The hidden cost can reshape your startup financials and undermine what investors may have once seen as a scalable model. To put it more bluntly, tariffs can change the financial makeup of a startup.
For those embarking on a Series A (and beyond), now’s the time to factor tariffs into your Series A strategy.
The Hidden Cost That Reshapes Your Startup's Financials
Tariffs can directly drive up product and eventual costs—and when you’re still finding product-market fit, even small changes in cost structure can have ripple effects. The impact of these costs can vary greatly depending on the nature of your business.
For software companies, like those rolling out a new UX, the direct cost impact of tariffs may be less pronounced than for hardware-focused startups manufacturing chips or physical components. While hardware businesses face tangible increases in production costs, software startups might deal with shifts in operational or development costs, but the broader financial ripple effects can still be substantial.
- For hardware startups, these costs can fundamentally alter unit economics, potentially undermining what investors saw as a scalable model.
- Software companies, on the other hand, may face slower rollouts, increased development costs, or delays, but their primary risk lies in the potential to miss market windows or alienate early users.
Startups in either category that don’t account for these shifts in their Series A or B rounds may see margin pressure or need to rework forecasts entirely. If investors are already nervous about macro conditions, any indication that a startup hasn't factored in global trade risk is likely to spook them further.
Supply Chain Disruption = Startup Risk
Tariffs are only part of the story—supply chain volatility more broadly is making it harder for startups to plan, partner, and deliver.
- Contract Manufacturing Organizations (CMOs) overseas may introduce tariff risk upon re-entry into the U.S., creating cost unpredictability and delayed timelines.
- MEP (Manufacturing Extension Partnership) networks, a once federally funded pipeline of domestic expertise, are no longer reliably available—leaving critical gaps for U.S.-based manufacturing support.
- The ripple effect hits your customers, too. When hospitals face higher labor costs and import expenses for surgical masks, medical equipment, and supplies, their already-tight budgets get squeezed even further. That means fewer resources for pilots, partnerships, and innovation—raising the bar for startups hoping to get a foot in the door.
What Founders Can Do Before and During Series A
It’s not about eliminating risk; it’s about showing investors you’re aware and have a plan. Even in the face of uncertainty, there are steps startups can take to prepare:
- Stress-test your financial model with multiple tariff scenarios.
- Work with a trade advisor to understand your classification, exemptions, or duty drawbacks.
- Be transparent with investors: include tariff exposure in your risk disclosures and data room.
- Diversify your supply chain early—even if you're not at scale yet.
Tariffs may not be on your pitch deck—but they should be part of your Series A story. In a time of volatility, startups that demonstrate foresight, resilience, and adaptability will stand out. If you're building a business, don't let overlooked trade policy be what slows you down.
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