What You Can Learn From These Startup Founders Dealing With Tariffs 

Editor’s note: The following is a follow-up piece to an earlier article by the author about the impact and opportunities for startups associated with new broad-based U.S. tariffs. 

By Raja Ghawi

Every hard-tech and international marketplace founder I’ve spoken to in the past couple of months is working on a response to tariffs. They’re reforecasting burn, adjusting margins, negotiating with suppliers and customers, and exploring new supply chains.

Many founders in Era Ventures’ portfolio and across our extended network anticipated this scenario in 2024 and spent much of the past year hedging against this exact scenario. Below, I share some ever-true business advice based on what we’ve observed founders do over the past year.

‘Only The Paranoid Survive’

The concept of Andrew Grove’s eponymous 1988 book “Only The Paranoid Survive” still holds true today. The founders we spoke to last year, who I believe are setting the right example, were quite concerned about the tariffs President Donald Trump campaigned on, and put plans in motion to hedge against them. This kind of foresight is essential, and these founders’ businesses will become stronger and more enduring because of this crunch moment.

Here are a few examples:

1. Anticipating China-specific tariffs, one hard-tech founder worked with their OEM partner to move manufacturing from China to Vietnam.
2. Worried about single-party risk with Mexico, one managed marketplace founder evolved his business from a nearshoring play to a global procurement play, expanding his supplier network to Europe and North Africa.
3. Many founders communicated early with their customers about potential tariffs, messaging them that they intend to pass on some or all tariffs to them. To our collective surprise, many buyers readily accepted the premise.

It’s not too late — you can still be ‘paranoid’ today

Tariff policy remains fluid, and significant changes are likely to occur over the next few months. If you’re a founder who’s affected by tariffs, it is not too late to start planning your tariff response. The examples above are just some of the many ways you can respond to tariffs, optimize your business and build a more enduring company.

The margin of safety

Also known as Warren Buffett’s three most important words in investing, a “margin of safety” across as much of the business as possible is more important than ever.

The founders we spoke with were looking for a margin of safety across the following:

1. Unit economics: One founder with a 30%-plus gross margin business was able to absorb a quarter’s worth of tariff shocks. Another with less than 15% gross margin is considering canceling some orders as he’ll likely have to deliver them at a loss. A third founder in the robotics space conducted a comprehensive analysis of the cost of goods sold, which included the bill of materials, operating costs (including AI infrastructure and remote operators), and preventative and proactive maintenance. This analysis enabled a reduction of each lever by 15% to 20%, dulling the net impact of tariffs on his business.
2. Market diversification: Refusing to settle for a lower-margin business, one hard-tech founder in the ESG space prioritized the European market, building a large pipeline in Europe throughout 2024, and now expects Europe to drive most of his revenue in 2025.
3. Capital reserves: Multiple founders were able to raise additional capital, not always on favorable terms, ahead of tariff announcements to extend their runway beyond the current moment of uncertainty and avoid a potentially worse fundraising outcome while they lacked the business proof points in a new market environment.

Improve your margin of safety now

No one should need to wait on tariffs to optimize their business model and improve their margin of safety. However, now is a better time than any to do just that. Arguably, even if you’re not affected by tariffs, you ought to constantly be thinking about ways to improve your margin of safety and continuously level up your business.

Embrace your innate antifragility

Nassim Taleb defines antifragility as a property that goes beyond merely being resistant to shock, but rather becoming better and stronger because of shocks.

Early-stage founders have one advantage that many entrenched incumbents don’t: the ability to quickly adjust their businesses in response to shocks and market pressures.

We believe that the ultimate impact of tariffs on startups (that can withstand them, of course) will be that they will not only survive, but thrive on the other end. Improving unit economics, diversifying manufacturing and supplier relationships, and repositioning market opportunities will all make these businesses better and improve their long-term prospects.

Strength in crunch times

Pressure turns coal into diamonds, and when we look back on this period in venture, the founders who built stronger businesses through the crunch will outpace their competitors and be in a position to capture larger shares of their target markets, setting strong examples for generations to come.

Raja Ghawi is a partner at Era Ventures, a venture capital firm he joined at inception in 2022 to drive transformational change in our physical world. Prior to joining Era, Ghawi worked at Suffolk Construction. While there, he helped to found Suffolk’s venture arm, Suffolk Technologies, which invests in startups in the AEC industry and helps them to scale by leveraging Suffolk’s network and resources. At the end of 2020, he was named Suffolk Tech’s investment director. While at Suffolk, he founded and led Boost, Suffolk Technologies’ accelerator program, a leading AEC innovation accelerator, which has since graduated 30 companies.

Illustration: Dom Guzman