Good day. Startups developing hardware products or that rely on raw materials are sprinting to remake supply chains in response to the Trump tariffs.

While tech startups that develop software might only feel indirect impacts from higher tariffs, hardware makers are a different story. Startups developing products ranging from warehouse robotics to medical devices could see their businesses upended by trade barriers.

In response, founders are moving quickly to assess their exposure, find alternative suppliers and tap venture investors and law firms for advice on how to navigate the fluctuating business environment. At the same time, some startups say they read the tariff tea leaves last fall and lined up alternative supply chains to minimize tariff costs.

The impact could slow innovation and ultimately put a damper on venture investment in the hard-tech sector, said Adam Sharkawy, a co-founder and managing partner at Material Impact, a hard-tech-focused venture firm.

Read the full article here.

And now on to the news...

PE exit concerns. Wild stock-market swings related to tariffs threaten to upend private equity’s plans to exit from investments as the industry sits on a backlog of more than 12,000 U.S. companies, including about 3,800 that have been held for five to 12 years, according to research firm PitchBook Data. Read the full article here.

• Nearly 60% of those 3,800 companies have significant exposure to imports—and to tariff volatility—adding pressure for firms looking to free up cash from those investments and return money to their fund backers, according to Garrett Hinds, a PitchBook senior private-equity analyst. But don’t expect fire sales, Hinds said.
   
• Unable—or unwilling—to sell some companies at current pricing and terms, private-equity firms will likely turn to partial liquidity options like continuation vehicles to buy time to ride out the volatility, according to Hinds.

Ireland’s data privacy watchdog opened an investigation into Elon Musk’s Grok artificial-intelligence chatbot over concerns that the way the tool processes data might break European Union data protection law, The Wall Street Journal reports. The regulator said it is looking into whether Grok—a group of large-language models developed by Musk’s xAI startup—has broken the bloc’s general data protection regulation by being illegally trained on European users’ posts on Musk’s X social-media platform. “The purpose of this inquiry is to determine whether this personal data was lawfully processed in order to train the Grok LLMs,” the Irish Data Protection Commission said in a statement Friday.

It was the greatest tragedy that could possibly befall our household, at least according to my 15- and 12-year-old sons: Their plan to pool their savings and preorder the eagerly anticipated Nintendo Switch 2 game console was foiled by the Trump administration. Trump’s tariffs could impede that plan for global videogame domination. Some of Nintendo’s consoles are assembled in China, which currently faces U.S. import tariffs of 145%. Others are made in Vietnam and Cambodia, whose U.S. tariffs could approach 50% but, for the next few months, are just 10%. These rapidly shifting tariffs put Nintendo—and every other maker of consumer electronics—in a precarious position: How are they supposed to figure out a price that accounts for tariffs but doesn’t scare away buyers?

Read the full article here. 

Funds

Symphonic Capital, an investor serving overlooked and underserved communities, closed its debut fund at $13.5 million to focus on early-stage investments in the healthcare and financial services sectors.

LiveKit, a San Jose, Calif.-based voice AI platform, scored a $45 million Series B round led by Altimeter Capital at a $345 million valuation.

Groundcover, a cloud observability platform, raised $35 million in Series B funding led by Zeev Ventures. The company has offices in San Jose, Calif. and Tel Aviv.

Tapcheck, a Plano, Texas-based on-demand pay provider for employees, landed $25 million in Series A extension funding led by PeakSpan Capital, alongside a $200 million credit facility from Victory Park Capital.

ConductorAI, a Biddeford, Maine-based startup that powers AI-augmented approval and review workflows for the government sector, picked up $15 million in Series A funding led by Lux Capital.

Blue Water Autonomy, a Boston-based startup building autonomous ships for the U.S. Navy, emerged from stealth with $14 million in seed funding from investors including Eclipse.

ClearCOGS, a Chicago-based provider of predictive analytics for restaurants, collected $3.8 million in seed funding led by Closed Loop Partners' Venture Group.

Noto, a software platform built for lesson-based businesses like tutoring centers and music schools, was seeded with a $3.8 million investment led by Base10 Partners. The company is based in New York and San Francisco.

• Byju’s lenders chase $500 million moved out of U.S.
   
• BlackRock’s assets hit record as net income falls
   
• General Motors to suspend production, lay off 500 at electric vehicle plant in Ontario
   
• Tesla deletes buy option for Model S and X from China website

• Tariff chaos and China decoupling pose twin threats for startups and VCs (Eric Newcomer)
   
• Ex-OpenAI staffers file amicus brief opposing the company’s for-profit transition (TechCrunch)

This newsletter was compiled by Marc Vartabedian and Zachary Cole.

WSJ Pro Venture Capital is a premium service of The Wall Street Journal. We cover venture capital and the global startup ecosystem. Share your tips, comments and questions: vcnews@wsj.com

The Team: Matthew Strozier, Yuliya Chernova, Brian Gormley, Angus Loten and Marc Vartabedian.

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