06.04
THOUGHTS ON WHY TRADE TENSIONS MAKE BOARD AND LEADERSHIP DEVELOPMENT A STRATEGIC IMPERATIVE FOR EUROPEAN VC AND PE FIRMS
The current trade climate between the US and Europe is far from business-as-usual. As tariff tensions and regulatory divergence create uncertainty across sectors, European venture capital and private equity firms are facing a more complex investment landscape – especially when it comes to backing tech companies with global ambitions.
To me, what’s clear is this: the economic and geopolitical challenges aren’t just shifting how firms invest – they’re also redefining what makes a portfolio company resilient. In this new normal, strong leadership and governance are not just desirable – they’re strategic assets. Here are my thoughts on why investing in board and leadership development is more critical than ever for European VC and PE firms.
Some of the main effects...
The current trade tensions and tariff disputes between the US and Europe can significantly influence European venture capital (VC) and private equity (PE) firms in several nuanced ways, especially in how they approach investments and manage portfolio risk in European tech companies.
PORTFOLIO RISK AND VALUATION UNCERTAINTY
Currency Volatility: Trade tensions often lead to fluctuations in the euro-dollar exchange rate. This increases valuation uncertainty for firms that report or raise funds in USD but invest in euro-denominated assets (or vice versa).
Supply Chain Exposure: Tech companies dependent on global supply chains or US-made components (e.g., semiconductors, specialized hardware) face higher input costs or delays if tariffs extend to relevant goods.
Export Risk: For European tech firms with significant US exposure (either clients or revenue), tariffs or retaliatory measures could threaten growth. This increases downside risk for VC/PE-investors.
Cross-Border Taxation & Regulation: Tensions may spill into regulatory divergence (e.g., digital services taxes, data protection disputes), increasing the compliance burden for transatlantic tech companies.
INVESTMENT STRATEGY ADJUSTMENTS
Geographic Focus Shifts: VCs/PEs may begin favoring intra-European markets or regions with less geopolitical risk, such as Scandinavia or Eastern Europe, as a hedge.
Sector Reassessment: Sectors with higher US exposure – such as fintechs dependent on global payment rails or enterprise SaaS companies with large US customer bases – might see reduced enthusiasm, while domestic AI, green tech, or B2B software players may get more attention.
More Conservative Valuations: With global macro risks rising, firms tend to apply more conservative revenue multiples, especially for companies reliant on transatlantic trade or scale-up in the US.
EXIT STRATEGY CONCERNS
Reduced US Acquirer Interest: If US tech giants become more risk-averse or face regulatory hurdles in Europe, M&A exit opportunities may narrow for European tech firms, affecting return expectations.
IPO Market Fragmentation: If capital markets diverge due to geopolitics, European companies may find it harder to access US IPO routes (like NASDAQ), making domestic or alternative markets more relevant but potentially less liquid or lower-valued.
FUNDRAISING DYNAMICS
Transatlantic LP Relationships: If US institutional investors become wary of European exposure due to trade frictions, it could impact European fundraisings from US LPs. On the flip side, it might encourage EU strategic investors (e.g., EIB, national innovation funds) to double down.
Co-investment Structures: Firms may reconsider cross-border co-investments, especially if regulatory uncertainties make syndication with US partners more complex.
INCREASED FOCUS ON STRATEGIC RESILIENCE
Due Diligence Deepens: VCs and PEs are now more likely to scrutinize a tech company’s exposure to tariffs, global supply chains, and regulatory risks.
Portfolio Resilience Initiatives: Firms may work with portfolio companies to diversify suppliers, strengthen onshoring capabilities, or localize customer bases.
In other words, trade tensions between the US and Europe could create a riskier macroeconomic and regulatory environment that forces European VC and PE firms to be more cautious, strategic, and localized in their investment decisions. This could lead to a shift in capital allocation within Europe, sector reprioritization, and a more risk-adjusted investment climate for European tech.
...and why these effects make Board and Leadership Development critical for VC and PE firms in safeguarding their portfolio.
In this challenging context, leadership teams must be capable of adapting to shifting conditions with agility and foresight. Board members and executives need the skills to think beyond the quarter and respond to macroeconomic shifts, policy changes, and geopolitical dynamics. Leadership development programs that build strategic thinking, scenario planning, and crisis management capabilities are essential tools for navigating this environment.
NAVIGATING UNCERTAINTY REQUIRES STRATEGIC LEADERSHIP
Adaptive Strategy: In a volatile global trade environment, tech companies must constantly adjust business models, market strategies, and supply chains. Founders and exec teams need the skills and frameworks to navigate ambiguity, which leadership programs can foster.
Scenario Planning: Board members must understand geopolitical dynamics and how to respond proactively to trade risks. Programs can equip them with tools for risk scenario modeling, macroeconomic sensitivity analysis, and crisis leadership.
GOVERNANCE IS A RISK MANAGEMENT TOOL
Board Resilience: VC/PE-backed companies are often still maturing. A well-trained board acts as a stabilizing force, ensuring governance structures help mitigate exposure to cross-border and macro risks.
Regulatory Oversight: With heightened regulatory divergence between the US and EU, leadership must navigate complex legal and compliance landscapes. Boards with members trained in global regulatory governance reduce liability and reputation risk.
STRENGTHENING EXIT OPPORTUNITIES THROUGH PROFESSIONALIZATION
Exit Readiness: Whether preparing for M&A or IPO, strong leadership and governance are key valuation levers. Professional boards instill confidence in potential acquirers or public market investors, especially when geopolitical risk is high.
Cross-Border Credibility: For exits involving US acquirers or capital markets, leadership professionalism and cultural fluency become even more important. Development programs can bridge transatlantic expectations and build credibility.
TALENT RETENTION AND SUCCESSION PLANNING IN A COMPETITIVE LANDSCAPE
Global Talent Tensions: As trade tensions impact mobility and labor markets, leadership continuity and succession planning become crucial. Development programs help groom internal talent to step up when executive transitions happen.
Founder Support: Many VC-backed founders lack deep management experience. Investing early in their growth – especially in leadership under pressure – reduces burnout and founder risk, a rising issue in uncertain environments.
RECILIENCE THROUGH DIVERSITY AND GLOBAL MINDSET
Cognitive Diversity for Complex Problems: Board and leadership training that includes DEI, international strategy, and stakeholder engagement builds teams with greater cognitive range – essential when responding to multilayered trade and political shocks.
Global Market Literacy: Programs that focus on international markets, trade structures, and policy impacts help leadership teams make more informed, less reactive decisions when facing shifting global dynamics.
The current geopolitical climate is a stress test for leadership in European tech. VC and PE firms that invest in board and leadership development gain a competitive edge – not only by safeguarding their portfolio from macro risks but also by enhancing long-term value and exit potential. In this era, good governance and strategic leadership are no longer optional – they’re core to resilience and return.