The U.S. government shutdown, which began Tuesday, is already sparking concerns across the startup and tech ecosystem. Experts warn that if the shutdown extends beyond a week, it could stifle deal flow, freeze visa processing, and even trigger layoffs.
This marks the first shutdown in seven years, driven by a politically entrenched Congress and an unpredictable Trump administration. Out of eight shutdowns since 1990, four have occurred under Trump. The last one lasted 35 days, the longest in modern history.
One of the biggest concerns is the immigration bottleneck. The Department of Labor, which provides initial approval for H-1B visas and green cards, is closed, effectively halting the pipeline for hiring and renewing visas for high-skilled workers.
“This creates significant uncertainty for a startup’s workforce, including founders who may be on visas themselves,” immigration attorney Sophie Alcorn told TechCrunch.
Visa-dependent workers face heightened risks, said Michael Scarpati, CEO of fintech RetireUS:
“When processes like E-Verify or labor certifications stop, workers risk falling out of status, leaving their future in the U.S. uncertain and creating added disruption for the businesses that depend on them.”
The shutdown also threatens regulatory approvals that startups depend on. Jenny Fielding, managing partner at Everywhere Ventures, said delays in FDA approvals or aerospace permits could be an “existential threat” to startups built on a single regulatory green light.
Fielding added that political uncertainty has already impacted fundraising. Her firm held off earlier this year due to tariff announcements and restarted efforts this week, only to be hit by the shutdown.
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“If it’s a week-long shutdown, then that’s manageable. But when it becomes weeks, then it can get uncomfortable,” she said.
Garima Kapoor, co-founder of software firm MinIO, urged startups to prepare for prolonged disruption.
“Deals in highly regulated industries like fintech, health tech, or M&A can grind to a halt. Even companies outside the federal sphere could face shrinking valuations and tougher deal terms as uncertainty seeps into the market.”
Despite the challenges, experts say resilience and proactive planning will help startups weather the storm. “Preparedness will separate those who weather the disruption from those who get caught flat-footed,” Kapoor said.
As thousands of tech workers on visas wait anxiously, founders and investors alike are bracing for impact.
