Trump taxes, budget cuts mean schools may retreat from VC funds
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Illustration: Brendan Lynch/Axios
America's educational endowments have long been among the most active and influential investors in venture capital funds, but soon they may retreat.
- No, this isn't another harangue about liquidity. It's much, much bigger than that.
This should be gravy days for college and university endowments, which typically have higher alternatives allocations than do pensions or other types of institutional investors.
- They generated 11.2% average returns in 2024, which was their third-best mark of the past decade.
But they're nonetheless staring down the barrel of a gun, and not just at schools that suffered donation losses due to on-campus protests.
One big issue is taxes, which endowments never paid until President Trump got a 1.4% levy into the 2017 tax bill for wealthy schools.
- Trump during the campaign indicated an interest in increasing the tax, at least on "left-wing" schools, and Rep. Mike Lawler (R-N.Y.) last week introduced a bill that would boost the rate to 10% and expand the number of schools required to pay.
- Vice President Vance, while still a U.S. senator, proposed raising the rate to 35% for top schools.
- Either one of these increases could significantly curtail an endowment's ability to make future investments, and even the threat may cause endowment managers to hold their wallets tighter.
The Trump administration's cuts to National Institute of Health matching grants also pose a huge problem for endowments of large research institutions.
- This is now being fought out in the courts but, if the White House succeeds, it could cause endowments to allocate significantly more annual money to institutional disbursements.
- Again, that eats into what endowments can invest.
Venture capitalist Ann Miura-Ko, a founding partner with Floodgate, said to Axios late last year: "Most people would say, 'Endowments are super rich, why do we care? It might really impact funding ... But, also, you think about the ways it will impact founders and the technologies we've invested in for so many years.
- "You look at Stanford. They're in their 60th anniversary of AI, and that's the fundamental research on which everything has been built that we're seeing today."
The bottom line: Endowments are on edge, and venture capital could tumble with them.
