As of Oct 2021, the inflation rate is 6.2% and it can get worse. In this unusual environment, what should founders do to protect their personal savings and startup cash from the inflation while also maintaining liquidity?
Ask HN: What should founders do to protect against inflation?
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Re: Ask HN: What should founders do to protect against inflation?
#2Interest/Inflation rates have been higher in the past. Aren't startups generally interested in a 1 year timeframe? It would be easy to burn a few percent in transaction fees if you're not careful.
Re: Ask HN: What should founders do to protect against inflation?
#3What comes to mind is speed up your program of work, ie spend your money as quickly as you responsibly can (easy to say I know, but the point is that speed and scaling should be a bigger part of your agenda if inflation is a concern). Anecdotally I feel like I have seen companies doing fundraising rounds very close together recently, inflation may be a reason. Investors will have the same concern and look for places that can deploy their cash fast.
Interestingly, I've talked to a few startup founders recently who were feeling good about having lots of money in the bank and not needing to fundraise for a while. This is probably still a common mentality, and may be more prudent. But if you can responsibly spend asap, you will get more bang for your buck
Re: Ask HN: What should founders do to protect against inflation?
#4The interest rates on credit are very favorable when considering inflation. Entities with significant medium to long term debt can be attractive right now.
On a personal note, if you have a mortgage at 3% and inflation is 6%, then you are generating value and free to use the money you do have for stuff like investment properties or securities.
Re: Ask HN: What should founders do to protect against inflation?
#5Regarding the start up, it highly depends what you are doing. Lets say it is work intensive. Then hire now more people, since wages might go up. Lets say you it is rather commodity intensive. Then guess it is better to buy the stuff that you might need later. Especially you even could hedge with option contracts. So basically I don't see any risk. If you are selling stuff, try to keep the contracts short or adjustable.
Regarding the personal savings. I'm in the same boat. No idea how to hedge, since it seems that everything is quite expensive. So even with high inflation doesn't always imply that the stock markets will go up. Same is true for real estate. It just implies that your real dollar value will go down. I don't see a real hedge, just diversification.
Re: Ask HN: What should founders do to protect against inflation?
#6Regarding the start up, it highly depends what you are doing. Lets say it is work intensive. Then hire now more people, since wages might go up. Lets say you it is rather commodity intensive. Then guess it is better to buy the stuff that you might need later. Especially you even could hedge with option contracts. So basically I don't see any risk. If you are selling stuff, try to keep the contracts short or adjustabl…
> Lets say it is work intensive. Then hire now more people, since wages might go up
And this is exactly why you should interview at another company every year
Re: Ask HN: What should founders do to protect against inflation?
#7The perfect time to take out a loan.
Re: Ask HN: What should founders do to protect against inflation?
#8The best thing you can do is ignore all of the inflation talk and focus on building your business. If your startup plans are put at risk by a couple extra percent of inflation, you have bigger problems.
If you're selling a product or service, don't forget that the price of your product or service will also rise with inflation. Unless you have a strange business that requires multi-year inventory storage and low margins, inflation isn't really a big deal. Raise prices when the time comes.
> As of Oct 2021, the inflation rate is 6.2%
The CPI inflation rate is based on consumer spending and reflects a basket of things like housing, gas, transportation, milk, eggs, groceries, and so on. It's not really relevant for your startup.
You need to look at your biggest expenditures. For a pre-traction software startup, this is basically employee compensation. There's not much you can do about this number changing, other than to be such a great place to work that employees don't necessarily mind falling behind the curve as compensation rises everywhere. Or just do the right thing and pay people market rate and get good work in return.
> what should founders do to protect their personal savings and startup cash from the inflation while also maintaining liquidity?
Personal savings and startup cash are two entirely different topics.
Personal savings: Standard mix of stocks and maybe bonds/CD ladders. People seem to forget that stocks tend to rise with inflation, but it's how investors have been floating above inflation for centuries. Do not buy into the hype about either gold or cryptocurrencies being the only way to hedge against inflation. It's not true.
Startup funds: Cash is fine. You shouldn't be planning on hoarding this for many years anyway, so don't put it at risk in order to chase higher returns.
Re: Ask HN: What should founders do to protect against inflation?
#9[deleted]
Re: Ask HN: What should founders do to protect against inflation?
#10Put all the cash into Bitcoin