New day, a new interest rate hike. They announced that they will make some serious faces from the federation Whatever it is To control inflation. Wall Street always reacts in the red, and startups announce tight availability of capital and low valuations.
But what exactly is the relationship between interest rates, startup capital and valuations?
According to modern monetary theory (MMT), the Fed is raising interest rates to “cool the economy” and prevent further inflation.
Despite the focus on interest rates, the second aspect – inflation and the government’s response – will have the greatest effect on the founders and the public.
If your customers benefit from inflation, chances are your company will too.
Inflation affects your customers, suppliers and capital
The startup literature surrounding inflation in startups focuses on cutting costs, reaching a positive default rate, controlling burnout, and slowing hiring. But some of these measures, while useful during a recession, are too general to be helpful. Instead, the best way to prepare for inflation is to understand how price increases will affect your business.
Every business has three main parts: customers, suppliers (including employees) and capital. How does inflation affect each of these factors?