, by definition, has to be adaptive and resilient.”

“They’re still figuring out their product market, they’re still figuring out really where their place is in the market and if there really is there a market,” he said.

“It’s about constantly proving that so being resilient, being able to pivot and make quick decisions, is really, truly what defines the entrepreneurial mindset and that’s what we teach.”

He added that his biggest takeaway, as both an entrepreneur and investor, is the importance of communication.

“The most successful businesses have amazing relationships with the people they do business with,” he said.

“Everybody’s being impacted by this because it’s so large, so you work together to get through it.”

As of April 9, some correction has come. President Trump announced a 90-day pause on new tariffs for most countries.

Though Trump doubled down on tariffs against China, his reversal on many of the newer tariffs across 75 different trading partners sparked the stock market on April 9.

While it may be too early to tell if the good sentiment will last, Engel noted that this recent crisis is a bit different than past ones.

“The good news is that, unlike past crises that spooked markets such as Covid or 2008 or the dot com bubble bursting, this one was created by and remains in the control of the administration to a large degree,” Engel said.

email: jmercado@pacbiztimes.com