[HN Gopher] Ask HN: What should founders do to protect against i...
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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.
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