[HN Gopher] Ask HN: What should founders do to protect against i... ___________________________________________________________________ Ask HN: What should founders do to protect against inflation? 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? Author : munirusman Score : 14 points Date : 2021-12-06 22:06 UTC (54 minutes ago) | giantg2 wrote: | The 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. | MichaelRazum wrote: | Regarding 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. | teeray wrote: | > 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 | vimy wrote: | The perfect time to take out a loan. | PragmaticPulp wrote: | The 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. | toomuchtodo wrote: | If you can, issue debt/borrow at long term low rates if the funds | would grow your business faster. The debt is the hedge (paid back | with inflated future dollars). | FinanceAnon wrote: | Put all the cash into Bitcoin | amelius wrote: | This might raise different concerns though. | mikewarot wrote: | Interest/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. | version_five wrote: | What 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 | 1cvmask wrote: | The inflation rate varies a lot by sector and industry. Hopefully | you have a startup that has a compelling product where you can | raise prices when and if you have to. | alandaitch wrote: | you should just hire an Argentinian who knows how to use its | force in its favour. Inflation Aikido | [deleted] | jimnotgym wrote: | Make sure you have not boxed yourself in by your pricing. Don't | set a model that doesn't allow you to increase charges in line | with inflation | bradgranath wrote: | Inflation is a vital part of our economy. | | Its how 'growth' remains 'sustainable'. | | (both of those words doin' ALLL the work in Consumer Capitalism) | | Hyperinflation is NOT happening right now. | | Stop watching Fox. | | PS: There is absolutely a ridiculous housing bubble right now. | AGAIN. Worry about that. ___________________________________________________________________ (page generated 2021-12-06 23:01 UTC)