[PragmaticPulp]

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.

[selectodude]

This is dead-on, but just to add to this, none of your investors are investing in your company for a 7 percent yearly return. The SPX will almost guarantee those. They want grossly outsized returns that are large enough for inflation to be a mere speedbump. Inflation shouldn't even enter the conversation.

[PragmaticPulp]

> This is dead-on, but just to add to this, none of your investors are investing in your company for a 7 percent yearly return.

Great point.

Also remember that your investors are investing specifically in your business, not giving you the money to re-invest in something else.

If you take investment money from someone to run a business then turn around and flip it into stocks or Bitcoin or something, you're going to have a serious problem if the value goes down. You might even have a problem if the value goes up. Investors don't take kindly to someone losing their money on something that wasn't agreed upon.

[hogFeast]

Inflation does enter the conversation for investors. Risk-free real rate is -450bps, equity risk premium is historically 200-300bps so implied return for SPX is -150bps.

One of the arguments is that things like tech will protect value because they have pricing power/growth or something similar, but this hasn't worked if you are starting from high valuations because inflation tends to change the cost of equity quite significantly, as the original calculation showed (to be clear, the point is that the price for bonds and/or equity is very wrong)...valuations are very high, a financial shock when you starting from a valuation that implies equities have no risk will be severe.

I am not saying that anyone should do or not do any specific thing but inflation, if it persists, will impact everyone because the effect of inflation is not limited to prices rising. For example, inflation might not impact you but a risk-free rate of 10% might.

[worik]

> The SPX will almost guarantee those

Interest new use of the word "almost"

[nuclearnice1]

Hardly new.

> But your father doesn't want to invest, say, ten thousand dollars in it, though I can almost guarantee that he'll get five times that sum back.

Tom Swift and His Giant Cannon 1913

https://www.gutenberg.org/files/1361/1361-h/1361-h.htm

[rkk3]

> The best thing you can do is ignore all of the inflation talk and focus on building your business.

Yeah the only inflation founder's need to worry about it is the valuations. Some will raise an A at 100x revenue but if B-Public multiples collapse in the future ... they are in a tough spot.