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Ask HN: Should startup founders be concerned about possible hyperinflation?
It seems that the fed will print money to provide liquidity to distressed banks. It also looks like gold is up as of late. Alternatively fed may also alter reserve requirements for banks which could hurt banks even further (along with rate hikes).
Should startup founders be concerned about this? What about VCs?
- legitster 4y agoI think you are conflating a few things. The premise of your question is wrong in a few places, but overall I will just say inflation is still trending down. Still, looking at the current situation, I think all founder should posit a few things: - Long term: the age of venture capital is going away. Gone will be the days when there is free money to throw at longshots on profitability. Your ideas will increasingly need to bootstrap themselves. - Short term: STOP SITTING ON SO MUCH MONEY IN CHECKING ACCOUNTS! Spend the money or at least hire a treasurer for crying out loud!
- gumby 4y ago> Long term: the age of venture capital is going away. Oh please. The VC market operated just fine when interest rates were high (as in over 18%). You might of heard of a few venture backed companies from back then, such as Intel, Apple, Cisco, Sun, Microsoft…
- davidkuennen 4y agoI'm guessing the VC market was much more strict then, since you had a way higher risk if a startup didn't turn a profit. Probably did a lot more due diligence then.
- gus_massa 4y agoYou mean real inflation with 50% MoM, or just hyperbole for a few % MoM?
- uptownfunk 4y agoI think the real concern is that the fed has backed itself into a corner. Banks will face liquidity crunch due to rise in interest rates which will require fed to step in to guarantee depositors, which it basically can only do by printing money (or some flavor of printing money). At the same time the fed won’t back down from continuing to raise rates to stem the tide from growing inflation (can’t cut the stimulus checks without them being cashed), which will only put further pressure on banks. The fed may have to pull some other lever (say reserve ratios to enforce banks to maintain liquidity). However this will wipe out bank valuations and raise the cost of debt which may end up putting further deflationary pressure on economy. I mean again it may be more complex (not in finance) but the situation looks dire.
- ashwagary 4y agoDepending on the amount of cash you keep on hand, you may need to be concerned. Preserving as much value as possible, which is normally a side task, should become a bigger priority.
- relaunched 4y agoHyper inflation would be a catastrophic risk to the entire economy. If it happened in the US, it would be a catastrophic risk to the world economy. Insofar as everyone should be worried, startups should be worried. However, the only way to manage that risk would be to focus on markets that would be insolated from such a risk. That would be economies like Russia, Iran, North Korea, etc... many of which US startups can't operate in anyway. One should be aware, but there isn't much you can do against hyperinflation in the US and the world.
- deleted 4y ago[deleted]
- hazyc 4y agoI think if a startup founder is worrying about anything other than product-market-fit and customer retention then they're doing it wrong.
- uptownfunk 4y agoWell in any normal market yes. But when Blackrock with UBS is considering bailing out Credit Suisse, along side many other bank failures, which somehow are now all “oh this happens all the time and is business as usual” something seems to have me concerned.