In this blog post, our Founder & Managing Partner Terhi Vapola shares her perspective on how shifting geopolitics are shaping venture capital. She explores how de-globalization, the rise of defense tech, and the push for technological sovereignty are reshaping the landscape— and what these shifts mean for climate tech in the Trump era.
The venture capital market has always been influenced by macroeconomic trends. However, more than ever before, it is also being shaped by geopolitics. Markets are shifting in ways I have never seen before in my lifetime.
It all started with COVID-19, which brought unprecedented business shutdowns and restrictions on production, distribution, and commerce. Suddenly, we saw just how interconnected the world had become within the global innovation and production ecosystems. At the same time, it became evident that globalization and mutual interdependencies are not purely beneficial. On the other hand, the national stimulus packages combined with non-existential interest rates provided an unprecedented amount of capital inflow to the venture capital markets. This led to a bubble; number of deals done - especially the mega-deals - rising valuations and round sizes in the startup investment area. It also was the time when climate tech emerged as one of the key investment focus areas.
On a societal level, the rise of populist nationalism, amplified by social media’s influence, has rapidly divided people into opposing camps. COVID-19 only exacerbated this trend, as countries prioritized their own citizens over global solidarity. International cooperation took a backseat, becoming little more than an afterthought.
Meanwhile, the influence of the Global South is growing, with these nations now securing seats at key decision-making tables. The economic significance of populous BRICS countries and their rising middle classes was recognized decades ago. But now, we are beginning to understand its geopolitical implications. The once-unquestioned global dominance of the United States is now under scrutiny. Is this the same trajectory that the UK experienced after the World Wars, with new economic powers emerging? And what about Europe, as Trump aims to “Make America Great Again”? One thing is certain: the world is reorganizing into new geopolitical blocs, and de-globalization has begun.
Then, there are the wars. For as long as I can remember, conflicts have existed, but they primarily took place in the Global South—far from Western nations. Many were proxy wars, fought in the shadows. However, Russia’s full-scale invasion of a sovereign European country shattered this paradigm. Tanks and troops crossed the border openly, with no attempt to disguise their identity. “The masks were dropped,” as the President of Finland put it. For the first time in my life, I worried that my own neighbor could do the same to Finland. I feared for my daughter’s safety.
It is also evident that global institutions are failing. When decision-making requires unanimous consent—including from aggressors—what can realistically be expected? Predictably, those responsible for violations exploit these institutions, making a mockery of them. The principle of “divide and conquer” is especially visible in Europe, where even the largest nations are too small to stand alone.
These geopolitical developments have shifted public focus away from climate tech and toward national sovereignty, security, defense and near-shoring of critical technologies.
For venture capitalists, this opens new perspectives.
The most obvious shift is the rise of defense tech and dual-use technologies. I recall a few years ago when we invested in a satellite tech company—we were adamant that the technology must never be used for military purposes. At the time, defense tech was largely off-limits for most VC funds. Today, however, we have come to recognize our vulnerabilities and the rapidly growing need to strengthen national and allied defenses. The venture capital ecosystem has opened its eyes—and changed its stance. Where VCs see problems, they also see opportunities. Defense tech is now a rapidly expanding frontier for investment.
As the world moves toward de-globalization, there is also an increasing need for technological sovereignty—especially in critical fields such as semiconductors and AI. This trend extends beyond computing, encompassing essential infrastructure such as energy, water, food, communications and housing.
So, what do I believe will happen to climate tech in a Trump-led world? Here are my key takeaways:
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